Greek debt crises: The European Stability Mechanism money started flowing – to creditors, not to Greece

8 September by Bodo Ellmers

La entrada Greek debt crises aparece primero en Auditamos Grecia.

Zoe Konstantopoulou’s speech was given during the Fourth World Conference of Speakers of Parliament on 2^nd September in New York.

Sovereign debt is being used against the Greek population and the Hellenic Parliament to reduce Democracy. But Democracy is an ultimate value.

Ladies and gentlemen,
Speakers of the world’s Parliaments,

At this occasion of the 70^th anniversary of the UN,
Also marking 70 years from the end of World War II,

At this 4^th World Conference of the Inter-Parliamentary Union, on placing democracy at the service of peace, sustainable development and building the world that people want, I stand before you and among you, as President of the recently dissolved Hellenic Parliament to address you with a call for solidarity to the Greek people and to Greece: The place where democracy was born and where it is now being bluntly attacked and violated.

Greece and its people have been victimized during the last five years by policies purported to provide a sustainable solution to the country’s over-indebtment and a way out of the economic crisis.

These policies, contained in agreements called “Memoranda of Understanding” and concluded by the Greek governments and a trio of international institutions (namely the IMF, the EC and the ECB) known as the TROIKA and acting as Greece’s creditors, have resulted to severe violations of human rights, especially social rights, fundamental freedoms and the very rule of law.

What has been presented as “bail-out” loan agreements has resulted to misery, unemployment at unprecedented rates (72% among young women and 60% among young men), hundreds of thousands of young people emigrating, an explosion of suicides, the marginalization of the young, the old, the weak, the poor, the immigrants the refugees, half of the country’s children living under the poverty line, a situation amounting to a humanitarian crisis and documented in the UN Independent Experts’ on Debt and Human Rights reports and public statements, as well as in a series of international court decisions and findings.

On the 25^th of January 2015, only seven months ago, the Greek people through general elections gave a clear and unequivocal mandate to government and to parliament to do away with these homicidal policies. Negotiations started.

A special Committee of the Parliament was formed, called the Truth Committee on Public Debt, to conduct an audit and a legal assessment of the debt it issued a preliminary report last June.

The report found that the state’s sovereign debt is illegal, illegitimate, odious and unsustainable. It found that the sovereign debt has been concluded through procedures which grossly violate constitutional law, parliamentary procedure and fundamental human rights and freedoms guaranteed under international law, thereby justifying the denunciation of the debt. It found that creditors had been acting in bad faith, knowingly burdening the country with unsustainable loans to save French, German and Greek private banks.

Despite these findings, Greece’s creditors insisted that the people’s mandate be neglected.

On June 25^th, a 48 hour ultimatum was addressed to the Greek government asking it to accept, contrary to popular mandate, a series of measures dismantling labour law, abolishing social security guarantees and legal protection for over-indebted citizens, while at the same time requiring the sell-out of the most precious public assets and public enterprises, but also major ports, airports and public infrastructure.

All to be sold or given away to repay an unsustainable and odious debt.

The Hellenic Parliament, accepted the Government’s proposal to hold a referendum on the ultimatum, and the Greek people, through a large majority of 62%, rejected the measures.

During the referendum week, international and foreign government officials tried to influence the referendum outcome through statements terrorizing the people.

The referendum was held with the banks closed and capital controls imposed as a result for the ECB’s refusal to provide liquidity after the proclamation of the referendum.

And yet, democracy prevailed. The people pronounced themselves clearly and said a 62% NO to those homicidal measures.

What followed is a nightmare for every democratic conscience and a disgrace.

The creditors refused to consider the referendum outcome. They insisted, under the threat of provoking a bank-failure and a humanitarian disaster, that measures harsher than those rejected be adopted.

The government was forced to accept that Parliament legislates on pre-formulated texts of hundreds of pages with no deliberation and at pre-fixed dates with an emergency procedure and with the banks still closed. This extortion was baptized “prerequisites” for an agreement and Parliament was called to abolish laws it had only voted during the previous 4 months and to refrain from any legislative initiative without prior approval by the creditors.

An over 100 page law construed in 1 article was passed on July 15^th in less than 24 hours. A 1000 page law construed in 3 articles was passed on July 22^nd in less than 24 hours. An almost 400 page law was passed on August 14, in 24 hours.

Parliament legislated 3 times under duress and coercion.

And after this was done, attesting that a large part of the deputies of the major governing party, including the Parliament’s President, refused to vote such legislation, Parliament was inadvertedly dissolved to ensure a “more stable majority” to implement what the people have rejected.

Ladies and gentlemen,

Sovereign debt is being used against the Greek population and the Hellenic Parliament to reduce Democracy. But Democracy is an ultimate value.

And Parliaments cannot be reduced to simple stamps approving dictated norms, rejected by the people and construed to destroy societies and the next generations.

I call upon you as Parliamentarians of the world to support the claim for democracy and parliamentary sovereignty against debt-coercion.

And to support the initiatives of the UN General Assembly and the Ad Hoc Committee on Sovereign debt as well as the initiatives of the UN Independent Experts on debt and human rights.

Do not allow for democracy to be annihilated at the place where it was born.
Do not allow that any other Parliament be coerced to vote against the people’s will and against its’ deputies mandate.
Do not allow that human rights, human lives, human dignity and the most valuable UN principles be crushed to serve the banking system.

The world that people want cannot be built without the world’s people.

La entrada Zoe Konstantopoulou’s speech at the UN Headquarters in New York aparece primero en Auditamos Grecia.

Download it here

La entrada Tsipras letter to the Troika, accepting most conditions aparece primero en Auditamos Grecia.

The proposal can be downloaded HERE.

La entrada Troika’s proposal for Greece aparece primero en Auditamos Grecia.

Greece is facing a huge debt problem and a humanitarian crisis. The situation now is many times worst than it was in 2010, when the Troika – IMF, EU Commission and ECB – imposed its “bailout plan”, justified by the necessity to support Greece. In fact, such plan has been a complete disaster for Greece, which has had no benefit at all out of the peculiar debt agreements implemented since.

What almost no one talks about is that another successful bailout plan effectively took place at that time in 2010, although not for Greece, but in benefit of the private banks. Behind the Greek crisis there is a huge illegal bailout plan for the private banks. And the way it is being done represents an immense risk for Europe.

After five years, the banks got everything they wanted. Greece, instead, got into a real tragedy: the country has far deepened its debt problem, lost State assets as the privatization process was accelerated, as well as shrunk its economy drastically. Most of all, it has had an immeasurable social cost represented by the lives of thousands of desperate people who had their livelihood and their dreams impacted by the severe austerity measures enforced since 2010. Health, education, labour, assistance, pensions, salaries and all other social services have all been destructively affected.

The distribution of the Greek National Budget shows that debt expenses prevail over all other State expenses. In fact, the loans, other debt obligations, interests and other costs cover 56% of the budget:

Source: Εισηγητική Έκθεση Απολογισµού και Ισολογισµού 2013 – p. 90. Elaborated by Stavros Papaioannou.

In May 2010, at the same time all attentions were focused on the abundant announcements about the interference of the Troika in Greece, with its peculiar “bailout” plan, another effective bailout plan and a set of illegal measures to rescue the private banks was also being approved, but no attention was being paid on these ones.

In one shot, justified by the necessity to “preserve financial stability in Europe”, illegal measures were taken in May 2010, in order to provide the apparatuses that would allow the private banks to get rid of the dangerous “bubble”, i.e., the great amount of toxic assets – mostly dematerialised and non marketable assets – that loaded their off-balance [2] sheets accounts. The main objective was to help the private banks to transfer such problematic assets to the European countries.

One of the measures adopted to accelerate the exchange of assets from private banks and settle the bank crisis was the SMP program [3], which allowed the European Central Bank (ECB) to do direct purchases of public and private debt securities on primary and secondary markets. The operation related to public debt securities is illegal under Article 123 of the EU Treaty [4]. This program is one among several “non-standard measures” then taken by the ECB.

The creation of a “Special Purpose Vehicle” company based in Luxembourg was another very important measure to help transfer dematerialised toxic assets from the private banks into the public sector. Believe it or not, the European countries [5] became “partners” of this private company, a “societé anonime” called European Financial Stability Facility (EFSF) [6]. The countries committed with billionaire guarantees, which was initially set on the amount of EUR 440.00 billion [7] and then, in 2011, was raised to EUR 779.78 billion [8]. The real purpose of this company has been shadowed by the announcements that it would provide “loans” to countries, based on “funding instruments”, not real money. Utterly, the creation of EFSF was an imposition from IMF [9], which gave it a support of EUR 250 billion [10].

Together, the SMP and the EFSF represent a crucial complementary asset relief scheme [11] the private banks needed to conclude the public support that had been initiated in the beginning of the 2008 bank crisis in the United States and also in Europe. Since early 2009 they had been applying for more public support to discharge the excessive amount of toxic assets loading their off-balance items. The solutions could be either the direct government purchases, or the transference of assets to independent asset management companies. Both tools were provided by the SMP and the EFSF, and the losses related to the toxic assets are being shared amongst the European citizens.

The exchange of toxic assets from private banks to a company through simple transference, without payment and a proper buy/sell operation would be illegal according to the accountability rules [12]. EUROSTAT changed these rules and allowed, “liquidity operations conducted through exchange of assets”, justifying it by the “specific circumstances of the financial turmoil”.

The main reason the EFSF was based in Luxembourg was to escape from being submitted to international laws. Besides, the EFSF is also financed by the IMF, whose collaboration would be illegal, according to its own statutes. Although, the IMF also changed its rules in order to provide the EUR 250 billion collaboration to EFSF [13].

According to the Act [14] that authorized its creation, the EFSF Luxembourg company could delegate the management of all funding activities; its board of directors could delegate their functions, and its associates Member States could delegate the decision-making related to guarantors to the Eurogroup Working Group (EWG). At that time, the EWG not even had a full-time President [15]. The German Debt Management Office [16] is the one who actually operates EFSF, and, together with the European Investment Bank, provide support to the operational functioning of EFSF. Its lack of legitimacy is evident, as it is actually operated by a diverse body. EFSF is now the major Greece creditor.

The funding instruments EFSF operates are the most risky and restricted ones, dematerialized, not marketable, such as Floating Rate Notes settled as Pass-trough, currency and hedge arrangements, and other co-financing activities that involve the British Trustee Wilmington Trust (London) Limited [17] as the instructor for issuing restricted type of not-certified bonds, which cannot be commercialized in any legitimate stock market, because they don’t obey the rules for sovereign debt bonds. This set of toxic funding instruments represent a risk to the Member States whose guarantees can be called to pay for all Luxembourg company financial products.

A large proportion scandal would have taken place in 2010 if these illegal schemes had been revealed: the violation of the EU Treaty, the arbitrary changes in the procedural rules by the ECB, EUROSTAT and IMF, as well as the association of Member States to the Luxembourg private special purpose company. All of that just to bailout private banks, at the expense of a systemic risk for the whole Europe, due the States commitment with billionaire guarantees that would cover problematic not marketable dematerialized toxic assets.

This scandal never took place, because the same EU Economic and Social Affairs Extraordinary Meeting [18] that discussed the creation of the “Special Purpose Vehicle” EFSF company in May 2010 gave a special importance to the “support package for Greece”, making it appear that the creation of this scheme was for Greece and that by doing so, it would ensure fiscal stability in the region. Since then, Greece has been the center of all attentions, persistently occupying the headlines of the main media vehicles all over the world, while the illegal scheme that has effectively supported and benefited the private banks remains on the shadows, and almost nobody talks about it.

The Bank of Greece annual report shows an immense increase of the “off-balance” accounts related to securities in 2009 and 2010, on amounts much greater them the total assets of the Bank, and this pattern continues on the following years. For example, on the Bank of Greece 2010 Balance Sheet [19] , the total of assets in 31/12/2010 was EUR 138.64 billion. The off-balance accounts on that year reached EUR 204.88 billion. In 31/12/2011 [20], as the total balance assets summed EUR 168.44 billion; the off-balance accounts hit EUR 279.58 billion.

Thus, the transference of toxic assets from the private banks into the public sector has been a great success: for the private banks. And the Debt System [21] is being the tool to hide that.

Greece was brought into this scenario after several months of persistent pressure from the UE Commission about allegations of inconsistencies on the statistics data and the existence of an excessive deficit [22]. Step by step a big deal was created over those issues, until May 2010, when the Economic and Financial Affairs Council stated: “in the wake of the crisis in Greece, the situation in financial markets is fragile and there was a risk of contagion” [23]. And so Greece was submitted to the package that included the interference of the Troika with its severe measures under annual adjustment plans, an odd bilateral agreement, followed by EFSF “loans” backed on risky funding instruments.

Greek economists, political leaders, and even some IMF authorities had proposed that restructuring the Greek debt would provide much better results than that package. This was ignored.

Critical denounces about the super estimation of the Greek deficit – which had been the justification for the creation of the big deal around Greece and the imposition of the package in 2010 – were likewise ignored.

The serious denunciations made by Greek specialists [24] about the falsification of statistics were also disregarded. These studies showed that the amount of EUR 27.99 billion loaded the public debt statistics in 2009 [25], because of untrue augmentation on certain categories (such as DEKO, Hospital arrears and SWAP Goldman Sachs). Previous years statistics had also being affected by EUR 21 billion of Goldman Sacks swaps distributed ad hoc in 2006, 2007, 2008 and 2009.

Despite all this, under an atmosphere of urgency and threat of “contagion”, peculiar agreements have been implemented since 2010 in Greece; not as a Greek initiative, but as conformed by the EU authorities and the IMF, attached to the accomplishment of a complete set of prejudicial economic, social and political measures imposed by the Memorandums.

The analysis of the mechanisms [26] inserted on those agreements show they didn’t benefit Greece at all, but served the interests of the private banks, in perfect accordance to the set of illegal bailout measures approved on May 2010.

First, the bilateral loan used a special account in the ECB by which the loans disbursed by the countries and KfW, the lenders, would go straight to private banks that held far-below par value existing debt securities. So, that peculiar bilateral agreement was arranged to allow full payment for those bondholders while Greece didn’t get any benefit. Instead, the Greeks will have to pay back the capital, high interest rates and all costs.

Second, the EFSF “loans” resulted in the recapitalization of Greek private banks and the exchanging and recycling of debt instruments. Greece has not received any real loan or support from EFSF. Through the mechanisms inserted on the EFSF agreements, real money never arrived in Greece, but only toxic dematerialized assets that fill the off-balance section of the Bank of Greece balance sheet. On the other hand, the country was forced to cut essential social expenses to pay back, in cash, the high interest rates and all abusive costs, and also will have to repay the capital it has never received.

We must look for the reason why Greece has been chosen to be on the eye of the storm, submitted to illegal and illegitimate agreements and memorandums, serving as the scenery to cover the scandalous illegal bailout of the private banks since 2010.

Maybe this humiliation is related to the fact that Greece has been historically the worldwide reference for humanity, as it is the cradle of democracy, the symbol for ethics and human rights. The Debt System cannot admit those values, as it has no scruple to damage countries and peoples to obtain their profits.

The Greek Parliament has already installed the Truth Committee on Public Debt and gave us the chance to reveal those facts; so necessary to repudiate the Debt System that subjugates not only Greece, but also many other countries under the exploitation of the private financial sector. Only through transparency the countries will defeat those who want to put them on their knees.

It’s time for the truth to prevail, the time to place human rights, democracy and ethics over any lower interests. This is a task for Greece to take on right now.

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[1] National Coordinator of Citizen Debt Audit in Brazil (www.auditoriacidada.org.br), invited by the president of Greek Parliament MP Zoe Konstantopoulou to collaborate with the Truth Committee on Public Debt created in April 4, 2015.

[2] Off-balance means a section outside of the normal balance sheet accounts, where the problematic assets, as the dematerialized not marketable assets are informed.

[3] Securities Markets Programme (SMP) – EUROPEAN CENTRAL BANK. Monetary policy glossary. Available from:

https://www.ecb.europa.eu/home/glossary/html/act4s.en.html#696 [Accessed: 4th June 2015]

[4] THE LISBON TREATY. Article 123. Available from: http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-the-functioning-of-the-european-union-and-comments/part-3-union-policies-and-internal-actions/title-viii-economic-and-monetary-policy/chapter-1-economic-policy/391-article-123.html [Accessed: 4th June 2015]

[5] The euro-area Member States or EFSF Shareholders: Kingdom of Belgium, Federal Republic of Germany, Ireland, Kingdom of Spain, French Republic, Italian Republic, Republic of Cyprus, Grand Duchy of Luxembourg, Republic of Malta, Kingdom of the Netherlands, Republic of Austria, Portuguese Republic, Republic of Slovenia, Slovak Republic, Republic of Finland and Hellenic Republic

[6] The private company EFSF was created as an instrument of the EUROPEAN FINANCIAL STABILISATION MECHANISM (EFSM), as in: http://ec.europa.eu/economy_finance/eu_borrower/efsm/index_en.htm

[7] EUROPEAN COMMISSION (2010) Communication From the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the Economic And Social Committee and the Committee of the Regions – Reinforcing economic policy coordination.

http://ec.europa.eu/economy_finance/articles/euro/documents/2010-05-12-com(2010)250_final.pdf – Page 10.

[8] IRISH STATUTE BOOK (2011) European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011.  Available from: http://www.irishstatutebook.ie/2011/en/act/pub/0025/print.html#sec2 [Accessed: 4th June 2015].

[9] Statement made by Mr. Panagiotis Roumeliotis, former representative of Greece at the IMF, to the “Truth Committee on Public Debt”, at Greek Parliament, on June 15^th 2015.

[10] EUROPEAN FINANCIAL STABILITY FACILITY (2010) About EFSF [online] Available from:

http://www.efsf.europa.eu/about/index.htm and http://www.efsf.europa.eu/attachments/faq_en.pdf – Question A9 [Accessed: 3 June 2015].

[11] HAAN, Jacob de; OSSTERLOO, Sander; SCHOENMAKER, Dirk. Financial Markets and Institutions – A European Perspective (2012) 2^nd edition. Cambridge, UK. Asset relief schemes, Van Riet (2010) Page 62.

[12] EUROSTAT (2009) New decision of Eurostat on deficit and debt – The statistical recording of public interventions to support financial institutions and financial markets during the financial crisis. Available from:

http://ec.europa.eu/eurostat/documents/2995521/5071614/2-15072009-BP-EN.PDF/37382919-ebff-4dca-9175-64d78e780257?version=1.0 [Accessed: 4th June 2015]

[13] “Most Directors (…) called for the Fund to collaborate with other institutions, such as the Bank for International Settlements, the Financial Stability Board, and national authorities, in meeting this goal.” In IMF (2013) Selected Decisions. Available from: http://www.imf.org/external/pubs/ft/sd/2013/123113.pdf – Page 72. [Accessed: 4th June 2015]

[14] EUROPEAN FINANCIAL STABILITY FACILITY ACT 2010. EFSF Framework Agreement, Article 12 (1) a, b, c, d, and (3); Article 10 (1), (2) and (3); Article 12 (4); Article 10 (8).

[15] Only from October 2011 on, according to a Council Decision on April 26^th , 2012, EWG has full-time president:

OFFICIAL JOURNAL OF THE EUROPEAN UNION (2012) Official Decision. Available from:

http://europa.eu/efc/pdf/council_decision_2012_245_ec_of_26_april_2012_on_a_revision_of_the_statutes_of_the_efc.pdf .

The same person, Thomas Wieser, had been the president of the Economic and Financial Committee (EFC) from March 2009 to March 2011: COUNCIL OF THE EUROPEAN UNION. Eurogroup Working Group. Available from:

http://www.consilium.europa.eu/en/council-eu/eurogroup/eurogroup-working-group/

[16] EUROPEAN FINANCIAL STABILITY FACILITY (2013) EFSF general questions. Available from:

http://www.efsf.europa.eu/attachments/faq_en.pdf – Question A6. [Accessed: 4th June 2015].

See also: Germany Debt Management Agency has issued EFSF securities on behalf of EFSF.

EUROPEAN FINANCIAL STABILITY FACILITY (2010) EU and EFSF funding plans to provide financial assistance for Ireland. Available from:

http://www.efsf.europa.eu/mediacentre/news/2010/2010-006-eu-and-efsf-funding-plans-to-provide-financial-assistance-for-ireland.htm [Accessed: 4th June 2015]

[17] Co-Financing Agreement, PREAMBLE (A) and Article 1 – Definitions and Interpretation “Bonds”. Available at http://crisisobs.gr/wp-content/uploads/2012/02/7-co-financing-agreement.pdf [Accessed: 4th June 2015]

These bonds are issued on dematerialized and not certificated form. Have many restrictions because they are issued directly for a certain purpose and not offered in market, as the Securities Laws and SEC rules determine. They are issued under an exception rule permitted only for private issuers, not for States.

[18] ECONOMIC and FINANCIAL AFFAIRS Council Extraordinary meeting Brussels, 9/10 May 2010. COUNCIL CONCLUSIONS

https://www.consilium.europa.eu/uedocs/cmsUpload/Conclusions_Extraordinary_meeting_May2010-EN.pdf

[19] BANK OF GREECE ANNUAL REPORT 2010. BALANCE SHEET p. A4 http://www.bankofgreece.gr/BogEkdoseis/Annrep2010.pdf

[20] BANK OF GREECE ANNUAL REPORT 2011. BALANCE SHEET p. A4. http://www.bankofgreece.gr/BogEkdoseis/Annrep2011.pdf

[21] Expression created by the author after verifying, trough several debt audit procedures in different instances, the misuse of the public debt instrument as a tool to take resources from the States, instead of supporting them, by functioning as a set of gears that relates the political system, the legal system, the economic model based on adjustment plans, the big media and corruption.

[22] 24 MARCH 2009 – Commission Opinion  – http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/104-05/2009-03-24_el_104-5_en.pdf

27 APRIL 2009 – Council Decision – http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/104-06_council/2009-04-27_el_104-6_council_en.pdf

10 NOVEMBER 2009 – Council conclusions – http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/111025.pdf

8 JANUARY 2010- Commission Report – http://ec.europa.eu/eurostat/documents/4187653/6404656/COM_2010_report_greek/c8523cfa-d3c1-4954-8ea1-64bb11e59b3a

2 DECEMBER 2009 – Council Decision – https://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/111706.pdf

11 FEBRUARY 2010 – Statement by Heads of States or Government of the European Union. – http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/112856.pdf

16 FEBRUARY 2010 – Council Decision giving – http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/104-09_council/2010-02-16_el_126-9_council_en.pdf

[23] 9/10 MAY 2010 – Council Conclusions – Extraordinary meeting – Under the justification of the “crisis in Greece”, the scheme measures to rescue banks are implemented.

https://www.consilium.europa.eu/uedocs/cmsUpload/Conclusions_Extraordinary_meeting_May2010-EN.pdf

10 MAY 2010 – Council Decision –

http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/104-09_council/2010-05-10_el_126-9_council_en.pdf

[24] Prof. Zoe Georganta, Professor of Applied Econometrics and Productivity, Ex member of ELSTAT board’s contribution to “The Truth Committee on Public Debt” 21 May 2015.

[25] HF International (2011) Georgantas says 2009 deficit was purposely inflated to put us in code red. Available from:  http://hellasfrappe.blogspot.gr/2011/09/shocking-report-official-admist-2009.html

[26] The mechanisms are summarized on Chapter 4 of the Preliminary Report presented by the Truth Committee on Public Debt on June 17^th 2015. Available from: http://www.hellenicparliament.gr/UserFiles/8158407a-fc31-4ff2-a8d3-433701dbe6d4/Report_web.pdf

La entrada The banks’ secret behind the Greek tragedy aparece primero en Auditamos Grecia.

The Truth Committee on Public Debt (Debt Truth Committee) was established on April 4, 2015, by a decision of the President of the Hellenic Parliament, Ms Zoe Konstantopoulou, who confided the Scientific Coordination of its work to Dr. Eric Toussaint and the cooperation of the Committee with the European Parliament and other Parliaments and international organizations to MEP Ms Sofia Sakorafa.

Members of the Committee have convened in public and closed sessions, to produce this preliminary report, under the supervision of the scientific coordinator and with the cooperation and input of other members of the Committee, as well as experts and contributors.

Access the full Preliminary Report of the Truth Committee on Greek Public Debt
or the Executive Summary

The preliminary report chapters were coordinated by:
Bantekas Ilias
Contargyris Thanos
Fattorelli Maria Lucia
Husson Michel
Laskaridis Christina
Marchetos Spyros
Onaran Ozlem
Tombazos Stavros
Vatikiotis Leonidas
Vivien Renaud

With contributions from:
Aktypis Héraclès
Albarracin Daniel
Bonfond Olivier
Borja Diego
Cutillas Sergi
Gonçalves Alves Raphaël
Goutziomitros Fotis
Kasimatis Giorgos
Kazakos Aris
Lumina Cephas
Mitralias Sonia
Saurin Patrick
Sklias Pantelis
Spanou Despoina
Stromblos Nikos
Tzitzikou Sofia

The authors are grateful for the advice and input received from other members of the Truth Committee on Public Debt as well as other experts, who contributed to the Committee’s work during the public sessions and hearings and the closed or informal consultations.The authors are grateful for the valuable assistance of Arnaoutis Petros Konstantinos, Aronis Charalambos, Bama Claudia, Karageorgiou Louiza, Makrygianni Antigoni and Papaioannou Stavros.

CONTENTS:

Introduction:

The work of the Truth Committee in Public Debt.

Definition of terms and acronyms.

Chapter 1: Debt before the Troika

Chapter 2: Evolution of the Greek public debt during 2010-2015

Chapter 3: Greek public debt by creditor in 2015

Chapter 4: Debt mechanism in Greece

Chapter 5: The conditionalities against sustainability

Chapter 6: The impact of the “bailout programme” on human rights

Chapter 7: Legal issues surrounding the MOU and Loan Agreements

Chapter 8: Assessment of the debt as regards illegitimacy, odiousness, illegality and unsustainability

Chapter 9: Legal foundations for repudiation and suspension of Greek sovereign debt

La entrada Preliminary Report of the Truth Committee on Greek Public Debt aparece primero en Auditamos Grecia.

In June 2015, Greece stands at a crossroad of choosing between furthering the failed macroeconomic adjustment programmes imposed by the creditors or making a real change to break the chains of debt.
Five years since the economic adjustment programmes began, the country remains deeply cemented in an economic, social, democratic and ecological crisis. The black box of debt has remained closed, and until now no authority, Greek or international, has sought to bring to light the truth about how and why Greece was subjected to the Troika regime.

The debt, in whose name nothing has been spared, remains the rule through which neoliberal adjustment is imposed, and the deepest and longest recession experienced in Europe during peacetime.

There is an immediate need and social responsibility to address a range of legal, social and economic issues that demand proper consideration. In response, the Hellenic Parliament established the Truth Committee on Public Debt in April 2015, mandating the investigation into the creation and growth of public debt, the way and reasons for which debt was contracted, and the impact that the conditionalities attached to the loans have had on the economy and the population. The Truth Committee has a mandate to raise awareness of issues pertaining to the Greek debt, both domestically and internationally, and to formulate arguments and options concerning the cancellation of the debt.

The research of the Committee presented in this preliminary report sheds light on the fact that the entire adjustment programme, to which Greece has been subjugated, was and remains a politically orientated programme. The technical exercise surrounding macroeconomic variables and debt projections, figures directly relating to people’s lives and livelihoods, has enabled discussions around the debt to remain at a technical level mainly revolving around the argument that the policies imposed on Greece will improve its capacity to pay the debt back. The facts presented in this report challenge this argument.

All the evidence we present in this report shows that Greece not only does not have the ability to pay this debt, but also should not pay this debt first and foremost because the debt emerging from the Troika’s arrangements is a direct infringement on the fundamental human rights of the residents of Greece. Hence, we came to the conclusion that Greece should not pay this debt because it is illegal, illegitimate, and odious.

It has also come to the understanding of the Committee that the unsustainability of the Greek public debt was evident from the outset to the international creditors, the Greek authorities, and the corporate media. Yet, the Greek authorities, together with some other governments in the EU, conspired against the restructuring of public debt in 2010 in order to protect financial institutions. The corporate media hid the truth from the public by depicting a situation in which the bailout was argued to benefit Greece, whilst spinning a narrative intended to portray the population as deservers of their own wrongdoings.

Bailout funds provided in both programmes of 2010 and 2012 have been externally managed through complicated schemes, preventing any fiscal autonomy. The use of the bailout money is strictly dictated by the creditors, and so, it is revealing that less than 10% of these funds have been destined to the government’s current expenditure.

This preliminary report presents a primary mapping out of the key problems and issues associated with the public debt, and notes key legal violations associated with the contracting of the debt; it also traces out the legal foundations, on which unilateral suspension of the debt payments can be based.

The findings are presented in nine chapters structured as follows:

Chapter 1: Debt before the Troika.

Analyses the growth of the Greek public debt since the 1980s. It concludes that the increase in debt was not due to excessive public spending, which in fact remained lower than the public spending of other Eurozone countries, but rather due to the payment of extremely high rates of interest to creditors, excessive and unjustified military spending, loss of tax revenues due to illicit capital outflows, state recapitalization of private banks, and the international imbalances created via the flaws in the design of the Monetary Union itself.
Adopting the euro led to a drastic increase of private debt in Greece to which major European private banks as well as the Greek banks were exposed. A growing banking crisis contributed to the Greek sovereign debt crisis. George Papandreou’s government helped to present the elements of a banking crisis as a sovereign debt crisis in 2009 by emphasizing and boosting the public deficit and debt.

Chapter 2: Evolution of Greek public debt during 2010-2015.

Concludes that the first loan agreement of 2010 aimed primarily to rescue the Greek and other European private banks, and to allow the banks to reduce their exposure to Greek government bonds.

Chapter 3, Greek public debt by creditor in 2015.

Presents the contentious nature of Greece’s current debt, delineating the loans’ key characteristics, which are further analysed in Chapter 8.

Chapter 4: Debt System Mechanism in Greece.

Reveals the mechanisms devised by the agreements that were implemented since May 2010. They created a substantial amount of new debt to bilateral creditors and the European Financial Stability Fund (EFSF), whilst generating abusive costs thus deepening the crisis further. The mechanisms disclose how the majority of borrowed funds were transferred directly to financial institutions. Rather than benefiting Greece, they have accelerated the privatization process, through the use of financial instruments.

Chapter 5: Conditionalities against sustainability.

Presents how the creditors imposed intrusive conditionalities attached to the loan agreements, which led directly to the economic unviability and unsustainability of debt. These conditionalities, on which the creditors still insist, have not only contributed to lower GDP as well as higher public borrowing, hence a higher public debt/GDP making Greece’s debt more unsustainable, but also engineered dramatic changes in the society, and caused a humanitarian crisis. The Greek public debt can be considered as totally unsustainable at present.

Chapter 6: Impact of the “bailout programmes” on human rights.

Concludes that the measures implemented under the “bailout programmes” have directly affected living conditions of the people and violated human rights, which Greece and its partners are obliged to respect, protect and promote under domestic, regional and international law. The drastic adjustments, imposed on the Greek economy and society as a whole, have brought about a rapid deterioration of living standards, and remain incompatible with social justice, social cohesion, democracy and human rights.

Chapter 7: Legal issues surrounding the MOU and Loan Agreements.

Argues there has been a breach of human rights obligations on the part of Greece itself and the lenders, that is the Euro Area (Lender) Member States, the European Commission, the European Central Bank, and the International Monetary Fund, who imposed these measures on Greece. All these actors failed to assess the human rights violations as an outcome of the policies they obliged Greece to pursue, and also directly violated the Greek constitution by effectively stripping Greece of most of its sovereign rights. The agreements contain abusive clauses, effectively coercing Greece to surrender significant aspects of its sovereignty. This is imprinted in the choice of the English law as governing law for those agreements, which facilitated the circumvention of the Greek Constitution and international human rights obligations. Conflicts with human rights and customary obligations, several indications of contracting parties acting in bad faith, which together with the unconscionable character of the agreements, render these agreements invalid.

Chapter 8, Assessment of the Debts as regards illegtimacy, odiousness, illegality, and unsustainability.

Provides an assessment of the Greek public debt according to the definitions regarding illegitimate, odious, illegal, and unsustainable debt adopted by the Committee.
Chapter 8 concludes that the Greek public debt as of June 2015 is unsustainable, since Greece is currently unable to service its debt without seriously impairing its capacity to fulfil its basic human rights obligations. Furthermore, for each creditor, the report provides evidence of indicative cases of illegal, illegitimate and odious debts.

Debt to the IMF should be considered illegal since its concession breached the IMF’s own statutes, and its conditions breached the Greek Constitution, international customary law, and treaties to which Greece is a party. It is also illegitimate, since conditions included policy prescriptions that infringed human rights obligations. Finally, it is odious since the IMF knew that the imposed measures were undemocratic, ineffective, and would lead to serious violations of socio-economic rights.

Debts to the ECB should be considered illegal since the ECB over-stepped its mandate by imposing the application of macroeconomic adjustment programs (e.g. labour market deregulation) via its participation in the Troïka. Debts to the ECB are also illegitimate and odious, since the principal raison d’etre of the Securities Market Programme (SMP) was to serve the interests of the financial institutions, allowing the major European and Greek private banks to dispose of their Greek bonds.

The EFSF engages in cash-less loans which should be considered illegal because Article 122(2) of the Treaty on the Functioning of the European Union (TFEU) was violated, and further they breach several socio-economic rights and civil liberties. Moreover, the EFSF Framework Agreement 2010 and the Master Financial Assistance Agreement of 2012 contain several abusive clauses revealing clear misconduct on the part of the lender. The EFSF also acts against democratic principles, rendering these particular debts illegitimate and odious.

The bilateral loans should be considered illegal since they violate the procedure provided by the Greek constitution. The loans involved clear misconduct by the lenders, and had conditions that contravened law or public policy. Both EU law and international law were breached in order to sideline human rights in the design of the macroeconomic programmes. The bilateral loans are furthermore illegitimate, since they were not used for the benefit of the population, but merely enabled the private creditors of Greece to be bailed out. Finally, the bilateral loans are odious since the lender states and the European Commission knew of potential violations, but in 2010 and 2012 avoided to assess the human rights impacts of the macroeconomic adjustment and fiscal consolidation that were the conditions for the loans.

The debt to private creditors should be considered illegal because private banks conducted themselves irresponsibly before the Troika came into being, failing to observe due diligence, while some private creditors such as hedge funds also acted in bad faith. Parts of the debts to private banks and hedge funds are illegitimate for the same reasons that they are illegal; furthermore, Greek banks were illegitimately recapitalized by tax-payers. Debts to private banks and hedge funds are odious, since major private creditors were aware that these debts were not incurred in the best interests of the population but rather for their own benefit.

The report comes to a close with some practical considerations.

Chapter 9, Legal foundations for repudiation and suspension of the Greek sovereign debt.

Presents the options concerning the cancellation of debt, and especially the conditions under which a sovereign state can exercise the right to unilateral act of repudiation or suspension of the payment of debt under international law.

Several legal arguments permit a State to unilaterally repudiate its illegal, odious, and illegitimate debt. In the Greek case, such a unilateral act may be based on the following arguments: the bad faith of the creditors that pushed Greece to violate national law and international obligations related to human rights; preeminence of human rights over agreements such as those signed by previous governments with creditors or the Troika; coercion; unfair terms flagrantly violating Greek sovereignty and violating the Constitution; and finally, the right recognized in international law for a State to take countermeasures against illegal acts by its creditors , which purposefully damage its fiscal sovereignty, oblige it to assume odious, illegal and illegitimate debt, violate economic self-determination and fundamental human rights.

As far as unsustainable debt is concerned, every state is legally entitled to invoke necessity in exceptional situations in order to safeguard those essential interests threatened by a grave and imminent peril. In such a situation, the State may be dispensed from the fulfilment of those international obligations that augment the peril, as is the case with outstanding loan contracts.

Finally, states have the right to declare themselves unilaterally insolvent where the servicing of their debt is unsustainable, in which case they commit no wrongful act and hence bear no liability.

People’s dignity is worth more than illegal, illegitimate, odious and unsustainable debt.

Having concluded a preliminary investigation, the Committee considers that Greece has been and still is the victim of an attack premeditated and organized by the International Monetary Fund, the European Central Bank, and the European Commission. This violent, illegal, and immoral mission aimed exclusively at shifting private debt onto the public sector.

Making this preliminary report available to the Greek authorities and the Greek people, the Committee considers to have fulfilled the first part of its mission as defined in the decision of the President of Parliament of 4 April 2015. The Committee hopes that the report will be a useful tool for those who want to exit the destructive logic of austerity and stand up for what is endangered today: human rights, democracy, peoples’ dignity, and the future of generations to come.

In response to those who impose unjust measures, the Greek people might invoke what Thucydides mentioned about the constitution of the Athenian people:

As for the name, it is called a democracy, for the administration is run with a view to the interests of the many, not of the few” (Pericles’ Funeral Oration, in the speech from Thucydides’ History of the Peloponnesian War).

La entrada Executive Summary: Greek Public Debt Audit report aparece primero en Auditamos Grecia.

Hellenic Parliament’s Debt Truth Committee:

Presentation of the Preliminary Findings

The Hellenic Parliament’s Debt Truth Committee will announce on 17-18 June 2015 the preliminary findings of its works, examining the legality and sustainability of the Greek public debt.

The Committee’s works will begin on Wednesday, 17 June 2015 (10:30am)), at the Senate Hall of the Parliament. The opening session will be addressed by

• Mrs. Zoe Konstantopoulou, President of the Hellenic Parliament

• Mrs. Sofia Sakorafa, Member of the European Parliament

• Dr. Eric Toussaint, Debt Truth Committee Scientific Coordinator

• Other state officials and guests from Greece and abroad

at the presence of Prime Minister, Mr. Alexis Tsipras.

A summary of the preliminary findings will be presented at the opening session, while a detailed presentation of the report, chapter by chapter, by members of the Debt Truth Committee will follow.

The works of the Committee will continue on Thursday morning at 10:30 and conclude with a press conference, which will be held at the Hellenic Parliament Lounge (“Entefktirio”) at 16:00.

The works will be open for the media, while interpretation will be available for foreign press correspondents and press foreign guests.

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Last month Greece began a Debt Audit process which aims to analyse its debt on the basis of it being illegal, illegitimate, odious or unsustainable, through the Greek Debt Truth Committee. This international group has representatives from the Spanish Citizen Debt Audit Platform (PACD) and people from related groups such as the Committee for the Abolition of Third World Debt (CADTM) or the Observatory of Debt in Globalization (ODG).

The PACD has launched a new monographic blog www.AuditamosGrecia.org in order to monitor this process, to bring it closer to citizens, to find similarities with the indebtedness’ process in the Spanish State and, above all, to show the injustice of the debt mechanisms, with focus on the Hellenic country. From now on, we will publish official information, interviews, analysis of the situation and voice our strong support for the Greek people, among other related contents.

We invite you to be part of this citizen audit project, which will guide us through the events surrounding Greece and the Audit of its Public Debt, which may mark a before and after in the relations among indebted countries and their creditors.

We are also taking this opportunity to send our message to the Greek people:
“You are not alone, We are all Greece!”

La entrada Introduction: “We are auditing Greece” aparece primero en Auditamos Grecia.

On March 4^th, Zoi Konstantopoulou officially presented in the Parliament the Truth Committee about Greek public debt: the “Debt Truth Committee.”

This committee is made up about thirty international and national experts, economists and lawyers, amongst others, with the mission of analysing if the Greek public debt is illegitimate, illegal, odious, or unsustainable. For this, the different concepts have to be understood: an illegitimate debt is a debt contracted against the general interest and in favour of a privileged minority; an illegal debt is a debt contracted without respecting a country’s laws and/or Constitution; an odious debt is a debt contracted in conditions that imply serious violations of fundamental human rights, guaranteed by a series of treaties and international conventions, from which States and institutions cannot escape because they ratified them; an unsustainable debt is a debt whose reimbursement prevents public powers from guaranteeing a country’s citizens the ability to exercise their fundamental human rights.

This committee has a double objective; on one hand to provide response elements and arguments to the Greek government for an eventual suspension or annulation of the debt, and on the other hand, elements for mobilisation and awareness of the citizens of Greece and the rest of the world.

The committee will analyse all debt contracted by Greece since mid-1990 until the present day, taking into account that over the last five years, the main creditors are the troika actors. That is to say, the FMI, 14 European countries that lent money to Greece since 2010, the European Central Bank, the European Commission, and the European Stability Fund. They are the different creditors of Greece, and they represent more than 80 percent of Greek public debt.

The committee, with 15 international members and 15 Greek members, is organised in different working groups that analyse the Greek debt’s creditors, from different points of view: macroeconomics, finance and the impact on human rights.

1. Pre-Troika Debt: Leonidas Vatikiotis, Michel Husson, Maria Lucia Fattorelli, Nikos Strombols and Zoe Georganta.
2. Evolution of Greek public debt from 2010 to 2105: Leonidas Vatikiotis, Michel Husson, Maria Lucia Fattorelli, Nikos Strombols and Zoe Georganta.
3. Greek public debt in 2015, by creditor:
   • Bilateral: Leonidas Vatikiotis and Eric Toussaint.
   • IMF: Christina Laskaridis.
   • EFSF: Sergi Cutillas and Daniel Alabarraecín.
   • ECB: Olivier Bonfond and Diego Borja.
   • Private creditors: short term / long term (Fotis Goutziomitros and Patrick Saurin).
4. Debt audit and accounting evidence: Nikos Strombols, Zoe Georganta, Maria Lucia Fattorelli, and other Greek auditors.
5. Social consequences of the policies imposed by creditors and consequences on the commons (State patrimony, etc.): Christina Laskaridis, Sofia Tzitzikou, Héraclès Aktypis, Michel Husson, Ozlem Onaran, Sonia Mitralias, and Stavros Tombazos
6. Assessment of debts with respects to: Illegitimacy, Odious nature, Illegality, and Unsustainability: Renaud Vivien.
7. Macroeconomic argument about debt sustainability: Michel Husson y Ozlem Onaran.
8. Options and requests concerning the cancellation of the debt: Ilias Bantekas, Professer Kassimatis, Raphael G. A., Renaud Vivien

The committee will be publishing the preliminary works to guarantee transparency during the process of analysis. Likewise, the committee has foreseen to finalise their work with the release of a report and an international press conference next June 18^th in Athens. The report will expose their conclusions about the audit and Greek public debt as well as arguments for the Greek government for not paying public debt.

La entrada “Debt Truth Committee” about the Greek Public Debt aparece primero en Auditamos Grecia.