Handelsblatt: The memoranda rescued European banks, not Greece

Handelsblatt: The memoranda rescued European banks, not Greece

Athens, May 5, 2016/Independent Balkan News Agency

By Spiros Sideris

To the question where did the money of the memorandum loans go answered the research of Berlin’s ESMT, published by Handelsblatt, at a critical juncture in the negotiations. European banks and private creditors were the ones that benefited.

We already knew that, but now it is confirmed by economists of a German private institution, for the first time with a precise calculation of the elements of each tranche of the memoranda in the last five years:

From the money of the first two “salvation of Greece” programmes, amounting to a total of 215.9 billion euro, only 9,7 billion, or less than 5%, resulted in the Greek budget and hence directly to Greek citizens. 95%, that the lion’s share went to the rescue of European banks.

More specifically, the EUR 86.9 billion were spent on servicing old debts, 52.3 to repay interest and 37.3 billion for the recapitalization of Greek banks.

This is the conclusion of the 24-page survey of the “European School of Management and Technology” (European School of Management and Technology – ESMT) in Berlin, which was published yesterday by the valid German economic newspaper Handelsblatt.

A revelation that comes at a critical juncture of the negotiation and at a time when Athens is struggling to create a positive for its own demands climate in Europe, given the tough IMF stance and with a question mark as to how far will Schauble “pull the rope”.

The survey shows that Europe and the IMF rescued the past years mainly banks and other private creditors, as most of the memorandum loans were used to service old debts and interest payments.

Essentially, European taxpayers rescued private investors, argues the head of ESMT Jörg Rocholl. “With the aid packages were saved mainly European banks”, Rocholl stresses in the German newspaper, who participates in the German Ministry of Finance Advisory Board.

The “European School of Management and Technology” (ESMT) in Berlin presents for the first time in a 24-page research a detailed account: Its economists analyzed each loan separately for weeks to find out where did the money go.

“This is something that everyone assumed, but few knew, and is now confirmed by this research: For six years, Europe is trying in vain to end the crisis in Greece with loans and constantly requires tougher measures and reforms. The cause of failure however, obviously lies less in the side of the Greek government and more in the design of the assistance programs”, notes the German daily.

As the newspaper notes, these calculations raise doubts about the design of assistance programs, since with the loans were served earlier debts, even though Greece is de facto bankrupt since 2010.

Especially the salvation of Greek banks proved disastrous for taxpayers. Overall, they channeled from the two aid packages EUR 37.2 billion to Greek banks. But this assistance was for nothing as meanwhile after the recapitalization of 2013 they lost almost 98% of their value in the stock market.

“The haircut of Greek debt would have been more appropriate, is already at the beginning of the assistance programs in 2010”, Rocholl says and adds: “The German government would have more likely needed to support German banks with state aid, but money it would at least have been clear were the money are going”.

The Director of ESMT noted with emphasis that “many conflicts between Berlin and Athens would thus had been avoided and the cost for German taxpayers would be less”.

According to the Handelsblatt, the German government defends the rescue policy even though the figures speak a different language. Of course it is correct that most of the money from the assistance packages ended up to European banks”, says an unnamed government official to the German newspaper.

In the wake of the collapse of Lehman-Brothers, however, anything else could have lead to severe turbulence, maintains the same source and points out that the risk of transmission results from the financial system and not by the Greek economy. Therefore, the money in Greece were to be able to serve and reassure its investors.

Along the same lines, the newspaper said, in previous years were the arguments of Merkel and Schäuble, that an early haircut in 2010 would have been counterproductive as it would save the Greek government the pressure to make the necessary reforms. However, given the continuing dispute between Greece and its creditors, there are doubts about the effectiveness of this approach, Handelsblatt writes.