“Breakthroughs” for Greece actually mean more debt for longer

There are many sad components of the Greek crisis and only on the 9th of this month I pointed out how the whole episode is like groundhog day or more realistically year. An example of this occurred late last night.  Here is Eurogroup President Jeroen Dijesselbloem.

We achieved a major breakthrough on which enables us to enter a new phase in the Greek financial assistance programme.

We have learned to be very careful with phrases like “major breakthrough” as the original hype of “shock and awe” reminds us. The Financial Times also decided to join in with the hype.

Greece reaches breakthrough deal with creditors

Care is needed with headlines written at 5 am after a long night and as discussed above particular care is needed with Greece so let us take a look at the deal.

Greece needs more funding

This is a regular feature of the ongoing story where despite all the hype Greece remains unable to fund itself in the financial markets but needs to refinance in debt. In particular the first rule of Greek fight club is on its way. That is that the ECB (European Central Bank) must always be repaid whatever the circumstances! Some 3.5 billion Euros is required by July if we include a component for the IMF (International Monetary Fund) as well. This meant that Greece did have something of a hold on its creditors but it has not used it. Also it is hard to avoid the thought that two of the main creditors the ECB and the IMF always insist on 100% repayment of capital which of course blocks debt relief.

The details of the funding to be provided are shown below.

The second tranche under the ESM programme amounting to EUR 10.3 bn will be disbursed to Greece in several disbursements, starting with a first disbursement in June (EUR 7.5 bn) to cover debt servicing needs and to allow a clearance of an initial part of arrears as a means to support the real economy. The subsequent disbursements to be used for arrears clearance and further debt servicing needs will be made after the summer.

You may note that this only mentions debt servicing and clearing arrears and not boosting the Greek economy for example. This is a rather dystopian style future which seems to be all about the debt and not about the people. Indeed those who have claimed that this whole process is like something from the world of the novel Dune do get support from this.

Do the Greek people get anything?

This does not seem to be much of a reward.

The Eurogroup also welcomes the adoption by the Greek parliament of most of the agreed prior actions for the first review, notably the adoption of legislation to deliver fiscal parametric measures amounting to 3% of GDP that should allow to meet the fiscal targets in 2018,

Ah so austerity is now spelt “fiscal parametric measures” in the way that the leaky Windscale nuclear processing plant became the leak-free Sellafield. What do the Greeks have to do? Well here it is.

the pension reform

Back on the 9th of this month I pointed out what this actually means in practice.

Sunday night of overhauls of the Greek tax and pension systems…..All 153 coalition lawmakers backed the legislation, which is worth 5.4 billion euros in budget savings.

In other words the Greek economy will be given another push downwards. This is happening in a country which has not be growing at over 2% per annum since 2012 in the original “shock and awe” “breakthrough” but as of the latest data has done this.

Available seasonally adjusted data indicate that in the 1 st quarter of 2016 the Gross Domestic Product (GDP) in volume terms decreased by 0.4% in comparison with the 4 th quarter of 2015, while it decreased by 1.3% in comparison with the 1 st quarter of 2015.

The economy is still shrinking in what we must now call a DEPRESSION. This is a human crisis on a large-scale which seems to have been forgotten in the hype above. Also anyone with any sense can see that such a situation makes the debt ever more unaffordable and in that sense is self-defeating.

What about debt relief?

The cat was put amongst the pigeons by this from the IMF.

So Greece is the new Japan or at least it would be. Except of course Japan has surpluses elsewhere and can finance itself extremely cheaply and these days even be paid to finance itself. Of the two graphs it is the second which is the most significant and let me show you the IMF text on it.

Gross financing needs cross the 15 percent-of-GDP threshold already by 2024 and the 20 percent threshold by 2029, reaching around 30 percent by 2040 and close to 60 percent of GDP by 2060.

Firstly the situation is now so bad the numbers which first went to 2020 and then 2040 now go to 2060 in a confirmation of my To Infinity! And Beyond! Theme. But also there is a debt filled future where in 2060 Greece will be spending 60% of its GDP on financing its GDP. This even had the IMF singing along to the nutty boys.

Madness, madness, they call it madness
Madness, madness, they call it madness
I’m about to explain
A-That someone is losing their brain.

What have they done?

Right now they have done nothing at all except make sure that the left hand of the Euro area taxpayer ( represented by the European Stability Mechanism) pays out the right hand of the Euro area taxpayer as represented by the ECB. Or an example of round-tripping.

Of course the last effort at debt restructuring did not go so well mostly because of the first rule of ECB fight club. Here is the Jubilee Debt Strategy.

At the end of 2011, before the ‘debt relief’, Greece’s government debt was 162% of GDP

Ah so the “breakthrough” is for it to rise to 250% by 2060?! Most people can see the problem there. However rather than a solution what we have seen overnight is yet more can-kicking as nothing will be done until 2018. As Oasis so aptly put it Definitely Maybe.

For the medium term, the Eurogroup expects to implement a possible second set of measures following the successful implementation of the ESM programme.

Oh and considering the track record so far this is simply breath-taking.

For the long-term, the Eurogroup is confident that the implementation of this agreement on the main features for debt measures, together with a successful implementation of the Greek ESM programme and the fulfilment of the primary surplus targets as mentioned above, will bring Greece’s public debt back on a sustainable path over the medium to long run.


So we see that the “breakthrough” is in fact yet another example of kicking the problem a couple of years ahead. This passes a few elections and the UK Brexit referendum but will weaken the Greek economy even more. It is a particular shame that at least part of the Financial Times seems to have joined the trend to copy and pasting official communiques.

Meanwhile ever more heroic efforts are required from the ordinary Greek for what exactly? Every number is fudged as for example the IMF view on trend growth goes from -0.6% per annum to 1.3%. If this were true it would be an oasis of good news in a desert but the truth is that this is backwards financial engineering so that the debt numbers do not look even worse. A bit like this really from the IMF.

it is no longer tenable to base the DSA on the
assumption that Greece can quickly move from having one of the lowest to having the highest productivity growth rates in the eurozone.

Hands up anyone who actually believed that?

Meanwhile let me end with some lighter relief even if it is of the wry variety. I need to pick my words carefully so let me say that there have been rumours that the Clintons ( yes those 2…) never had a loss making futures trade putting them ahead of Buffett and Soros. Well this does not apparently apply to all the family. as if their son-in-law had not closed large losses on his Greek bond fund he might be in profit today.




16 thoughts on ““Breakthroughs” for Greece actually mean more debt for longer

  1. yah I saw that article on the Beeb propaganda site

    MSM just proving they’re skilled with crayon again

    no checking , no critical thinking

    Our poor Greek friends , time you realized the EU is not yer buddy – they’re your torturer – true Stockholm syndrome in action

    Financial Times = crayon journalism



    • Hi Forbin

      I did spot an example of even worse behaviour from the BBC Website. It was bad enough calling the Greek deal a “Landmark” but when I looked for the article later I noted that the word “Landmark” had been removed. So in the light of publicity claims are made, but later on redacted, what could go wrong?

  2. “Greece’s public debt back on a sustainable path over the medium to long run.”

    in the long run we’re all dead


  3. Anyone who votes to “Remain” subjects of these utterly soulless bastards deserves a good helping of what Greeks are getting, as a lesson.

    • Yes, but those of us that want out also get the same…
      I think that overly kicked battered and dented can is going to hit a fairly substantial ultra right wing wall any time now.
      These shenanigans can’t go on too much longer can they?

  4. “We have learned to be very careful with phrases like “major breakthrough” as the original hype of “shock and awe” reminds us.”
    We have to be more careful with the phrase, “Financial assistance” which seems to mean, “Plunder to recompense irresponsible lenders.”

    • Hi therrawbuzzin

      We need to be careful with all of the phrases which come from political rhetoric. I was watching Sky News 30 minutes or so ago when the UK aid minister Andrew Walker MP asserted that no UK aid goes to corrupt countries. A blatant lie was left unchallenged.

      As to Greece just over a year ago the Jubilee Debt Campaign published this.

      “Since 2010, the IMF, European governments and the European Central Bank have lent €252 billion to Greece. Over the same period, €232.9 billion has been spent on debt payments, bailing out Greek banks and paying ‘sweeteners’ to speculators to get them to accept the 2012 debt restructuring. This means less than 10% of the money has been used for anything else.

      In 2010, virtually all Greek government debt was owed to private entities such as banks. Today 78% is owed to the public sector, primarily people in other Eurozone countries, but also throughout the world through the IMF’s loans.”

      A bailout of who?

  5. The FT has become a comic on all this. It’s main role is to troll anyone who thinks any thought that substantially challenges the establishment. BBC is just a tax on poor people to make them think they are the problem.

    As to the Greeks ;do they think sociopaths will stop taking? That they care how many Greeks die? Is the Euro worth it? Dying on your knees worse than living on your feet?

    • Hi bedfont

      The other problem the FT has is that it is consistently wrong on the big issues. As to its support for the UK joining the Euro it seems to be nothing to do with those that we there then ( Robert Peston, Stephanie Flanders..) but of course it was too early for AI. Oh well….

      As to Greece Elton John was right that “Sorry seems to be the hardest word” as a lot in authority need to say it.

  6. The Clintons, I suspect there will be more Panama papers fallout. If the Democratic party was their priority, Hilary would stand aside and let Trump’s strongest challenger (as shown in polls) compete for POTUS.

  7. Greece is in a debt trap and must dance to the creditor’s tune or default. If they default, the question is whether they can collect enough tax to pay politicians, civil servants and pensioners ?

    Either way, there will be no accountability for irresponsible lenders who have offloaded Greek bonds onto the ECB or the irresponsible politicians who misspent the money and probably pocketed a big cut thereof.

    • Hi ExpatInBG

      The saga rolls on and on and one of the factors no doubt is to let the guilty disappear into the distance and be forgotten…

      As to the Clintons well an issue seems to have returned today. From the Washington Post.

      “The State Department’s independent watchdog has issued a highly critical analysis of Hillary Clinton’s email practices while running the department, concluding that she failed to seek legal approval for her use of a private email server and that department staff would not have given its blessing because of the “security risks in doing so.”

      “The FBI investigation into whether Clinton mishandled classified material through her use of the private server in her home in suburban New York is still underway. FBI Director James B. Comey has said there is no “external deadline” for concluding that probe, but he acknowledged that there is pressure to wrap up the matter promptly and thoroughly.”

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