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Six key points about Greece’s debt

Greece’s election has delivered a clear rejection of Troika-imposed austerity and the EU’s approach to the crisis. Here are six key points about Greece’s debt.

Photo: Chaouki/Flickr

Photo: Chaouki/Flickr

1) European banks were bailed out, not the people of Greece

It is not the people of Greece who have benefitted from bailout loans from the IMF, EU and European Central Bank, but the European and Greek banks which recklessly lent money to the Greek State in the first place.

When the IMF, European and ECB bailouts began in 2010, €310 billion had been lent to the Greek government by reckless banks and the wider European financial sector. Since then, the ‘Troika’ of the IMF, EU and European Central Bank have lent €252 billion to the Greek government.[1] Of this, €34.5 billion of the bailout money was used to pay for various ‘sweeteners’ to get the private sector to accept the 2012 debt restructuring. €48.2 billion was used to bailout Greek banks following the restructuring, which did not discriminate between Greek and foreign private lenders. €149.2 billion has been spent on paying the original debts and interest from reckless lenders. This means less than 10% of the money has reached the people of Greece.

Today the Greek government debt is still €317 billion. However, now €247.8 billion – 78% of the debt – is owed to the ‘Troika’ of the IMF, European Union and European Central Bank, ie, public institutions primarily in the EU but also across the world. The bailouts have been for the European financial sector, whilst passing the debt from being owed to the private sector, to the public sector.

Greece government debt payments








Principal (minus payments covered by new T-bill issuances)






















Who the Greek debt is owed to, end-2014

Amount owed


€27 billion


€194.8 billion[2]


€26 billion


€69.2 billion[3]


€317 billion


2) It was clear in 2010 that the Troika programme wouldn’t solve the problem of Greek debt

When the ‘Troika’ programme began in 2010 Jubilee Debt Campaign warned that this was repeating mistakes made in developing countries in the 1980s and 1990s. Bailing out European banks rather than making them cancel debts would ensure the private speculators would get repaid, whilst the public would pay the costs of having to cancel debts in the future. Austerity would crash the economy, increase poverty and unemployment, and increase the relative size of the debt. This is exactly what has happened.

This was also known within the institutions conducting the bailout. Leaked minutes of the IMF Board meeting in 2010 which decided on the bailout showed that many countries were opposed and thought debts should be cancelled instead. Most strikingly, drawing on their own experience of failed bailouts in the late 1990s and early 2000s, Argentina argued that a “debt restructuring should have been on the table”. Brazil said the IMF loans:

“may be seen not as a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bailout of Greece’s private debt holders, mainly European financial institutions”.

Iran said it would have expected a debt restructure to be discussed, as did Egypt, which said the IMF’s growth projections were “optimistic”, a word repeated by China. The growth projections were extremely optimistic; Greece’s economy is now 19% smaller than the IMF said it would be, having shrunk by more than 20% since the start of 2010.

India warned that the scale of cuts would start a spiral of falling employment which would reduce government revenue, causing the debt to increase, and making a future debt restructuring inevitable. They did; unemployment in Greece is over 25%, with almost two-in-three young people out of work.

The combination of the crashing of the economy and the Troika debts means Greek government debt has grown from 133% of GDP in 2010 to 174% today.

The bailout and austerity programme did not take place because it was thought it would help the Greek people or reduce the size of the debt. It was done to save European and Greek banks and protect the profit of speculators.

3) Syriza’s proposals have a clear precedent

Syriza is proposing a debt conference based on the ‘London conference’ which agreed debt cancellation for Germany in 1953. The 1953 conference agreed to cancel 50% of Germany’s debt to governments, people and institutions outside the country, and the payments on the remainder were made conditional on Germany earning the revenue from the rest of the world to pay the debt. Greece was one of the countries which took part in the debt cancellation.

Syriza is proposing debt cancellation through a similar conference (some have suggested of around 50%, though there is no policy officially stated), with the remainder of the debt to be paid over several decades to ensure that Greece can continue to repay.

The German debt deal in 1953 was very successful. It supported German economic recovery, and gave an incentive for creditors to trade so that they would be repaid.

4) The 2012 private creditor write-down was a flawed solution

In 2012, two years after the bailouts began, it was finally accepted that Greece needed some debts cancelling. An agreement was reached with many private creditors to cancel 50% of the debt owed to them. However, by this stage, the IMF, EU and ECB had been bailing out these reckless lenders for the previous two years, so many had already been repaid. None of the debts owed to the public institutions were included in the debt reduction.

Moreover, whilst the IMF, EU and ECB debts were excluded, debts owed to Greek banks and financial institutions, including pension funds, were not. The 50% debt reduction bankrupted these banks, so the Greek government borrowed more money from the IMF, EU and ECB to bailout the banks. The pension funds which lost large amounts were not refunded.

Finally, whilst a large majority of private creditors agreed to the debt reduction, various vulture funds refused to do so. These speculators bought up Greek debts owed under British law cheaply and have continued to demand to be paid in full. The total amount of ‘vulture fund’ debt which avoided the agreed restructuring was €6.5 billion. The Greek parliament passed legislation to enforce the agreed debt reduction on all bonds held under Greek law, but the British government refused to do the same. The vulture funds have continued to be paid, making a huge profit on the amount they bought the debt for. This was effectively profit being given to the vultures by the IMF, EU and ECB, which has left a debt for the Greek people.

At the end of 2011, before the ‘debt relief’, Greece’s government debt was 162% of GDP. Today it is 174%.

5) If Greece defaults, it will not have to leave the Euro

Syriza’s policy is to hold a conference to negotiate debt reduction, rather than a default on the debt. However, if a default did take place, there is no economic reason why this would mean Greece would leave the Euro. Forcing Greece out of the Euro would be a political retaliation to a default.

Even if Greece were forced out of the Euro it could continue to use the currency, just as many countries use the US dollar without the approval of the US government. What other Eurozone members could do is withdraw European Central Bank lending to Greek banks, so that all Euros in circulation in Greece would have to already be there, or come from income from trade.

Whilst Syriza has said it will not unilaterally default on the debt, defaults tend to be economically beneficial for the country concerned.

At the end of 2001 Argentina defaulted on unaffordable debt payments. In 2000, Argentina’s debt payments had reached 45% of exports ($14 billion),[4] double the amount the IMF and World Bank regard as payable.[5]  At the time the Argentine people had experienced three years of recession. The percentage of the population living on less than $2 a day had quadrupled from less than 5 per cent in the early 1990s to over 20 per cent.

Following the default, the Argentine economy began growing again, poverty fell rapidly and the country became more equal.


Microsoft Word - Six key points about Greek debt_01 15.docx

6) The way the world deals with debt crises is not working

The Greece and European debt crisis is the latest in a long-line of debt crises which have affected all continents since bank lending was liberalised in the 1970s. The African and Latin American debt crises of the 1980s and 1990s were followed by the East Asian Financial Crisis of 1996-1998, Russian default in 1998 and Argentina default in 2001.

The current case in the US courts, where vulture funds have forced Argentina to default on its debts, has convinced developing countries that change is needed and rules need to be introduced through the UN for resolving debt crises. In September 2014 a UN resolution was passed by 124 votes for to 11 against to establish a new legal framework for the debt restructuring process (such as a bankruptcy procedure for governments). The first negotiations in this process are taking place in early-February 2015.

However, despite the clear failures to resolve debt crisis in Europe, the EU decided to abstain on the vote, with the UK and Germany amongst those who broke from this collective position and voted against. Such governments are acting as if the international debt system is working fine, when current events in Greece and Argentina show it is clearly broken and in need of major overhaul.

View and print as a PDF >>



[1] The IMF lent €20.1 billion in the first programme and €12 billion in the second. Some has been repaid, so debt today is €27 billion. The EU has lent €194.8 billion, none of which has been repaid. ECB has bought up bonds on private markets and has not said how much has been bought and repaid. However, IMF documents show €26 billion is due to be repaid to the ECB between 2015 and 2030.

[2] €52.9 billion from the first programme and €141.9 billion from the second programme EU debts are due to begin to be repaid in 2020.

[3] Implied from the amount left over from the other creditors

[4] World Bank. World Development Indicators database.

[5] The IMF and World Bank say that once foreign debt payments reach 15-25 per cent of exports, a government is likely to be unable to pay its debts. In reality, levels less than this can still cause huge suffering or lead countries into defaulting.


  • jeffgood

    Tim, excellent work. And thank you. What amazes (and discourages) me is that this article, put together by a private citizen on his own time, with his own resources and for no compensation, provides much more relevant information about the Greek financial situation than anything I have read in mainstream, for profit publications. To this day, almost all news organizations begin their “Grexit” coverage with a description of the prior bailout of “Greece” or “the Greek government” or the “Greek people”. In America, newspapers do the same thing when they describe TARP or HAMP programs as “homeowner assistance” or “a bailout of subprime borrowers”. These descriptions are at best misleading and, at worst, lies. Only debt forgiveness is a “bailout” of the debtor; everything else is a refinance for the sole benefit of the debtor’s creditor — in this case, private banking interests who control our government institutions and orchestrated the bailout of THEIR bad loans while claiming it was all about helping the “Greek people”.

  • has Varoufakis read this? Nice work Tim.

  • sonerismail

    Excellent work. It helps to understand how Greek crisis perpetuated and crushed the Greek society.


    Mr. Jones, of course the whole Troika/banking financial system is foul BUT the most important thing –which nobody seems to acknowledge– is that even if all of Greece’s debt is cancelled, the way this country was and STILL IS operating, is not only rotten and corrupted but also the mechanisms that make it (barely) stand on its feet are so outdated that I’m sure we are going to stand on the exact same spot in 50 or so years. Greeks have not the necessary discipline as north-europeans such as the Germans have to reconstruct the country. So, reforms are NECESSARY either the country is in debt or not. And this is the truth that no one wants to admit. Oh, and by the way, did you know that more than half of SYRIZA are either ex-PASOK members (if you know what that means) and radical stalinists?

    • bio2811 .

      North-european mentality strongly opposes corruption which is solely inherent in southern country members’ mindset. Siemens and LuxLeaks confirm.

      • SUNNY

        I am not taking sides here, just trying to look at the bigger picture. Of course there’s corruption in other countries (I wrote that in my comment above about the troika/financial/banking system). Unfortunately corruption will always exist, it’s part of the human nature. The question is if it can be controlled up to some point.

        The case with Greece is that it is a small country, it had no productive mechanisms to support itself and the corruption that evolved from that system in unevenly large. I am not against a left-wing government that is willing to fight corruption and get Greece on a clean productive track, but I can not support a party like SYRIZA for the reasons i mentioned above plus i believe they do not have either good intentions or a vision for Greece.

        • bio2811 .

          This is a more modest approach which I am inclined to agree with. The fact is that Greece did not meet the very criteria to enter the EU in the first place and allegedly achieved this by falsified statistics with the tolerance of both corrupted Greek governments and EU officials, for obvious reasons. Huge profits are generated from the long anticipated Greek crisis, whereas no European tax-payer is actually being financially burdened by the bail-out attempts, as it transpires by mainstream media propaganda.

          It is common knowledge that all major economies worldwide are in debt. What is different in Greece, is that it has been led to engage in extremely disproportionate debts, both by the ECB and the IMF, which makes them totally unsustainable. I share your viewpoint regarding the dubious SYRIZA’s intentions, however, they have a point by asking the 1953 Germany’s precedent to be implemented. Part of Greek public debt should be cancelled and a more rational sustainable agreement should be reached, meaning that Greece should submit payments once economy is re-established and growth is attained. Greece was among Germany’s creditors and co-agreed to erase 50% of German debt back then, thus contributing to Germany’s recovering after WWII and economic advancement. The plausible thing to do is to configure internal economy, ensure survival and sustainability and on a second level, address public external debt.

          To wrap it up, from my perspective, it is the very foundation of the EU which is at question. EU has missed its orientation as a federation of countries, instilled with the same humanistic concepts, sharing a great deal of common history and being characterised by fraternization and solidarity. I think the EU has evolved into an austerity imposing mechanism, functioning in all sorts of meticulously orchestrated unorthodox and non-constitutional ways to implement austerity and drain european peoples, strip them off their labour rights, trigger humanitarian crisis and radical impoverishment, only in order to maintain and grow a financial elite. Ground-breaking amendments need to be made towards a more humanistic direction and this can be achieved only by contemplating on what kind of alliance/federation/organisational pattern we want for Europe.

          • μεταναστης

            100 % correct!

          • TYPO: Should be ‘falling employment’
            “India warned that the scale of cuts would start a spiral of falling unemployment which would reduce government revenue, causing the debt to increase, and making a future debt restructuring inevitable. They did; unemployment in Greece is over 25%, with almost two-in-three young people out of work.”

          • JonathanJDC

            Thanks for this – now corrected!

  • Shane McGill

    “..banks which recklessly lent money to the Greek State.”
    Oh, the poor and innocent Greek state who relentlessly had to take all that money!

  • Mike

    What I have not seen in all the discussion on Greece’s debt
    and its treatment by the troika is that we now have a European country being
    treated as the poor world countries have been treated for about 50 years ie
    with the neo-liberal medicine, privatise, obey the market whoever it hurts,
    reduce taxes on the richer citizens, remove benefits and open up barriers to

    50 years of field testing of these ideas has demonstrated,
    without any doubt being possible, that they cause pain to those least able to
    bear it and cause the national debt to increase not decrease.. This is proof, If
    one needed it, that the dominant school of economics is a belief system and not
    a science

    It is time the neo-liberal economists were ousted from
    control of the University departments in the developed world. We may then start
    to reverse the growth in inequality since the time of Thatcher/Reagan.

  • tsilibaris

    so if Greece defaults now will it be able to obliterate the debt or not??

  • Keine_Euro_Bonds

    Jubilee Debt Campaign’s statement “90 % to the banks — 10 % to the Greek people” is not true.
    First, the statement that Geece received 252 bn USD by Euro governments, and
    the ECB , is unsufficient: the truth is that Greece received, in plus,
    110 bn USD by ELA of the ECB, plus another 110 bn USD by ECB’s Target2.

    Please look at, Prof. Sinn’s (of Germany) website.

    There you will find an Adobe.pdf “Die griechische Tragödie” (“Greek tragedy”), and there you will find the info:

    1. The comprehensive sum mentioned above has to be particularly reduced.

    2. A rather precise evaluation on what happened to all the money
    transferred to Greece. The net transferral was 325 bn EUR (= 360 bn
    USD). One third of that sum went to the banks. Another one third was
    spent to improve Greek standard of living (to live better on the cost of
    others). The last third was spent to finance the Greek exodus of
    capital: rich Greeks bought real estate objects in London, Paris,
    Berlin, …. or simply transferred the money to their foreign banking
    accounts, until Greek government introduced capital transactions
    controls a few weeks ago.

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