This site is for archive purposes. Please visit for latest updates
Go to Top

Greece, Its International Creditors and the Euro

Sabri Öncü, T. (2015) “Greece, Its International Creditors and the Euro“, Naked Capitalism Blog, 17 February.


Yves here. This is an excellent background piece on how Greece got where it is and how its various bailouts were structured. It also helps explain the past and current roles the various members of the Troika play and discusses the prospects for Greece achieving its aims.

By T ([email protected]), a financial economist based in Istanbul, Turkey who was recently the Head of Research at the Centre for Advanced Financial Research and Learning, Reserve Bank of India. Original published on February 14 2015 in the Indian journal Economic and Political Weekly

Can the Syriza government in Greece maintain an impossible triangle: (1) stay in power, (2) reverse austerity, and (3) stay in the euro? It will all depend on whether the European Union sees itself as a progressive ethical project of civilisation based on liberal market principles or as an anti-democratic imperialist project of international finance capital.

On 25 January, Syriza won the Greek elections but fell two seats short of the 151 seats it needed to form the government on its own. Subsequently, it formed a coalition government with the 13-seat Anel party the next morning. Syriza (an acronym of Synaspismós Rizospastikís Aristerás) is a coalition of the radical left as its Greek name indicates. Anel (Independent Greeks) is a conservative nationalist party which opposes austerity. Alexis Tsipras is now the Prime Minister of Greece whereas the economist Yanis Varoufakis is the current fi nance minister.

Since the formation of the new government in Greece, Europe is in flames and the world is watching. Consequently, Tsipras, Varoufakis, the European Union (EU), the Eurogroup and the Troika have become household names. (The “Troika” consists of the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF).) The EC is the executive body of the EU. The Eurogroup is a conference of finance ministers of the 19 euro area (eurozone) member-states for the discussion of matters related to the euro.

Macroeconomic Adjustment Programmes

The Eurogroup provided the bilateral eurozone member-states loans pooled by the EC into the so-called Greek Loan Facility (GFL). The €77.3 billion GFL was part of a 2010 joint “financial assistance (bailout loan)” package, with the IMF committing an additional €30 billion. Provided on 2 May 2010, these bailout loans were made to “support” the fi rst Macroeconomic Adjustment Programme (MAP) for Greece. The loans were to be disbursed from May 2010 to June 2013 in a certain number of tranches.

In addition, the Eurogroup controls the European Financial Stability Facility (EFSF) and, its successor, the European Stability Mechanism (ESM). Established in June 2010, the EFSF was a private company — a special purpose vehicle — created as a temporary crisis resolution mechanism. Established in September 2012, the ESM is an international organisation created as a permanent rescue mechanism with the same mission as the EFSF: to “safeguard” financial stability in Europe by providing bailout loans to the eurozone countries. The ESM and EFSF now share the same staff and offices.

Unlike the GFL and like the EFSF, the ESM funds its operations by issuing money market instruments as well as medium and long-term debt. Currently, the ESM is the only rescue mechanism. The EFSF will not provide bailout loans to any more countries. However, it will continue its operations to make payments on the EFSF debt, roll over the EFSF debt since the loans it made are of longer maturities than its own debt and collect payments from the debtors until loans are redeemed.


Relevant posts: