The third “memorandum of understanding” expires today. With Greece’s completion of a three-year, 61.9-billion-euro eurozone emergency-loan package, it can once again borrow at market rates. The expiration of the memorandum also ends, for now, the direct control by Europe’s “troika”—the International Monetary Fund, the European Commission, and the European Central Bank—over the Greek government. But its conditions, constraints, and consequences will endure.
How Germany gamed the euro and worsened the crisis
Back in 2010, Greece, along with Portugal, Spain, Ireland, and Italy, was definitely in trouble. The Great Financial Crisis crashed into all of Europe, but it hit the weaker countries hardest—and Greece was the weakest of them all. Its economy shrunk by a quarter, and youth unemployment rose to roughly 50 percent. The memorandum was, for all concerned, the easy way out. It started a game of “extend and pretend” on the Greek debt, based on optimistic forecasts and on policies of reform that had no basis in the reality of Greek economic conditions.
The policies came from the IMF—its standard repertory of austerity and “reform.” But its staff and directors knew from the beginning that these measures would not suffice. IMF executive directors from Australia, Switzerland, Brazil, and China voiced objections. Channels were therefore bypassed, objections ignored. The Fund was nearly out of work and money because of the failures of its programs—and the relative success of countries that ignored them—all over the world. And its managing director at the time wished to be the next president of France. So Greece, which is to say its creditors—especially French and German banks—received the largest loan in IMF history (relative to its ownership share). And that 289-billion-euro loan came largely from U.S. taxpayers.
In Athens, teams of functionaries from the Fund, the European Central Bank, and the European Commission came to Greece, where they stayed in fancy hotels at Greek expense and were escorted by uniformed police from ministry to ministry to dictate policy in detail. (Such a nice gig, in a warm and sunny place, so close to the sea.) In 2015, they were lodged for a time in a four-star hotel, deprived of their convoys, and given protection by elite forces dressed in plain clothes. They didn’t like that at all, and their bosses, Mario Draghi and Christine Lagarde, complained loudly on their behalf.
And what of the policies? Public assets were to be dumped en masse at fire-sale prices, but only if they were already profitable. (Regional airports making losses, for example, stayed with the state.) Dutch dairies and German drug companies were taken care of. Labor markets were deregulated while collective bargaining was wiped out—an unethical experiment on an untenable premise. Neither German nor Chinese industry was moving to Greece even if the Greeks worked for free. The value-added tax was raised, pensions were cut, and hundreds of thousands of civil servants were sacked. Ministries lost cleaning ladies, who set up camp, bless them, in front of the Ministry of Finance.