The EU90 Billion “Bail-Out”—Where’s the Money Going? Not to the Greek People

Where’s the new bailout money going? Not to the Greek people. This is clear. Friday, the European Economic and Financial Affairs Council (Ecofin) of the 28 EU economic and finance ministers, officially approved the “bridge loan” of EU7.16 billion to cover debt payments while the new bailout is negotiated. Of that, EU4.5 billion is going directly to the European Central Bank on July 20 to pay interest on Greek bonds held by the ECB; the rest is going to the IMF to cover the payments Greece failed to make at the end of June, which only covers payments up to Aug. 20. Later in August another payment is due to the ECB, which Greece, without a bailout, will not be able to make. If Greece does not make these payments, and Greece does not have the money to pay them, then Greece’s entire unsustainable debt pile would be declared in default, a move whose consequences would go way beyond Greece.

The bridge-loan funds came from the European Stability Mechanism (ESM), according to European Commission Vice President Valdis Dombrovskis, who said that Great Britain expressed its strong opposition regarding funding via the ESM, of which it is a financial backer although it is not in the Eurozone. Reportedly, Britain has made an arrangement that it would not suffer losses if the ESM loan to Greece were defaulted on.

The negotiations for a new bailout are currently being approved by parliaments throughout Europe (in nations requiring votes). Germany, Austria, and Latvia voted up approval for the talks. The negotiations could result in a new bailout of between EU82 billion to more than EU90 billion. Where will the money go?

The popular Greek website DefenceNet published a preliminary rundown of where it claims the debt will be going. It includes:

—EU29.7 billion for loan repayments within the Eurozone

—EU9.9 billion to the IMF

—EU5.5 billion to private debt holders.

—EU25 billion for the recapitalization of the banking system (which was destroyed when ECB cut off liquidity)

—EU17.2 billion in interest payments on debt.

—EU7 billion for domestic debt.

—EU7.7 billion for the liquidity of the banking system.

As for France’s backing for debt relief, French Finance Minister Michel Sapin told Europe 1 radio, that debt relief could involve measures such as an extension of maturities, lengthening of the grace period on repayment, or easing of interest rates. However, Sapin ruled out any write-off of Greek loans, saying that as a creditor, France wanted to ensure it gets its money back, according to Reuters.