Not only is Greece being denied the entire refund for the illegitimate ECB profits made out during the crisis, but some countries are now conditioning the next repayment to stricter reforms.
Cross-posted from Positive Money EU
Greece ended its bailout programme in June 2018, but its troubles are continuing. As reported in the media, some member states are threatening to block the next €600 million repayments of ECB profits as agreed by the Eurogroup last year. The threat comes as several member states are reportedly unhappy about several issues in Greece, including privatizations, healthcare reform, minimum wage, and other structural reforms.
To ensure Greece sticks to hard policies (despite being out of any programme), some Eurogroup ministers are using the ECB profits money – which is legitimately owed to Greece – as blackmail. This behaviour is utterly unfair, illegitimate and counter-productive. Once again, Greece is stripped of its ownership on economic reforms, thus complicating its path towards the full recovery from the crisis.
Where do the ECB profits profits come from?
It is key to understand that the ECB profits in question are not connected to the subsequent memorandum agreements between Greece and the Troika. Those profits were made accidentally by the ECB through the “Securities Market Programme” (SMP) programme, and distributed to all member states.
In 2010, the ECB started implementing the SMP programme, which involved buying Greek government bonds to the tune of around 40 billion euros. Because the ECB refused to engage in debt restructuring alongside private bondholders in 2012, the ECB ended up making a huge profit on the Greek bonds it held when Greece repaid them. Under EU law, ECB profits are transferred to all member states through their national central banks. As a consequence, bigger member states like France and Germany made billions out of the Greek crisis.
At the Eurogroup, Finance ministers eventually agreed to refund part of those profits, by semi-annual payments to be made until 2022, under condition that Greece will keep delivering key reforms. The next payment is due next month.
However, our calculations unveiled in July 2018 that 8 billions are missing out from the deal. This is why Positive Money Europe has joined a petition campaign aiming to get money back to Greece, and helped deliver 117,000 signatures back in October.
Our claim was recently confirmed by the ECB itself. In a public letter to Greek MEP Nikolaos Chountis, the ECB provides more transparency on the profits it made prior to 2013 (4.3 Billions) which allow us to confirm that at least 8.7 billions euros are missing out from the Eurogroup’s arrangements.
At its next meeting on 11 March 2019, the Eurogroup will decide to disburse or not the next ECB profits repayment, as agreed in June 2018.
In light of the evidence that those ECB profits are owed to Greece and were not part of the initial memorandum of understanding, Positive Money Europe calls on all member states to refrain from blocking the next repayment of the ECB profits.
Of course, Greece can benefit from reforms in key areas such as the overall management of the public administration, taxation and the downsizing of the financial sector. However, those reforms can no longer be imposed from outside entities such as the Eurogroup, and even less so through blackmailing. Now that Greece has put an end to the bailout programme, conditionalities like this should be put to an end and future ECB profit refunds should be granted automatically. This is a precondition that the Greek People can fully take ownership of the future reforms they need.
The wounds from the crisis are still fresh and the recovery period will be slow: Greece’s economy is 25% smaller than when the crisis began. Refunding Greece those ECB profits will be a huge boost to the Greek economy and its most damaged sectors, alleviating poverty among the population.
European elections are approaching and populist forces are gaining more and more electoral support highlighting the flows of the Eurosystem. A strong message from the Eurogroup would help rebuilding trust in the EU and its currency, showing that the European political elite cares about its citizens and have learnt the lessons from the crisis.