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The Greek "Rescue": Where Did the Money Go? An Analysis

Author

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  • Pablo G. Bortz

    (University of San Martan, Argentina)

Abstract

This paper analyses the financial assistance provided to Greece in the first two rescue packages granted by the Troika (European Union, European Central Bank and IMF). It looks particularly carefully at claims by Sinn that a third of the public credit granted to Greece financed its current account deficit, while another third funded capital flight by Greek nationals, with only the remaining third used to pay creditors. The paper shows that Sinn inflates the assistance given to Greece by mixing several different concepts in the total. It also critically reviews the claim that the assistance was used to finance the current account deficit or capital flight by Greek citizens. Realistic accounting shows that 54% of the financial assistance provided to Greece was used to repay (foreign) debt, while another 21% was used to recapitalize Greek banks (some of which were owned by foreign institutions). Other claims about the rescue package are also analyzed in relation to the treatment of Greek and foreign banking exposure to sovereign debt.

Suggested Citation

  • Pablo G. Bortz, 2015. "The Greek "Rescue": Where Did the Money Go? An Analysis," Working Papers Series 29, Institute for New Economic Thinking.
    • Handle: RePEc:thk:wpaper:29
    DOI: 10.2139/ssrn.2692653
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    References listed on IDEAS

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    4. Jeromin Zettelmeyer & Christoph Trebesch & Mitu Gulati, 2013. "The Greek debt restructuring: an autopsy [Greek bond buyback boondoggle]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 28(75), pages 513-563.
    5. Helen Thompson, 2015. "Germany and the Euro-Zone Crisis: The European Reformation of the German Banking Crisis and the Future of the Euro," New Political Economy, Taylor & Francis Journals, vol. 20(6), pages 851-870, December.
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    Cited by:

    1. Economides, George & Papageorgiou, Dmitris & Philippopoulos, Apostolis, 2020. "Macroeconomic policy lessons from Greece," LSE Research Online Documents on Economics 107155, London School of Economics and Political Science, LSE Library.
    2. George Economides & Dimitris Papageorgiou & Apostolis Philippopoulos, 2020. "Macroeconomic Policy Lessons for Greece from the Debt Crisis," CESifo Working Paper Series 8188, CESifo.
    3. Charles A.E. Goodhart & M. Udara Peiris & Dimitrios P. Tsomocos, 2019. "Debt, recovery rates and the Greek dilemma," Chapters, in: Financial Regulation and Stability, chapter 13, pages 313-326, Edward Elgar Publishing.

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    More about this item

    Keywords

    Quantitative Easing; Monetary Policy; Federal Reserve; Inequality;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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