The Money Went to the Greeks : €600 Billion Subsidy of Hellenic State Largesse

Critics loudly complain that few if any of the €260 billion so far lent to Greece as part of the infamous bailouts that began in mid-2010 have directly benefited the Greek people. Nothing could be further from the truth. Not only is avoiding a historic sovereign default and the insolvency of the local banking industry of obvious benefit to the whole population, but direct non-debt-related government spending was much higher than otherwise. Without the bailouts Greece would have most likely defaulted and exited the Eurozone, so every Euro in government revenue during that period was possible thanks to, and only thanks to, the bailouts. €530 billion in total revenues for 2010-2015 plus €48 in accumulated primary surplus yields €578 billion in non-debt-related state spending that took place because of the bailouts and that would not have taken place otherwise. Absent the bailouts, and following default and Grexit, the Greek government would not have been able to raise Euro-denominated revenue and its Euro-denominated spending would have been nil. While Greece may have theoretically remained in the Eurozone in the absence of bailouts, by trying to repay its outstanding debts entirely through internal resources (and thus avoiding the default that would stop the flow of Euros from the ECB to the banks and into the country), the resulting collapse of government spending would have been enormous, even under optimistic assumptions. Likely too large to be feasible, with Greece almost certainly having chosen to depart the Eurozone rather than live in it under such reduced state presence. The conclusion is that €578 billion would seem the most appropriate number: this is how much more the Greek public sector was able to spend directly on salaries, pensions, subsidies, and social benefits thanks to the bailouts. Once we add the fact that a lot of the €200 billion or so in bailout money allocated to debt repayments have gone to Greek institutions and individuals we further realize that the €260 billion “for greedy French and German speculators” was really a €790 billion rescue of the Greeks. Talk about avoiding, not creating, austerity!