Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

The problem was that the funds to sweeten the deal and induce the creditors to engage in the “voluntary” write-down did not come out of thin air. Nor did the money to pay for recapitalizing the Greek banks in the wake of the restructuring, or to pay for the December 2012 buyback. All this was funded by new borrowing from the troika. Furthermore, the 56 billion euros in Greek bonds held by the ECB were exempt from the 2012 restructuring. So the overall reduction in Greece’s debt burden was far less than advertised. As a result of the debt restructuring of 2012, Greece’s public debt was reduced from 350 billion to 285 billion euros, a 19 percent reduction. The really dramatic transformation was not in the quantity of debt but in who it was owed to: 80 percent was now owed to public creditors—the EFSF, the ECB or the IMF. In effect, Greece swapped a reduction of its obligations to private creditors of 161.6 billion euros for an increase in obligations to public creditors of 98.8 billion euros.

Impt