Originally published at Critical Legal Thinking
To understand the Greek crisis and the stream of ever worsening deals between the EU and Greece, it is essential to understand just how involved the EU main players have been in the creation of this situation over the past decade. Across much of the media there has been a focus on the character of Syriza as a movement and Tsipras or Varoufakis as politicians and economists. Again and again we have seen aspersions being cast on the credibility or competence of the left. Curiously, there has been little interest in the mainstream on the web of vested interests on the EU side. On The Automatic Earth Raul Ilargi Meijer celebrated the emergence of little ‘factoids’ which complicate the claimed purity of the EU’s financial interests. We thought it would be interesting to begin collecting these little factoids, and hope that you will help us. As you come across reports of EU actors with vested interests in foisting austerity and privatisation on Greece, please post them on our Facebook page or in the comments below. We will try to update this page with more details as they come in. In the mean time, here is some well sourced information on the key players.
Wolfgang Schäuble (German Finance Minister): While the Greeks resisted the proposal, one of the key demands was to transfer fifty billion euros of assets to an independent fund like the Luxembourg based Institution for Growth in Greece. However, it turns out that the Institution for Growth is in fact a wholly owned subsidiary of the German KfW Bank, of which Schäuble serves as the chairman of the board. We are not aware of similar funds existing, so the wording suggests a very big hint at where the 50 billion in assets should go. The KfW bank is a German institution, where the bank invests 1.5 billion euros, and yields 3 – 4 billion euro.
Schäuble is no stranger to financial controversy: In 1999, Schäuble took 100,000 marks from Canadian/German arms lobbyist Karlheinz Schreiber for the CDU party. ‘He initially denied in parliament that he had received money… but then conceded’ that he had received it. This was the scandal that brought down Helmut Kohl as head of the CDU, and paved the way for Angela Merkel. ‘The case has never been entirely solved, no charges were laid against Kohl or Schäuble.’ There were other suspicious cash transfers during his time as leader of the parliamentary party – including an apparently illegal one million deutschmark transfer in 1997.
Jean Claude Juncker (EU Commission President), in his 18 year stint as Prime Minister of Luxembourg, oversaw the country’s conversion into ‘the worlds best tax haven’ (according to a Forbes 2010 list). It uses its respectable EU membership to get advantages that other more sunny tax havens could only dream about. The Guardian, among others, has revealed the ‘damning picture of an EU state which is quietly rubber stamping tax avoidance on an industrial scale.’ Junker himself is said to have ‘fiercely courted’ and ‘helped solve problems’ for Amazon’s move to Luxembourg for ‘tax efficiency’ reasons.
Mario Draghi (ECB Chair): Between 2002 and 2005, Draghi was vice chairman and managing director of Goldman Sachs International. He arrived just after the investment bank helped Greece use swaps to hide its debt and so to join the Euro. However, he presided over the bank as it continued to help the Simitis (PASOK) and Karamanlis (New Democracy) governments hide their debt. The practice of The Maastricht rules limited total government debt to 60% of GDP and insist upon a maximum of a 3% deficit. From 2002 onwards, with the help of Goldman-Sachs, Greece used complex cross-currency swaps with fictional exchange rates to hide debt. ‘In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks. This credit disguised as a swap didn’t show up in the Greek debt statistics.’ Of course, the bombshell of this debt was that it remained hidden for ten to fifteen years… in other words they begin maturing in 2012. Finally, just at the end of Draghi’s time in Goldman-Sachs, the bank sold these toxic swaps onwards to a Greek bank, while charging the Greek state a hefty commission. While he has denied knowledge of the initial use of swaps (in his nomination hearings at the European Parliament), it is the continuing use of swaps that remains troubling. There was also a cloud of conteoversy over his time as head of the Bank of Italy, when the Banca Monte dei Paschi di Siena undertook some very dodgy dealings, and at best Draghi waved it by.
Jeroen Dijsselbloem (Head of the Eurogroup) is infamous for whispering to Varoufakis that he had ‘just killed the Troika’ and for his half-cock remarks which wipe millions of stock markets. He seems to be the archetypal modern social democrat, which is to say he is ideologically prosaic, a technocrat beloved of habit without process, but Dijsselbloem’s devotion to the order of things is such that he was prepared to defy a Dutch court order in refusing to name an informer who had made a shady tax deal with his superior in exchange for information about tax evaders. All well and good perhaps, but against natural justice the said informer benefited financially from naming alleged evaders; the deal was structured as a public-private partnership of all things. Dijsselbloem’s devotion to his master led to criminal charges being filed against him in The Hague.
Dijsselbloem has also come under criticism for his handling of the nationalisation of dodgy Dutch bank SNS Reaal in 2013. The allegations, voiced in the Dutch Parliament, run that Dijsselbloem knew of the mismanagement, corruption and money laundering at SNS before this information became public and injected taxpayer funds into the bank to save it in spite of this. As Dutch finance minister he has rejected calls for any inquiry into the handling of the nationalisation, and his ministry has refused to confirm or deny that Dijsselbloem did indeed know about serious malpractice at SNS.
Guy Verhofstadt (MEP and leader of Liberal Group) excoriated Tsipras in the European Parliament. It turns out that he has a major interest in seeing Greece privatize its utilities. He sits on the board of Sofina, a multi-billion euro Belgian investment holding company which invests in GDF Suez and its parent company Suez Environment, which is one of only two consortia that have reached the final phase of the privatisation of EYATH, the state owned water company which manages Thessaloniki’s water. This privatisation is hugely controversial with an unofficial referendum voting 98% against it.
Christine Lagarde (Head of the IMF) in 2012 told the Greeks to help themselves by paying their taxes, the irony being that she pays no tax at all on her $500,000 IMF salary. She runs the IMF which has made 2.5 billion Euro profit out of the loans that it has made to Greece and its banks. Lagarde was placed under investigation by a French court in 2014 regarding a possible ‘abuse of position’ when she was French finance minister. The allegations included that she had diverted a court case against prominent French businessman Bernard Tapie out of the court system and into a private arbitration which Tapie subsequently won. Lagarde denies any wrongdoing.
Klaus Regling (managing director of EFSF and ESM) has switched between politics and the financial sector numerous times during his career. Before joining the EFSF, he worked in turn for the German government, the hedge fund Moore Capital Strategy Group, the European Commission’s Directorate-General for Economic and Financial Affairs and the hedge fund Winton Futures Fund Ltd. Regling thus stands as a symbolic example of the intertwining between financial markets and politics which partly explains why the EU’s crisis management policy is primarily aimed at saving the financial sector.