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Published 30 June 2015

As Greece prepares for a referendum on further austerity proposals, teleSUR explores the legitimacy of the Greek debt.

The tens of billions in bailout funds provided to Greece, rescued the finance sector, a member of the Greek Debt Truth Commission told teleSUR in an exclusive interview.

“It had one core aim, it was to bailout the private German and French and Greek banks, amongst other European banks”, Turkish economist Ozlem Onaran told teleSUR, who served as part of the Greek debt truth commission.

As Onaran explains, most of the bailout plans were designed to help the private banking system and not the Greek government or its people..

In fact, almost all of the funds which Greece borrowed ended up in banks, and a small percentage actually went to the government.

“If you look at the total of the funds...only about 10 percent went into the government's budget.”

Based on these figures, Onaran and other experts consider the debt illegitimate. Not only because it was mainly diverted to private banks but also because the terms reached with the creditors severely restrict Athens ability to serve its social obligations.

“The debt is unsustainable from a human rights perspective, it is illegal because it impairs the Greek government's human rights obligations,” explains Onaran.

In fact, many of Greece's creditors knew in advance that – due to the conditions imposed – the country would be unable to pay its debt.

“The lenders knew about these outcomes from the beginning...it (the bailout plan) focuses very narrowly in neoliberal reforms.”

As the economist explains, based on current numbers and predictions, if the country was not forced to implement austerity measures, and instead opted for an increase in taxes, the debt would be more manageable today.

Instead, Greece has been plunged into a spiral of crisis, “it has experienced a greater depression than the US had experienced in the 1930s Great Depression,” says Onaran.

“As of 2014, real wage per worker in Greece was about 17 percent lower than what it was in 2009. This is an outcome of cuts to minimum wages, cuts to public civil servants wages,” both conditions that creditors imposed as part of the austerity measures.

Neoliberal reforms together with austerity measures caused inequality to increase in worrying levels.

“In terms of income distribution something dramatic happened...the share of wages and salaries in national income decreased from about 68 percent in 2010 to 55 percent in 2013. Just in three years the distribution shifted away from wage income, towards capital, towards profit income. Such changes take ages under normal conditions to happen,” explains Onaram.

This means that families' income decreased but banks, corporations and other private businesses saw their income increase.

Furthermore, one of the strongest point experts point at is that the crisis could have been averted. But the political elite governing in Athens and the creditors continued applying an irresponsible set of policies with complete disregard to the Greek people.

In contrast to the human costs, the “private banks managed to get out of their very risky, speculative, misguided financial activities without any mess,” explains the Turkish economist.

But the core issue remains unresolved. Should European citizens pay for the adventures of private bankers?

“The Greek people, and the German or French or dutch people, are suffering from irresponsible activities by the overblown financial industry. My suggestion is they have to send the bill of this crisis to the private banks,” believes Onaram.

What comes next?

As the Greek economy enters into default mode, it is unclear what would be the next step for Athens to avoid the crisis becoming even greater.

“A referendum can open better options for the Greek government...the Greek government still has options,” explains Onaram.

According to the economist, the Eurogroup has used Greece's example to send a political message to all the member countries. But it is also seeking to punish Athens for trying to defy the pro-austerity consensus.

If the Eurogroup fails to keep up its position, it would give in to the first anti-austerity government in the region, unleashing the possibility of other countries electing left-leaning parties.

Will Greece leave the eurozone? Onaram believes that such a measure would not be taken immediately, and that the EU is divided on its position regarding Greece, with countries like France pushing for renewed negotiations.

“Its up to how long the Greek government can continue the negotiations and up to what the European governments want to do,” she concludes.

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