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Fuente: When Greece banks melted, the EU talked threatened to cut it loose... but have ¿10billion | Mail Online
Resumiendo, han estado llevando montones de billetes en aviones en secreto a Grecia y Chipre para salvar el euro.The secret plane stuffed full of cash that saved the euro: When Greece burned and its banks melted, the EU talked tough and threatened to cut it loose... but covertly flooded it with €10billion
The European bank Troika boosted Greek banks through secret flights
Billions of euros were flown to Greece and Cyprus to save the currency
By Faisal Islam
PUBLISHED: 21:00 GMT, 24 August 2013 | UPDATED: 12:58 GMT, 25 August 2013
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To the casual observer there was nothing odd or even surprising in the sight of cargo planes lumbering east over the Adriatic or occasionally skimming southwards over the Alps towards the Balkans and beyond to Greece.
Some of these aircraft, giant Boeings, bore the distinctive livery of Maersk, the international carriers. Others, smaller, more discreet, were painted in the pale blue and white of the Greek military.
Had anyone bothered to pay attention, or even note down the serial numbers – such as the plane marked OY-SRH seen landing in Cyprus earlier this year – surely they would not have guessed at the purpose of these journeys or their extraordinary cargo.
Rescue mission: Maersk flights to Athens and Larnaca carried billions-worth of euros on each flight to save the Greek economy
Rescue mission: Maersk flights to Athens and Larnaca carried billions-worth of euros on each flight to save the Greek - and the eurozone - economy
Because the flights to Athens and Larnaca that began in 2011 were nothing short of a secret airlift.
The mission was neither to save lives nor even to preserve a fragile democratic freedom like the famous airlifts in post-war Berlin, but to protect and prolong the economic experiment of a multi-national currency. Billions in freshly minted euro notes made a clandestine journey to struggling Greece – a drama worthy of a John Le Carré novel but authored in Frankfurt am Main, known as Mainhattan, world headquarters of the euro.
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It was well known that Greece was running out of cash, in metaphorical terms at least. In June 2011, after months of stalling on its economic reform programme, the foreign Troika that effectively controlled the country had run out of patience.
Consisting of the European Union, the European Central Bank and the International Monetary Fund, the Troika made it clear that it would withhold the final instalment of a €110 billion bailout, agreed in May 2010. This last €12 billion payment of foreign funds was needed desperately – to pay pensions, public servants and interest on Greece’s huge debts. It was funding that Greece could raise neither in taxes from its own people, nor from the financial markets.
But what most people did not know was that Greece was running out of cash quite literally, too.
There were shortages of all denominations apart from the €10 note. Greeks had responded to the Troika’s threat to pull the €12 billion payment by withdrawing euros from their bank accounts at a record rate.
On the brink: Protesters clash with riot police in Athens, Greece, as its government was teetering on the edge of collapse over the austerity measures
On the brink: Protesters clash with riot police in Athens, Greece, as its government was teetering on the edge of collapse over the austerity measures
Soon there would be not enough euro notes in the country to cope with the number of Greeks trying to get their hands on their money from cash machines and banks. And so a secret plan was activated. ‘We’re talking about June 2011,’ a senior official overseeing Greece’s bailout told me. ‘Greeks were taking about one to two billion euros a day from the banking system. The Greeks had to send military planes to Italy to get banknotes. It got to that point.’
A decade after it gave up the drachma, the world’s oldest existing currency, Greece faced the crushing reality that it did not have the sovereign authority to meet the demand for paper currency from its own citizens.
It could mint euro coins and there were also plates for the €10 note. But coins and small denomination paper were not going to satisfy the demand.
Only the German Bundesbank, the National Bank of Austria and the Luxembourgers have ever had the plates for the highly prized €500 note, the highest-value paper currency in the world. (This form of manufacturing would appear to have been confined to German-speaking countries.)
Intentionally or not, the ability of Greece to meet a huge surge in demand for banknotes had been effectively proscribed.
By June 2012, Greek demand for paper currency had nearly trebled and amid last summer’s electoral tumult, the secret missions started in 2011 were once again required.
The response was extraordinary. While issuing public threats to Greeks, in private the Troika authorised military and commercial cargo planes to feed them euros – billions-worth on every flight. They were intended not only to preserve Greece’s fracturing social stability, but also to preserve the single currency itself.
Greece’s European partners were worried, and no wonder. The Governor of the Bank of Greece, George Provopoulos, subsequently explained that if the demand for notes had not been met, an impression would have been created that the banks were unable to repay depositors.
‘It would have caused a collapse of confidence with dire consequences for financial stability and the general outlook of the country,’ he said.
A Northern Rock-style bank run in Greece could have spread quickly across the Mediterranean – investor concern had already spread to Italy.
A Troika figure told me: ‘There would have been complete and immediate panic. They had no time.
A billion, two billion per day in banknotes is a lot of money. This then becomes an industrial problem.’
The airlift was only the first stage of the mission. Scores, if not hundreds, of journeys by truck and boat spread the new notes across the mainland and the Greek islands, from Rhodes to Corfu, from Crete to Komotini. Staff worked through the night to ensure that bank branches across Greece had sufficient notes to meet depositor demand, and contain any incipient bank run.
Incredibly, this operation proceeded without anyone noticing. The Bank of Greece tracked demand for paper money through bank branch orders. It did not have to deploy teams of ‘bank-run spotters’ as the Bank of England did in the crisis of 2008.
As far as ordinary Greeks were concerned, the cash machines continued to function. However, underneath their very noses a monetary revolution was taking place.
The value of notes in circulation in Greece doubled from €19 billion in 2009 to €40 billion in September 2011. By the summer of 2012 the total had reached €48 billion, of which at least €10 billion – possibly much more – had been delivered through secret airlifts.
Typically, developed economies have cash in circulation worth between four and seven per cent of gross domestic product. In 2009 in Greece, the figure was 8.2 per cent. By 2012 it had trebled to 24.8 per cent.
On these numbers, in mid-2012, Greece had a greater value of euro notes in circulation than the Netherlands, even though the Dutch economy is four times that of Greece.
Tens of billions of euros were yanked from Greek banks in the bank runs of 2011 and 2012, yet the authorities estimate only a third of it was spent. Another third was taken abroad for investments in, for example, London property, and a third was ****** under mattresses and floorboards in Greek homes.
It was not long before Greece’s near neighbour and cultural sibling, Cyprus, found that it too was in crisis. This time, Berlin was determined that a large chunk of the bailout would come from savings deposited in Cypriot banks. Bedlam, bank holidays and bank runs were the predictable result. As dusk fell over Nicosia on March 27 this year, the shouts of protesters were drowned out by the angry buzzing of helicopters and deafening wail of police sirens.
Safely kept: Money is seen stored overnight at Central Bank of Cyprus
Safely kept: Money is seen stored overnight at Central Bank of Cyprus
The uproar seemed to be converging on the Central Bank. Had the previous day’s sit-down protest by bank workers turned into a riot?
The truth was much stranger.
At the Central Bank, tense meetings between international financiers, American management consultants, British Treasury advisers and Cypriot bankers suddenly broke off. Four very large green juggernauts laden with euros had arrived from the European Central Bank, just hours before Cyprus’s banks were due to reopen.
An historic just-in-time delivery. That afternoon a Maersk Star Air cargo plane had parked up at the end of the runway at Larnaca airport. Flight logs record that the plane, registration OY-SRH, had flown from Cologne to Munich in the early hours, and then, via Athens, to Larnaca. It was carrying €5 billion euros in notes – not a bailout, but an epic logistical effort to sate the Cypriot desire for paper money.
The cash had been transferred from the Bundesbank logistical reserve at the request of the ECB. But only after the Cypriot government had done its ‘homework’, complying with Troika demands for economic and financial reform.
After the notes had been loaded on to the trucks, their journey to Nicosia was accompanied by squads of police cars, while helicopters buzzed overhead. The cash had come courtesy of Cyprus’s real central bank, the one based in Frankfurt, 1,500 miles away – the European Central Bank. Effectively, the ECB’s threat made a week before to pull emergency liquidity funding to the island’s banks was a threat to withhold the cash that arrived on this plane. The consequences would have been dire.
It is perhaps understandable that this and the other cash flights remained clandestine but, in their secrecy and urgency, they offer a window to a still more extraordinary landscape of lies and half-truths told across the continent to keep the single currency alive.
Greece’s membership of the eurozone was, from inception, built on misleading data about the state of its economy. The Cypriot entry in 2008 was waved through, yet only now have the Cypriots been told that their main industry, an offshore banking sector, needs to be dismantled amid antiestéticars that it has aided tax evasion and money laundering.
But even these extraordinary lapses pale into insignificance against the two mega lies – untruths in the very structure of the euro – which persist even now, despite the seemingly calmer weather in the currency bloc. A blueprint for revival is being drawn up in the German headquarters of the European Central Bank. The ECB is in absolutely no doubt that the euro will survive.
But the people of the crisis countries – Spain, Portugal, Greece, Cyprus, Italy and Ireland – are yet to be enlightened by their politicians about the price to be paid: in short, the survival of the euro means much lower wages for them.
To use the jargon, the Mediterranean countries must be ‘internally devalued’, which means pushing down average wages that had risen sharply, to regain competitiveness and promote growth. The existence of a common currency means, of course, that old-fashioned currency devaluation – the standard method of achieving these things in the past – is impossible.
I know for a fact that two ministers in charge of struggling Mediterranean economies (sadly, they must remain anonymous) are happy to boast about the scale of the cuts in workers’ wages when addressing international bond traders. Would they ever dream of saying this in public? Decisively not.
‘The public would not take it,’ one crisis economy minister tells me.
Meanwhile, even in the final weeks of a German election campaign (which Angela Merkel seems likely to win) the voters remain ignorant that they too must pay a price: that they are about to foot a bill of billions of euros as Greece heads inexorably for a third bailout.
It will happen safely after the votes are counted, of course.
Germany benefited the most from the introduction of the euro through trade within Europe, a cheaper currency for exports outside Europe, and ultra-low interest rates on its debts. But it now seems inevitable that northern European taxpayers, and German ones in particular, will bear a heavy share of the cost of rescuing the currency.
After all, the northern European taxpayer has effectively replaced bankers in funding Greece’s remaining debts. The first test will come from Greece, which will soon require a remarkable third bailout and yet another default on its debt, having already had the world’s biggest sovereign default in 2012.
This will be just the start of a process where public debts across the eurozone are shared. A de facto fiscal union and, soon enough, a form of ‘banking union’ will amow.
Underlying all of this will be political union – a super state.
The Maersk Star Air OY-SRH that landed in Larnaca five months ago was the equivalent of a printing press in a nation that had ceded its monetary sovereignty. Such planes are a visible symbol of the loss of national power necessary to prevent the currency itself from crashing.
After the German elections next month, this truth will be revealed. A resumption of the airborne rescue missions is possible; turbulence is guaranteed. Fasten your seatbelts.
This is an edited extract from The Default Line: The Inside Story Of People, Banks And Entire Nations On The Edge, by Faisal Islam, published by Head of Zeus at £15.99. To buy a copy for £12.49 with free UK p&p, call the Mail Book Shop on 0844 472 4157 or visit mailbookshop.co.uk
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