When a government’s public debt grows too large, so much so that it needs to be bailed out in order to continue functioning, who do you suppose benefits the most from the bailout?

If you said “the government”, or “the people”, you’re wrong. In reviewing the series of bailouts of Greece from 2010 through 2015, a recent study by the European School of Management and Technology (ESMT), a business school based in Berlin, found that nearly all of the money that was spent by the European Central Bank, the International Monetary Fund, and the European Commission (together called the “Troika“) to bail out the Greek government as it repeatedly defaulted on its national debt obligations in 2010, 2012 and again in 2015, went to the big European banks that had loaned it money. Via Global Research, Greek news outlet Ekathemerini reports:

Some 95 percent of the 220 billion euros disbursed to Greece since the start of the financial crisis as loans from the bailout mechanism has been directed toward saving the European banks. That means about 210 billion euros was eventually channeled to the eurozone credit sector while just 5 percent ended up in state coffers, according to a study by the European School of Management and Technology (ESMT) in Berlin.

“Europe and the International Monetary Fund have in previous years mainly saved the banks and other private creditors,” concluded the report, published yesterday in German newspaper Handelsblatt. ESMT director Jorg Rocholl told the financial newspaper that “the bailout packages mainly saved the European banks.”…

The economists who took part in the study have analyzed each loan separately to established where the money ended up, and concluded that just 9.7 billion euros – less than 5 percent – actually found its way into the Greek budget for the benefit of citizens.

“This is something that everyone suspected, but few people actually knew. That has now been confirmed by the study: For six years Europe has tried in vain to put an end to the crisis in Greece through loans, and keeps demanding ever harder measures and reforms. The cause of the failure obviously lies less on the side of the Greek government and more on the planning of the bailout programs,” the German daily concluded.

There’s an old saying about debt that was immortalized by billionaire oil baron J. Paul Getty: “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”

That saying has just been proven true with the identification of the primary beneficiaries of the Troika’s multiple Greek government bailouts.

The reason it is important to recognize this today is because, once again, Greece is approaching fiscal and economic ruin. The Wall Street Journal describes why all of the previous actions that Greece has taken on the behalf of its lenders have failed:

Back in May 2010, a heavy austerity program in Greece was inevitable. The country had lost control of its finances. No lender was willing to finance the status quo. Greece’s primary budget deficit, which excludes interest, was over 10% of its gross domestic product.

Over the next five years, Greek governments enacted spending cuts and tax increases worth a total of 32.3% of GDP, a scale of austerity far beyond that seen in any other European country during the financial-crisis era. The budget recorded a small primary surplus of 0.7% of GDP in 2015, an improvement of nearly 11 percentage points since the dawn of the crisis.

But two-thirds of the fiscal effort was needed just to offset the impact of Greece’s collapsing economy, which crippled tax revenues. The IMF said in 2013 that creditors had underestimated how hard the radical austerity plan would hit the economy. As GDP shriveled, Greece’s debt burden rose, keeping the country from regaining solvency.

What is important to recognize here is that one of the actions that the Troika demanded from Greece – sharp increases in the nation’s top income tax and value added tax rates – is primarily responsible for most of the nation’s collapsing GDP. The Troika’s “solution” has ensured that Greece’s debt problems can never, ever be truly resolved.

At this point, only one member of the Troika, the International Monetary Fund (IMF), recognizes that the main beneficiaries of the Greek government bailout are the ones in most need of sharing the pain. The Financial Times reports on a leaked letter sent by IMF head Christine Lagarde to Europe’s finance ministers, which the FT‘s Peter Spiegel describes as being the equivalent of the IMF putting “the gun on the table” in demanding that European banks finally accept losses on their failed loans. Here’s the section of Lagarde’s letter that drives home that reality (emphasis ours).

I understand the urgency of the situation in the case of Greece and Europe as a whole, and our common objective is to quickly agree on a way forward. This requires compromises from all sides, and we have contributed our part by focusing conditionality on what we see as the absolute minimum, leaving important structural reforms to a later stage. However, for us to support Greece with a new IMF arrangement, it is essential that the financing and debt relief from Greece’s European partners are based on fiscal targets that are realistic because they are supported by credible measures to reach them. We insist on such assurances in all our programs, and we cannot deviate from this basic principle in the case of Greece.

The IMF’s Lagarde is telling the biggest beneficiaries of all the Greek government bailouts that her organization will not participate in another bailout unless they write off significant portions of the bad loans they made, and thereby reduce Greece’s debt burden. Not just because they are just as responsible for the existence of those bad loans, but also because of their bad decisions in ensuring that Greece could never regain its solvency.

Or rather, because they have been made whole by the Troika’s bailouts while Greece has been left in ruins.

Featured Image: Ruins of Ancient Greek Settlement and Temple of Poseidon at Cape Sounio, Greece. Source: Craig Eyermann