Grexit or Jubilee? How Greek Debt Can Be Annulled

The crushing Greek debt could be canceled the way it was made – by sleight of hand. But saving the Greek people and their economy is evidently not in the game plan of the Eurocrats.

Greece’s creditors have finally brought the country to its knees, forcing President Alexis Tsipras to agree to austerity and privatization measures more severe than those overwhelmingly rejected by popular vote a week earlier. No write-down of Greece’s debt was included in the deal, although the IMF has warned that the current debt is unsustainable.

Former Greek finance minister Yanis Varoufakis calls the deal “a new Versailles Treaty” and “the politics of humiliation.” Greek defense minister Panos Kammenos calls it a “coup d’état” done by “blackmailing the Greek prime minister with collapse of the banks and a complete haircut on deposits.”

“Blackmail” is not too strong a word. The European Central Bank has turned off its liquidity tap for Greece’s banks, something all banks need, as explained earlier here. All banks are technically insolvent, lending money they don’t have. They don’t lend their deposits but create deposits when they make loans, as the Bank of England recently confirmed. When the depositors and borrowers come for their money at the same time, the bank must borrow from other banks; and if that liquidity runs dry, the bank turns to the central bank, the lender of last resort empowered to create money at will. Without the central bank’s backstop, banks must steal from their depositors with “haircuts” or they will collapse.

What did Greece do to deserve this coup d’état? According to former World Bank economist Peter Koenig:

[T]he Greek people, the citizens of a sovereign country . . . have had the audacity to democratically elect a socialist government. Now they have to suffer. They do not conform to the self-imposed rules of the neoliberal empire of unrestricted globalized privatization of public services and public properties from which the elite is maximizing profits – for themselves, of course. It is outright theft of public property.

According to a July 5th article titled “Greece – The One Biggest Lie You’re Being Told By The Media,” the country did not fail on its own. It was made to fail:

[T]he banks wrecked the Greek government, and then deliberately pushed it into unsustainable debt . . . while revenue-generating public assets were sold off to oligarchs and international corporations.

A Truth Committee convened by the Greek parliament reported in June that a major portion of the country’s €320 billion debt is “illegal, illegitimate and odious” and should not be paid.

How to Cut the Debt Without Loss to the Bondholders

The debt cannot be paid and should not be paid, but EU leaders justify their hard line as necessary to save the creditors from having to pay – the European taxpayers, governments, institutions, and banks holding Greek bonds. It is quite possible to grant debt relief, however,

without hurting the bondholders. US banks were bailed out by the US Federal Reserve to the tune of more than $16 trillion in virtually interest-free loans, without drawing on taxes. Central banks have a printing press that allows them to create money at will.

The ECB has already embarked on this sort of debt purchasing program. In January, it announced it would purchase 60 billion euros of debt assets per month beginning in March, continuing to at least September 2016, for a total of €1.14 trillion of asset purchases. These assets are being purchased through “quantitative easing” – expanding the monetary base simply with accounting entries on the ECB’s books.

The IMF estimates that Greece needs debt relief of €60 billion – a mere one month of the ECB’s quantitative easing program. The ECB could solve Greece’s problem with a few computer keystrokes. Moreover, in today’s deflationary environment, the effect would actually be to stimulate the European economy. As financial writer Richard Duncan observes:

When a central bank prints money and buys a government bond, it is the same thing as cancelling that bond (so long as the central bank does not sell the bond back to the public).

. . . The European Central Bank’s plans to create €1.1 trillion over the next 20 months will effectively cancel the combined budget deficits of the Eurozone national governments in both 2015 and 2016, with a considerable amount left over.

Quantitative Easing has only been possible because it has occurred at a time when Globalization is driving down the price of labor and industrial goods. The combination of fiat money and Globalization creates a unique moment in history where the governments of the developed economies can print money on an aggressive scale without causing inflation.

They should take advantage of this once-in-history opportunity to borrow more in order to invest in new industries and technologies, to restructure their economies and to retrain and educate their workforce at the post-graduate level. If they do, they could not only end the global economic crisis, but also ensure that the standard of living in the developed world continues to improve, rather than sinking down to third world levels.

That is how it works for Germany after World War II. According to economist Michael Hudson, the most successful debt jubilee in recent times was gifted to Germany, the country now most opposed to doing the same for Greece. The German Economic Miracle followed massive debt forgiveness by the Allies:

All domestic German debts were annulled, except employer wage debts to their labor force, and basic working balances. Later, in 1953, its international debts were written down.

Why not do the same for the Greeks? Hudson writes:

It was easy to write down debts that were owed to Nazis. It is much harder to do so when the debts are owed to powerful and entrenched institutions – especially to banks.

Loans Created with Accounting Entries Can Be Canceled with Accounting Entries

That may be true for non-bank creditors. But for banks, recall that the money owed to them is not taken from the accounts of depositors. It is simply created with accounting entries on the books. The loans could be canceled the same way. To the extent that the Greek debt is owed to the ECB, the IMF and other financial institutions, that is another option for canceling it.

British economist Michael Rowbotham explored that possibility in 1998 for the onerous Third World debts owed to the World Bank and IMF. He wrote that of the $2.2 trillion debt then outstanding, the vast majority was money simply created by commercial banks. It represented a liability on the banks’ books only because the rules of banking said their books must be balanced.  He suggested two ways the rules might be changed to liquidate unfair and oppressive debts:

The first option is to remove the obligation on banks to maintain parity between assets and liabilities, or, to be more precise, to allow banks to hold reduced levels of assets equivalent to the Third World debt bonds they cancel.  Thus, if a commercial bank held $10 billion worth of developing country debt bonds, after cancellation it would be permitted in perpetuity to have a $10 billion dollar deficit in its assets.  This is a simple matter of record-keeping.

The second option, and in accountancy terms probably the more satisfactory (although it amounts to the same policy), is to cancel the debt bonds, yet permit banks to retain them for purposes of accountancy.

The Real Roadblock Is Political

The Eurocrats could end the economic crisis by writing off odious unrepayable debt either through quantitative easing or by changing bank accounting rules. But ending the crisis is evidently not what they are up to. As Michael Hudson puts it, “finance has become the modern-day mode of warfare. Its objectives are the same: acquisition of land, raw materials and monopolies.” He writes:

Greece, Spain, Portugal, Italy and other debtor countries have been under the same mode of attack that was waged by the IMF and its austerity doctrine that bankrupted Latin America from the 1970s onward.

Prof. Richard Werner, who was on the scene as the European Union evolved, maintains that the intent for the EU from the start was the abandonment of national sovereignty in favor of a single-currency system controlled by eurocrats doing the bidding of international financiers. The model was flawed from the beginning. The solution, he says, is for EU countries to regain their national sovereignty by leaving the euro en masse. He writes:

By abandoning the euro, each country would regain control over monetary policy and could thus solve their own particular predicament. Some, such as Greece, may default, but its central bank could limit the damage by purchasing the dud bonds from banks at face value and keeping them on its balance sheet without marking to market (central banks have this option, as the Fed showed again in October 2008). Banks would then have stronger balance sheets than ever, they could create credit again, and in exchange for this costless bailout central banks could insist that bank credit – which creates new money – is only allowed for transactions that contribute to GDP in a sustainable way. Growth without crises and large-scale unemployment could then be arranged.

But Dr. Werner acknowledges that this is not likely to happen soon. Brussels has been instructed by President Obama, no doubt instructed by Wall Street, to hold the euro together at all costs.

The Promise and Perils of Grexit

The creditors may have won this round, but Greece’s financial woes are far from resolved. After the next financial crisis, it could still find itself out of the EU. If the Greek parliament fails to endorse the deal just agreed to by its president, “Grexit” could happen even earlier. And that could be the Black Swan event that ultimately breaks up the EU. It might be in the interests of the creditors to consider a debt jubilee to avoid that result, just as the Allies felt it was in their interests to expunge German debts after World War II.

For Greece, leaving the EU may be perilous; but it opens provocative possibilities. The government could nationalize its insolvent banks along with its central bank, and start generating the credit the country desperately needs to get back on its feet. If it chose, it could do this while still using the euro, just as Ecuador uses the US dollar without being part of the US. (For more on how this could work, see here.)

If Greece switches to drachmas, the funding possibilities are even greater. It could generate the money for a national dividend, guaranteed employment for all, expanded social services, and widespread investment in infrastructure, clean energy, and local business. Freed from its Eurocrat oppressors, Greece could model for the world what can be achieved by a sovereign country using publicly-owned banks and publicly-issued currency for the benefit of its own economy and its own people.


Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 300+ blog articles are at

51 Responses

  1. Ellen,speaking of ‘jubilees’..Have u seen this clip from Jonathan Cahn about Sept 13th?Extremely fascinating! The Shmitah And The Jubilee Jonathan Cahn        The Shmitah And The Jubilee Jonathan Cahn From: WEB OF DEBT BLOG To: Sent: Tuesday, July 14, 2015 8:00 PM Subject: [New post] Grexit or Jubilee? How Greek Debt Could Be Annulled #yiv0548676294 a:hover {color:red;}#yiv0548676294 a {text-decoration:none;color:#0088cc;}#yiv0548676294 a.yiv0548676294primaryactionlink:link, #yiv0548676294 a.yiv0548676294primaryactionlink:visited {background-color:#2585B2;color:#fff;}#yiv0548676294 a.yiv0548676294primaryactionlink:hover, #yiv0548676294 a.yiv0548676294primaryactionlink:active {background-color:#11729E;color:#fff;}#yiv0548676294 | Ellen Brown posted: “The crushing Greek debt could be canceled the way it was made – by sleight of hand. But saving the Greek people and their economy is evidently not in the game plan of the Eurocrats.Greece’s creditors have finally brought the country to its knees, forc” | |

  2. germany needs greece and the other south european countries to be insolvent to keep the value of the Euro low; to make german goods more competative in world markets. so germany and holland prosper but all others suffer austerity.also while greece dominates the headlines france,italy and spain`s debts stay below the radar.

  3. “Give me control of a nations money supply, and I care not who makes it’s laws,” is attributed to the founder of the massive financial crime syndicate, Mayer Amschel Rothschild (1744-1812). The Greeks are finding this quote to be tragically true. It’s not the “Germans” who are financially raping Greece, but the crime syndicate members who control the German banks, the Greek banks, the European Central Bank, the International Monetary Fund, the World Bank, and the Bank for International Settlements. Those criminals are enslaving Greeks and stealing Greece and other nations, because the Greeks and most of the world have been indoctrinated to think they owe a national debt for worthless cyber and paper currency “loaned” to them by the central banking crime syndicates’ owners and executives. It is the inherent right of any nation to create and use its own debt-free, interest-free, and tax-free currency. It is utter insanity to give that control to master criminals like Rothschild and his kind, who should have been imprisoned long ago. Greeks, the banking crime syndicate members wage war against you, and the entire world. They must be treated brutally for their ongoing crimes against humanity, or they will suck the very life out of our planet.

    • SPOT On e.h.:
      This clip underscores what u’v said but the MIC must be included
      as part of the mix:
      Another major war cannot be that far off in our future.

    • you are absolutely correct save the fact that no-one is informed to know this fact.only a small percent of the u.s./e.u. have any clue to the way their money is created and why they are in debt.therefore there is no way that this rothchild agenda will ever be dismantled and imprison the criminals.all wall street asnd the city of london should e in prison so many we would have to uild new ones.

  4. Think of ‘predatory lending’ for countries…

  5. Oh yes, and I forgot to mention that any debt-solution forgiveness that favors arbitrarily Greece, ipso facto, can be claimed also any other EuroZone nation in debt.

    Notably France, Spain, Italy, Ireland and Portugal presently over-indebted according to EU standards set down in the Maastricht Treaty that created the EuroZone in 1992.

    Which is what the Germans fear most – ie., that Greece becomes an open-door to other EuroZone nations to do the same thus threatening EuroZone solvency generally…

  6. Greece’s current PM will eventually ‘retire’ from his post, so he can enjoy his recently acquired fat Cayman Islands bank account and new mansion.

    The Greeks were invaded by a hostile army of rapacious bankers and should be shown the same any invading force gets; a repelling of the invasion by declaring most of the debt odious and to start printing their own debt-free currency.

    Until the central banks and their horrendous fiat money game are kicked to the curb, more and more nations will follow in Greece’s footsteps…

    P.S. My AV software is warning me about your site, so you must have gotten some bankers attention!

  7. You can only push the public so far. What happens when in the next election you have a party that promises to natonalize all banks, and forgive all mortgages, and possibly nationalize the rest of the energy and corporate sector. Europe and others may impose sanctions, but Greece has almost no industry for exports. As long as tourists come and give Greece euros for the archeological tours and sandy beaches, would they not be better off than losing their homes to banks, pensions and jobs to cutbacks? The concept of communism aint pretty, but isnt the Greek public being pushed in that direction. I cant see the Greek public voting to be the Mexico of Europe. The only other choice is to become a larger version of Monaco and totally drop taxes so that all the ultra rich escaping France and going to England and such places come to Greece instead. My how that might change things.

    Europe is like a collection of corporations, all undercutting each other for the sake of grabing market share. In the end there can only be one left standing, and that one will be so far in debt that it ends up being foreclosed on by the banks. So who really wins, and what about all the callateral damage to the publics lives

  8. The precedent has been set, all we can now do is watch the cards tumbling into a catastrophic jumble of chaos, as those who manipulate the banks, the religious cult, crush the global economy betwixt their greedy, evil, demonic hands, apply the final touches to their global
    Yes, as I read many of the comments readers of this site post, it is easy to see many have fundamental understanding of what is happening globally, but few seem to recognize the traumatic, dictatorial, new world order satan’s servants, the bankers, are inflicting on us.
    There is no way we can reverse the path along which we are being led; the masses, the public, the proles, are mentally incapable of comprehending how quickly the ax is falling on their primed neck.
    Their medications, their soma, be it booze, religion, sport, inoculations, have destroyed the mental abilities of the populace to reason, to think clearly, lucidly.
    Yes, if the masses would/could get off their butts, point out to the politicians that they are our EMPLOYEES, and demand politicians nationalization all banks, change the economic system we are enslaved to, nothing would change, as the politicians are in cohorts with their over lords.
    What percentage of the populace will ever understand that money is a fictitious commodity, that has zero value, it is a tool to control the public, to trap them into poverty and subservience.
    It is too late to undo the damage, the horrific plans the illuminated ones are now bringing to fruition on our community, and, we need ponder “for Whom the Bell Tolls; I think it be for thee.

  9. Syriza’s problem in resolving this issue hinges on their intransigent desire to remain in the EU regardless of the outcomes of negotiations. It’s like choosing to stay in a burning house because you don’t want to leave the neighborhood. You can’t negotiate with the bankers anymore than you can with fire. If the Greeks don’t leave the EU and nationalize their banks they are to blame. By Syriza Portraying itself as the hapless victim when they have had a game changing solution at their disposal from the start is not only deceptive, but a criminal betrayal of the welfare of their people.

    • I agree with Greece repudiating the so-called “debt”, but that doesn’t mean they need to voluntarily exit from the EU.

      A radical approach would be to cancel the debt unilaterally, accept NO austerity, nationalize the banks, expose Germany’s non-payment of its own loans after WW2 and its much larger debt burden (the U.S., remember, is the largest debtor nation in the world!), apply for loans from competing capitalist sectors (Russia, China) and play them off against the German bankers — while intensively propagandizing the people of Greece, prepare them for being thrown out of the EU but do not leave voluntarily — issue no statement about leaving the EU, which as I understand it has no way of throwing out a member country.

      In other words, force the contradiction. Force them to throw you out, if that’s what the EU wants to do. It will create a huge fracture. And appeal to the working class throughout Europe to do the same in their own countries.

      What little would be gained by leaving the EU and going onto the drachma is offset by much greater losses. Bring the fight INTO the European Union and the centers of global capital.

      • How can you unilaterally cancel troika debt when you nation is governed by unelected bureaucrats only accountable to the banks? What’s their legal leverage — the people’s referendum? Most of the member states were forced to join in spite of their objections in referendums. Explain this to me and I will agree with your that it is possible to change their banking system from inside.

        As for forcing the EU to throw Greece out, I don’t see why they would. As a member state of the EU, they are legally entitled to collect their fraudulent debts. Doesn’t the European stability mechanism give them this right card blanche? The only way they cannot collect is if your not part of the EU.

        Feel free to correct me.

  10. […] Secret IMF Report (Reuters) • IMF: Greece May Need 30 Years To Recover (Reuters) • Grexit or Jubilee? How Greek Debt Can Be Annulled (Ellen Brown) • Decoding the IMF: Grexit is Inevitable (Paul Mason) • What’s Behind The IMF […]

  11. Plaudits to the IMF in splitting from Germany and saying the debt level has to be reduced. However, Greece does not want tot and cannot compete with Germany, something that is required if they use the same currency – Sadly, the current Greek government is completely incompetent: it starts by attacking the European countries unnecessarily and most importantly not preparing the country to launch its own currency.

    • i’m still not getting it. “launch its own currency.” and then how do they cover necessary imports? until their economy revives enough to make the new drachma a means of paying for them, it seems to me that they wd have to go without medical supplies, to take on example.

      please instruct.

  12. As can be witnessed first hand in the US, QE does not help the economy and devalues the money in your pocket. When combined with the increased taxes required to service an ever-increasing govt and debt burden, especially as rates rise, the net effect is less income and a lower standard of living…and more importantly, less freedom as govt digs in their heels to save themselves.

  13. […] Grexit or Jubilee? How Greek Debt Can Be Annulled […]

  14. The Greeks ought to print debt free drachmas and pay their EU debt with it. Riskless credit is a fraudulent fantasy.

    It might even reduce unemployment, in Germany as well as Greece!

  15. […] Brown looks at various ways to relieve Greece’s debt crisis and support recovery, while busting some of the myths surrounding how the situation developed, and […]

  16. Does Greece bear NO responsibility for its current situation because of disastrous internal monetary policies? The EU did not hold a gun to Greece’s head to force them into debt. While I agree that a sovereign Greece that has the ability to create money (ala USA) could alleviate the problem that they have created for themselves, (individual US states have some of the same problems with their budgets — see Ellen’s articles re South Dakota’s answer to this problem) there still needs to be some sort of fiscal responsibility — to assure that you can pay for what you voluntarily purchase — so that you don’t expose yourself to this kind of “new warfare”. Loan-Sharking requires at least two participants.

    • First of all, loan sharking isn’t voluntary if its the only game in town.

      Secondly, most of the debt the troika demands for repayment wasn’t even loaned to Greece. In fact, any debt the ECB incurs from whatever source can legally be imposed upon its member States per the European Stability Mechanism.

  17. Reblogged this on burlhall and commented:
    Great article.

  18. […] Ellen Brown Web of Debt […]

  19. Ellen – Brilliant thinking as usual, and an uplifting proposal. One big thing missing when you say:

    If Greece switches to drachmas, the funding possibilities are even greater. It could generate the money for a national dividend, guaranteed employment for all, expanded social services, and widespread investment in infrastructure, clean energy, and local business. Freed from its Eurocrat oppressors, Greece could model for the world what can be achieved by a sovereign country using publicly-owned banks and publicly-issued currency for the benefit of its own economy and its own people.

    All of the above would be positive but this would in turn increase land values, thus increase housing costs, land speculation. You simply must include land value tax / capture in your analysis! Then the cycle of the currency flow will be complete for both production and fair wealth distribution.

    – Alanna

  20. […] Ellen Brown Global Research, July 15, 2015 Web of Debt 14 July […]

  21. Reblogged this on maldichos and commented:
    though i am a “utopian” anarcho-communist, i find the analysis of the Modern Monetary theorists very solid. their key ideas c’d be used by a worker’s government to resolve the monetary that plague Greece and w’d certainly plague a genuine revolutionary government.

  22. Great article Ellen! Have you been directly corresponding with the Syriza leadership? I know that many Greeks already share your perspective. But I think it might be helpful if you & hopefully great numbers of similarly minded experts from everywhere were in Greece right now actively educating the Greek people about the history of countries such as Argentina and Iceland whose economies ultimately greatly prospered after they defaulted on their debts to these predatory banks.

    Though this situation is more challenging due to this issue of returning to the drachma, in this case, having your own currency might be the only solution. One benefit would be the relatively low prices of exported Greek goods if they had their own currency.

  23. Reblogged this on Keithpp's Blog.

  24. […] Source: WEB OF DEBT BLOG The crushing Greek debt could be canceled the way it was made – by sleight of hand. But saving the Greek people and their economy is evidently not in the game plan of the Eurocrats. Greece’s creditors have finally brought the country to its knees, forcing President Alexis Tsipras toRead more… […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: