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Wednesday 8 July 2015

Barclays Fires CEO In Latest Rate-Rigging Euro Bank Shakeup

It's shaping up to be a rough year for CEOs at Europe's most notorious rate rigging, scandal-laden investment banks.

Just three months after Brady Dougan left Credit Suisse and barely 30 days since Anshu Jain and Jürgen Fitschen tendered their resignations at Deutsche Bank, Barclays has shown CEO Antony Jenkins the door. 

The move comes as Chairman John McFarlane (who took over as Chairman in April) looks to restrucutre what he calls a "cumbersome bureauacracy." The bank did not mince words in its press release announcing the shakeup: 

"It became clear to all of us that a new set of skills were required for the period ahead. New leadership is required to accelerate the pace of execution going forward. Mr. McFarlane is ideally qualified in this respect.”


Here's WSJ with a look back at the outgoing Jenkins' stint at the helm:

  1. Despite recent calls of dissatisfaction, the decision to name Mr. Jenkins as chief executive in August 2012 was broadly supported by analysts, and was described as “sensible”, “cool-headed” and “intelligent.” However, the honeymoon period was short-lived. One month later, Barclays was downgraded by Credit Suisse and J.P. Morgan over concerns about the profitability of its investment bank.
  2. Mr. Jenkins was a Barclays man. He joined the bank as a graduate trainee in 1983. After a six-year spell at Citigroup, he returned in 2006 and by 2009 headed up its retail and business banking. This lack of investment banking acumen led some analysts to speculate that Mr. Jenkins might cut back the unit after its growth under Mr. Diamond. But this never really materialized. Despite some cut backs in fixed-income and commodities, Barclays remains one of the largest investment banks in Europe, despite underperforming its rivals in recent years. Mr. Jenkins defended the high-pay for the unit in 2014 after a poor year, stating that he had to avoid a “death spiral” of rainmakers leaving for rivals.
  3. Mr. Jenkins didn’t waste time installing a number of projects aimed at moving Barclays away from the Libor-scandal that rocked the bank in 2012. First there was program dubbed “Transform”, aiming to “turnaround, return acceptable numbers, and sustain forward momentum”. Then there was Project Mango, a review of business practices in its investment bank. And then there was Project Electra, another review of the investment bank. During this, Barclays was dubbed itself a ‘go-to’ bank, with reviews into culture, pay, and performance reviews of managers.
  4. On a long enough time frame, Mr. Jenkins seemed to be the right man for the job. Since he joined in August 2012, Barclays share price is up 52.68%, in comparison the FTSE 100 is up around 15%. On this basis – his reign has been success.  However, from August 2013 the share price has fallen 1.12%, compared with an increase of 2.5% for the FTSE 100. During this period Barclays has paid billion-dollar fines for forex rigging, Libor rigging, and failing to keep client assets segregated. It is still facing investigations from the Serious Fraud Office around its capital raising in 2008. While not related to Mr. Jenkins’ tenure, the fines have weighed down the bank’s share price.
  5. But despite his rocky road, Mr. Jenkins is in good company, joining a group of blue-chip bank chief executives looking for new employment, including Anshu Jain, the former head of Deutsche Bank, and Peter Sands the former head of Standard Chartered. During Mr. Jenkins’s time as chief executive, he was paid a total of £10,011,000. He making money from his own exit: part of his pay, which continues until July 7 2016, is share-based. Shares are up more that 3% on news of his exit.

It's too bad, really. We're sure Jenkins was looking forward to a long and fruitful relationship with Richard Fisher, the former Dallas Fed chief Barclays hired last week as a "senior advisor."

*  *  *

Full statement from Barclays:

Antony Jenkins to leave Barclays; John McFarlane to become Executive Chairman

Barclays PLC and Barclays Bank PLC (Barclays) announce the departure of Antony Jenkins as Chief Executive and the appointment of John McFarlane as Executive Chairman pending the appointment of a new Chief Executive.  Subject to regulatory approval the change will come fully into effect on 17 July 2015 when John retires from FirstGroup.  A search for Mr Jenkins' successor is underway.  The interim results will be announced as planned on 29 July 2015. 

The Non-Executive Directors led by Sir Michael Rake, Deputy Chairman and Senior Independent Director,  concluded that new leadership is required to accelerate the pace of execution going forward and that John McFarlane is ideally qualified in this respect until a permanent successor is appointed.  This development does not signal any major change in strategy.

The Board recognises the contribution made by Antony Jenkins as Chief Executive over the past three years in incredibly difficult circumstances for the Group, and is extremely grateful to him in bringing the company to a much stronger position.  The situation he inherited would have challenged anyone facing the same issues.  This continued a period of achievement as head of Barclaycard and our Retail and Business Banking businesses.

Members of the Group Executive Committee will now report to Mr McFarlane, who will work particularly closely with Tushar Morzaria, Group Finance Director. 

Sir Michael Rake commented, "I reflected long and hard on the issue of Group leadership and discussed this with each of the Non-Executive Directors.  Notwithstanding Antony's significant achievements, it became clear to all of us that a new set of skills were required for the period ahead.  This does not take away from our appreciation of Antony's contribution at a critical time for the company."

Mr McFarlane said, "Whilst it is unfortunate that I have had little time to work with Antony, I respect and endorse the position of the Board in deciding that a change in leadership is required at this time.  I would add my personal thanks for everything that Antony has done for us.  He can be proud of his heritage, especially his excellent work on culture and values that we will continue.  I wish him well."

"Arriving at Barclays with a fresh perspective, it is evident that we have a standout brand with first-class retail, commercial and investment banking businesses.  Nevertheless, we are leaving value on the table and a new approach is required.  As a Group, if we aspire to bring shareholder returns forward, we need to be much more focused on what is attractive, what we are good at, and where we are good at it."

"We therefore need to improve revenue, costs and capital performance.  We also need to become more externally focused and deal with the internal bureaucracy by becoming leaner and more agile.  I have experienced good results in dealing with these matters elsewhere," he added.

Antony Jenkins said, "In the summer of 2012, I became Group Chief Executive at a particularly difficult time for Barclays.  It is easy to forget just how bad things were three years ago both for our industry and even more so for us.  I am very proud of the significant progress we have made since then.  Our capital position is much stronger, our business model is more balanced, we are much more disciplined on cost management, we have made good progress in rebuilding our reputation and we are seen as a leader in the application of technology to our business.  While the external environment has continued to be, and will remain, challenging the Group now has the resilience to overcome these challenges. 

"Most of all, I am proud that we have defined our culture through a common set of values for the Group and that the progress we have made and the tough decisions we have needed to take have all been achieved by applying these values and by focusing on the needs of all our stakeholders. 

"I want to thank the people of Barclays for their tireless efforts and support in achieving these results and for my own part I am looking forward to the professional opportunities that lie ahead."

Greece Caves, Formally Requests ESM Bailout: Full Headline And Next Steps Summary

As we reported yesterday, following the latest European leaders summit, Greece was given until the end of the week to come up with a proposal for sweeping reforms in return for loans that will keep the country from crashing out of Europe's currency bloc and into economic ruin.

"The stark reality is that we have only five days left ... Until now I have avoided talking about deadlines, but tonight I have to say loud and clear that the final deadline ends this week," European Council President Donald Tusk told a news conference.

It did that moments ago when Greece officially submitted a request for a three-year loan facility from the European Stability Mechanism. And to think Syriza's main election promise was no more bailouts...

As Bloomberg reports, the loan will be used to meet Greece’s debt obligations, and to ensure financial system stability. Greece proposed immediate implementation of measures, including tax, pension reforms as early as next week. Govt to detail its  proposals for specific reform agenda on July 9 at latest or tomorrow.

More details from the WSJ:

Greece formally requested a three-year bailout from the eurozone’s rescue fund Wednesday and pledged to start implementing some of the overhauls demanded by creditors by early next week, according to a copy of the request seen by The Wall Street Journal.

Crucially for Greece’s creditors, the letter says the government would start implementing some measures, including on taxation and pensions, by the beginning of next week, though it doesn’t go into details.

The letter is a first step toward fulfilling a demand by international creditors, who have given Athens until Sunday to come up with tougher measures they would impose in return for desperately needed financing that could keep the country from bankruptcy and even worse economic turmoil. 

The full list of overhauls and budget cuts is what will determine whether the application for a new rescue program will be approved by the rest of the eurozone. The currency union’s leaders said Tuesday they would assess whether it makes sense to start formal negotiations on a bailout program at an emergency summit on Sunday.

In other words, and as expected, Greece has essentially capitulated to Troika demands which will come with far harsher terms and even more austerity, just to keep the myth that Greece is an "equal member" in the Eurozone, yet virtually all the proceeds will go back to repaying the ECB, the IMF and other official taxpayer-backed European creditors as well as the occasional private holdout creditor.

This is all happening as Tsipras is currently talking in the Euro parliament, where he is trying to strike a far more cooperative tone now the only Greek hope is that it is not too late for Europe to accept any offer Greece will propose, oblivious of the referendum.

Earlier he submited the following statement after the Eurozone summit.

Here are some of his speech highlights via Reuters:

Thank you for the invitation-& honor-to address the elected representatives of peoples of Europe.

The Greek people's brave choice in conditions of unprecedented pressure, does not mean a break w/Europe.

My country was used to experiment with austerity. The experiment, we must admit, failed.

The majority of Greek people feel that there is no other choice but to stop treading this road to nowhere.

Our proposal to the institutions includes: credible reforms based on a fair sharing of burdens.

It includes the adequate coverage of the country's financial needs.

It includes a strong investment program, primarily for combating unemployment and encouraging entrepreneurship.

It includes a commitment to begin a sincere discussion regarding a solution to problem of sustainability of Greece's public debt.

Our proposals for financing our obligations & restructuring our debt will not burden European taxpayers.

I'm not one of those politicians who claim that foreigners are to blame for all of Greece's woes.

Previous governments created clientelistic state, furthered corruption & strengthened ties to economic elite.

Our proposals focus on reforms that aim to change #Greece, reforms that the Memoranda purposely did not include.

Now, must reach a viable & honest compromise, one that will avoid a historical break & goes against EU tradition.

And I am sure that we're all aware of-& we'll all take into account-our historic responsibility. Thank you.

It is unclear if Tsipras has converted the Syriza hard cores to his camp just days aftter the critical Greek "Oxi" referendum passed on a landslide, but at least one MEP was convinced:

All of us, urgently, by Sunday, have to do what needs to be done, whatever it takes, as Mr. Draghi says, so we see the word Grexit wiped out of EU vocabulary for ever.

     - Dimitrios Papadimoulis, MEP FROM TSIPRAS'S SYRIZA PARTY

But others were not easily fooled:

So if this piece de theatre continues I think we will be more and more confused about who and what we are trying to save. Are we trying to save the currency union, Greek society, the credibility of the government, the creditors, the reputation of Angela Merkel, or the infallibility of ever closer-union?

 

We certainly cannot save all of these. There will be some casualties.

     - Ryszard Legutko, MEP FROM CONSERVATIVE GROUP ECR

In any event, the latest Greek crisis, if only for the time being, is likely about to close this weekend. Will the can be kicked for 3 years or will the Greek people confirm they have had enough and rebel from under Tsipras, we will hopefully find out shorly.

In the meantime, here is the recap of all the key Greek headlines and events in the past several hours from Reuters and Bloomberg...

  • 1015 - Technical experts will review Greece's request for an ESM loan on Wednesday but there will be no conference call among euro zone ministers, a spokesman says
  • 0956 - Russia is not in a position to help solve the Greek debt crisis, and the EU should resolve it on its on, the chief executive of Russia's second largest bank VTB says
  • 0947 - Greece lodges formal request for bailout loan with the euro zone's special support fund, a spokesman for the European Stability Mechanism says
  • 0920 - European Central Bank Governing Council member Ewald Nowotny says hard to imagine that ECB council could increase emergency liquidity for Greece
  • 0904 - Bank of Italy and ECB member Ignazio Visco says ECB will will do what it can to contain financial and economic consequences of Greek crisis.
  • 0903 - Greece successfully rolls over T-bills to refinance a maturing six-month issue
  • 0820 - Greek Prime Minister Alexis Tsipras tells European Parliament says will present details proposal to EU in next 2-3 days.
  • 0812 - Greek Prime Minister Alexis Tsipras tells European Parliament the referendum gave him a mandate to find a socially just and economically sustainable solution to end the crisis.
  • 0747 - EU Economics Commissioner Pierre Moscovici tells BBC radio an agreement between Greece and its euro zone partners is still possible.

    JULY 7

  • 2347 - Euro zone members give Greece until the end of the week to come up with a proposal for sweeping reforms in return for loans
  • 2135 - Merkel says she hopes to have sufficient reform proposals from Greece this week to be able to ask the German parliament to approve negotiations on a new long-term aid programme for Athens. If the reform list was adequate and Greece took some prior actions to enact first measures, she says she is sure that short-term finance can be provided to help Athens over its immediate funding needs.
  • 2030 - Austria's finance minister says Greece's request for financial aid from the European Stability Mechanism (ESM) is so far very vague.
  • 2020 - Summit over; Italian Prime Minister Matteo Renzi says a final meeting on Greece, involving all 28 EU leaders, will take place on Sunday.
  • 1932 - Greek banks could start to run out of cash over the next two days if creditors do not agree to a new aid deal, two sources familiar with the country's financial system say.

.... and here are the key catalysts in the coming days.

  • July 8: Greece scheduled to submit request for a bailout agreement to the European Stability Mechanism
  • Euro area finance ministers may hold a conference call to assess Greece’s request for a new program * European Central Bank Governing Council will review liquidity situation of Greek lenders
  • Greek bank holiday, capital controls decree expires; government set to renew it
  • July 9: Greece must submit its reform agenda, which will be assessed by the European Commission, the European Central Bank and the International Monetary Fund. Results will be given to the Eurogroup, which will hold another call to discuss the new proposals
  • July 10: Greece needs to refinance EU2b in t-bills
  • July 11: Euro-area finance ministers will meet in Brussels
  • July 12: Euro-area and EU leaders will hold meetings to discuss the results of Greece’s expected comprehensive reform agenda

Between Berlin and a Hard Place: Greece and the German Strategy to Dominate Europe

Germany and the Troika: (left to right) German Chancellor Angela Merkel, IMF Managing Director Christine Lagarde, European Commission President Jean-Claude Juncker, European Central Bank President Mario Draghi

Germany and the Troika: (left to right) German Chancellor Angela Merkel, IMF Managing Director Christine Lagarde, European Commission President Jean-Claude Juncker, European Central Bank President Mario Draghi

“They just wanted to take a bat to them,” said former U.S. Treasury Secretary Timothy Geithner, referring to the attitude of European leaders towards debt-laden Greece in February of 2010, three months before the country’s first bailout. Mr. Geithner, Treasury Secretary from 2009 until 2013, was attending a meeting of the finance ministers and central bankers of the Group of Seven (G7) nations: the United States, Japan, Germany, France, Britain, Italy and Canada.

It was the first occasion he had to meet Germany’s new Finance Minister, Wolfgang Schauble, presenting an opportunity to pressure the Europeans to end the crisis. The Europeans, specifically Germany and the European Central Bank (ECB), always had the ability to end the crisis. Putting up enough money in a regional bailout fund or allowing the ECB to fund governments (acting as a ‘lender of last resort’) would provide enough reassurance to the markets that no country would go bankrupt and therefore the crisis would end. It was referred to as the ‘big bazooka’ option, but Mr. Geithner had no such luck in convincing the Europeans to act quickly, largely due to German resistance.

The Europeans arrived at the G7 meeting in the remote Arctic Canadian city of Iqaluit wanting “to teach the Greeks a lesson” and “crush them,” explained Mr. Geithner. The Treasury Secretary warned them, “You can put your foot on the neck of those guys if that’s what you want to do,” but they still had to take action to reassure markets that the crisis would not spread to other countries, or threaten the euro itself. “I thought it was just inconceivable to me they would let it get as bad as they ultimately did,” said Mr. Geithner.

As the United States and the rest of the world would learn, the European strategy for the debt crisis that began in Greece and spread across the eurozone would be dictated by Germany, “the undisputed dominant power in Europe.” More than five years later, the Americans are still pressuring the Europeans to resolve their debt crisis problems, but to little effect. The stakes are now even higher as the U.S. fears the possibility of losing Greece to Russia, a conflict in which Germany is increasingly involved.

The Americans would attempt to influence Europe’s crisis through extensive contact between Mr. Geithner and Mr. Schauble at the German Finance Ministry, Mario Draghi at the ECB, and Christine Lagarde at the International Monetary Fund (IMF). The Americans knew that for anything to get done in Europe, you needed the Germans and the central bankers on board. The U.S. spy agency, the NSA, was even wiretapping the phone calls of German Chancellor Angela Merkel, top officials of the Finance Ministry and the ECB, with a particular interest in economic issues and Greece.

Germany’s political strategy was to allow the debt crisis to spread, creating the pressure required to force eurozone nations to accept German demands of restructuring their economies in return for financial aid from the EU. The German magazine Der Spiegel described Frau Merkel’s overall European strategy: “the aim was to solve the debt crisis in a step-by-step fashion.”

“If the euro fails, then Europe fails,” said the Chancellor in May of 2010, shortly after the first Greek bailout program was agreed. “The euro is in danger. If we do not avert this danger, then the consequences for Europe are incalculable and then the consequences beyond Europe are incalculable.” Merkel worked closely with Mr. Schauble at the Finance Ministry and her Minister of Economics, Rainer Brüderle, to write a draft proposal outlining the changes Germany wanted in the European Union.

The German publication Der Spiegel was leaked a copy of the draft, and concluded: “Berlin is serious about taking the lead as the euro zone struggles with a suddenly weak currency.” Germany wanted a Europe where the European Commission had the power to suspend the voting rights of nations for violating the eurozone’s debt and spending laws, including plans for managing the bankruptcy of a member nation. “Europe,” said Angela Merkel, “needs a new culture of stability.” But that culture would be enforced through the destabilizing power of financial market crises.

The German bet was that the EU could outrun financial markets, using the crisis as an opportunity to advance fiscal and political integration and impose their demands upon the rest of Europe, while simultaneously preventing markets from creating a crisis so severe that it threatened the euro or the economies of the more powerful nations. Without the pressure of financial markets, the EU could not force its member nations to restructure their economies and societies. Chancellor Merkel would frequently describe the European debt crisis to her colleagues as a “poker game” between financial markets and politicians. The first to flinch would lose.

In 2011, Bloomberg noted that Merkel was “turning Europe’s sovereign-debt crisis into an opportunity to reshape the euro region in Germany’s image,” concluding that she had “pulled ahead for now in her battle to restore policy makers’ mastery over the market.” A biographer of Merkel explained, “It’s policy by trial and error.”

Merkel’s powerful Finance Minister, Mr. Schauble, was one of the chief architects of the German strategy for Europe’s crisis. In March of 2010, he wrote in the Financial Times that, “from Germany’s perspective, European integration, monetary union and the euro are the only choice.” But aid comes with strings attached and harsh penalties for violations. “It must, on principle, still be possible for a state to go bankrupt,” wrote Mr. Schauble. “Facing an unpleasant reality could be the better option in certain conditions.”

The German minister believed “the financial crisis in the eurozone is not just a threat, but an opportunity,” as markets would “force the most debt-laden members of the 17-nation currency union to curb their budget deficits and increase their competitiveness.” This would pressure governments to accept further integration into a “fiscal union” defined and shaped by Germany. “We need to take big steps to get that done,” Mr. Schauble said in 2011. “That is why crises are also opportunities. We can get things done that we could not do without the crisis.”

Financial markets were happy to oblige the German-EU strategy, as the crisis would force the reforms long demanded by banks as a solution to the irresponsible spending of governments: austerity and structural reform. From 2002 to 2012, Josef Ackermann led Germany’s largest bank, Deutsche Bank. In 2011, the New York Times described Ackermann as “the most powerful banker in Europe” and “possibly the most dangerous one, too,” standing “at the center of more concentric circles of power than any other banker on the Continent.”

When the financial crisis struck in 2008, Angela Merkel and Josef Ackermann established a close working relationship, though not without its ups and downs. “We have a cordial and professional relationship,” said Mr. Ackermann in 2011. The banker would advise Frau Merkel on her strategy through the financial and debt crises, also working closely with Jean-Claude Trichet, then-president of the ECB. From his “seat at the nexus of money and politics,” Ackermann was “helping to shape Europe’s economic and financial future.”

After he left Deutsche Bank in 2012, Ackermann delivered a speech to the U.S.-based think tank, the Atlantic Council, where he outlined Germany’s overall strategy for Europe’s crisis. When asked why Germany simply didn’t say that it would do whatever it took to protect the euro and eurozone nations from bankruptcy (thus ending the financial crisis), Ackermann explained that it was largely due to a “political tactical consideration.” While such an option would surely end the market panic and save the euro, it would be unacceptable to the German public, let alone the German parliament.

But another major problem, noted Mr. Ackermann, was that if Germany made such an announcement, other eurozone nations “would then say, well, why then go on with our austerity programs? Why go on with our reforms? We have what we need.” Thus, he said, “I think to keep the pressure up until the last minute is probably a – not a bad political solution.” However, “if it comes to the worst,” with the potential of a eurozone collapse, the banker had “no doubt” that Germany would come to the rescue.

If the eurozone collapsed, not only would an economic and financial contagion spread with drastic consequences for all its members and the world economy as a whole, but there was also a strong political element. “A fragmented Europe has no way for self-determination,” said Mr. Ackermann. “We will have to accept what the United States, China, India, Brazil and other countries will finally define for us.” But Germany was to define the future of Europe.

“My vision is political union,” said Chancellor Merkel in January of 2012. “Europe has to follow its own path. We need to get closer step by step, in all policy areas.” In the Chancellor’s Europe, Brussels (home of the European Commission) was to be given immense new powers over member nations. “In the course a long process,” she said, “we will transfer more powers to the Commission, which will then work as a European government.” Outlining the EU’s path to a federation of nations functioning like individual states within the U.S., Merkel said, “This could be the future shape of the European political union.” Further integration among eurozone nations was a major objective, she explained, “we need to give institutions more control rights and give them more teeth.”

As Chancellor Merkel and other German leaders would frequently remind the rest of Europe and the world, with 7% of the world population, 25% of global GDP and 50% of world social spending, Europe’s economic system was unsustainable and uncompetitive in a globalized economy. Germany’s vision for Europe was aimed at introducing “rules to force Europe’s economies to become more competitive.” But competitiveness was defined by Germany, and thus, “the rest of Europe needs to become more like Germany.”

Germany wanted Greece and the rest of Europe to impose ‘budgetary discipline’ through austerity measures: cutting public spending in order to reduce the debt. But these are painful and highly destructive policies that depress the economy, impoverish the population, destabilize the political system, undermine democracy and devastate the wider society. If you live in a country where the government funds healthcare, education, social services, welfare, pensions and anything that benefits the general population, under austerity measures, now you don’t! Not surprisingly, austerity is always unpopular with the people who are forced to live through it.

Only in times of crisis can austerity be pushed through. When financial markets threaten to cut a country off from its sources of funding, it must to turn to larger nations and international organizations for financial aid. “The current strategy of the EU,” wrote Wolfgang Münchau in a November 2009 article for the Financial Times, “is to raise the political pressure – perhaps even provoke a political crisis – with the strategic objective that the Greek government might eventually relent.” And the government would have to relent to the diktats of Germany and “the Troika”: the European Commission, European Central Bank (ECB), and the International Monetary Fund (IMF), who collectively managed Europe’s bailout programs.

In early 2010, European banks held more than 141 billion euros of Greek debt, with the largest share being held by French and German banks. The first bailout largely went to bailout these very banks. Karl Otto Pohl, the former President of the German Bundesbank noted back in 2010 that the Greek bailout was about “rescuing the banks and the rich Greeks,” especially German and French banks. As the Troika bailed out the banks, these institutions took on the Greek debt.

The second bailout organized by the Troika largely went to paying interest on Greek debt owed to the Troika. Thomas Mayer, a senior adviser to Deutsche Bank, said, “the troika is paying themselves.” Between May 2010 and May 2012, Greece had received roughly $177 billion in bailouts from the Troika. A total of two-thirds of that amount went to payoff bondholders (banks and rich Greeks), while the remaining third was left to finance government operations.

In 2015, a study by the Jubilee Debt Campaign noted that of the total 252 billion euros in bailouts for Greece over the previous five years, over 90% ultimately went “to bail out European financial institutions,” leaving less than 10% for anything else. At the time of the first bailout in 2010, Greece had a debt-to-GDP ratio of roughly 130%. As a result of the bailouts and austerity, the debt ratio has risen to 177% of GDP at the beginning of 2015. Thus, after more than five years of supposed efforts to reduce its debt, that debt has grown substantially.

But the banks are no longer the largest holders of Greek debt. Today, the Troika owns 78% of the 317 billion euro Greek debt. Greece now owes the IMF, ECB, and eurozone governments a total of 242.8 billion euros, with the largest single holder being Germany with more than 57 billion euros in Greek debt. And now the Troika wants to be paid back. “In short,” wrote Simon Wren-Lewis in the New Statesman, “it needs money from the Troika to repay the Troika.”

The effects on Greece of more than five years of living under the domination of Germany and the Troika have been palpable. Greece is a ruined economic colony of the European Union. Austerity in Greece led to the creation of “a new class of urban poor” with more than 20,000 people being made homeless over the course of 2011, and dozens of soup kitchens and charities opening up to attempt to address the growing social and human crisis.

As austerity continued to collapse the economy, unemployment and poverty soared. By 2013, more than 27% of Greeks were unemployed and 10% of school-age children were going hungry. Between 2008 and 2013, the Greek government cut 40% of its budget, healthcare costs soared, tens of thousands of doctors, nurses and other healthcare workers were fired, drug costs rose, as did drug use with HIV infections doubling and a malaria outbreak was reported for the first time since the 1970s, while suicide rates increased by 60%.

By early 2014, more than a million Greeks were left without access to healthcare, accompanied by rising infant mortality rates. A charity director in Athens noted that, “Alcoholism, drug abuse and psychiatric problems are on the rise and more and more children are being abandoned on the streets.” By 2015, roughly 40% of children in Greece lived under the poverty line while the richest Greeks, responsible for roughly 80% of the tax debt owed to the government, were hiding tens of billions of euros in offshore accounts.

Unemployment has grown to 26% (and over 50% for youth), wages dropped by 33%, pensions were cut by 45%, and 40% of retired Greeks now live below the poverty line. Just prior to the Greek elections that brought his party to power in January of 2015, Alexis Tsipras wrote in the Financial Times that, “This is a humanitarian crisis.” Joseph Stiglitz, the Nobel Prize-winning former chief economist of the World Bank, wrote in late June of 2015 that, “I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences.”

Thus, the German-Troika strategy of prolonging the debt crisis to reshape Europe has resulted in a human, social and political crisis that threatens the future of democracy in Europe itself. Germany has, in effect, established an economic empire over Europe, largely operating through the Troika institutions, all of which are unaccountable technocratic tyrannies.

The first pillar of the Troika is the International Monetary Fund (IMF), based in Washington, D.C., just a few short blocks down the road from the White House and U.S. Treasury Department. The United States is the largest single shareholder in the IMF, and the only one of its 188 member nations with veto power over major Fund decisions. The Financial Times referred to the IMF as “a tool of US global financial power.”

In 1977, U.S. Treasury Secretary Michael Blumenthal described the IMF as “a kind of whipping boy” in a memo to President Carter. In return for a loan to a country in crisis, the Fund would demand harsh austerity measures and other ‘structural reforms’ designed to restructure the economy along the lines desired by Washington. “If we didn’t have the IMF,” wrote Blumenthal, “we would have to invent another institution to perform this function.”

In the early 1990s, the IMF was managing ‘programs’ in over 50 countries around the world, and was “long been demonized as an all-powerful, behind-the-scenes puppeteer for the third world,” noted the New York Times. In 1992, the Financial Times noted that the fall of the Soviet Union “left the IMF and G7 to rule the world and create a new imperial age.” Operating through the Troika, IMF Managing Director Christine Lagarde took a “tough love” approach to Greece, with the Fund being referred to as “the toughest” of the three institutions.

The European Central Bank (ECB) is another pillar of the Troika, run by unelected central bankers responsible for managing the monetary union, with its headquarters in Frankfurt, Germany, home to the German central bank (the Bundesbank) and Germany’s large financial sector. Throughout the crisis, Brussels has pushed to give the ECB more powers, specifically to oversee the formation and management of a single ‘banking union’ for the EU. The ECB has, in turn, advocated for more power to be given to Brussels.

The ECB played a central role in the debt crisis, pushing Greece into a deep crisis in late 2009, making “an example” of the country for the rest of Europe, blackmailing Ireland into accepting a Troika bailout program, then blackmailing Portugal into doing the same, and putting political pressure on Italy and Spain to implement austerity measures.

In late 2014, ECB President Mario Draghi rebooted efforts to advance integration of the economic and monetary union. When the anti-austerity Syriza government came to power in Greece in early 2015, the ECB was placed to be “the ultimate power broker” in negotiations between the country and its creditors. A member of the central bank’s executive board welcomed the democratic victory in Greece by warning, “Greece has to pay, those are the rules of the European game.”

The ECB took a hardline approach to dealing with Greece, increasing the pressure on Athens to reach a deal with its creditors, with The Economist referring to the central bank as “the enforcer.” This unelected and democratically unaccountable institution holds immense, undeniable power in Europe.

The European Commission is the third pillar of the Troika based in Brussels, functioning as the executive branch of the European Union overseeing a vast bureaucracy of unelected officials with responsibility for managing the union. Throughout the crisis, the Commission has been given sweeping new powers over economic and spending policies and priorities of member nations.

Brussels was to be given the centralized power to approve and reject national budgets of eurozone nations, establishing a technocrat-run ‘fiscal union’ to match the ECB’s role in managing the monetary union. EU institutions would have “more powers to serve like a finance ministry” for all the nations of the eurozone, potentially with its own finance minister, “who would have a veto against national budgets and would have to approve levels of new borrowing,” said Mr. Schauble, the German Finance Minister.

In 2007, European Commission President José Manuel Barroso mused aloud during a press conference. “Sometimes I like to compare the E.U. as a creation to the organisation of empires,” he said. “We have the dimension of Empire but there is a great difference. Empires were usually made with force with a centre imposing diktat, a will on the others. Now what we have is the first non-Imperial empire.” Eight years later, it is clear that the EU is officially an imperial empire, using bailouts not bombs, choosing the Troika over tanks, Brussels over bullets, austerity instead of armies, advocating for consolidation instead of colonization.

Philippe Legrain, a British political economist, author, and adviser to President Barroso from 2011 to 2013 wrote that the debt crisis “divided the euro zone into creditor nations and debtor ones,” and the EU’s institutions “have become instruments for creditors to impose their will on debtors, subordinating Europe’s southern ‘periphery’ to the northern ‘core’ in a quasi-colonial relationship. Berlin and Brussels now have a vested interest to entrench this system rather than cede power and admit to mistakes.”

“In general,” wrote Gideon Rachman in the Financial Times in 2007, “the [European] Union has progressed fastest when far-reaching deals have been agreed by technocrats and politicians – and then pushed through without direct reference to the voters. International governance tends to be effective,” he concluded, “only when it is anti-democratic.”

Perhaps the greatest lesson of the past five years of crisis is that in a Europe under the rule of Germany and the Troika, the people and democracy suffer most. For democracy to survive in Europe, the technocratic tyranny of the Troika and debt-based domination of Germany must be challenged. Democracy is too important to be sacrificed at the altar of austerity. It is any wonder why Greeks voted ‘no’ to the status quo?

Andrew Gavin Marshall is a freelance researcher and writer based in Montreal, Canada.

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