Tsipras and the Transitive Property

During his speech at the European Parliament today, Prime Minister Tsipras, exposed a common argument heard very often from his national and international supporters: he accused the international creditors of the fact  that their loans only served to payback (German and French) banks, rather than help the Greek people. (“The money that was given to Greece never went to the people,…the money was given
to save Greek and European banks.”)

Now, as a matter of logic, consider the panel below. On the left, Greece borrows from “Europe” (Tax payers of EU, ECB plus IMF) and, eventually,   pays back much lower an amount. The difference in present value is a transfer from “EU” to Greece.  On the right panel, Greece borrows from private (German and French) “Banks” , and EU funds serve to payback the Banks, while the debt incurred by Greece with EU will be eventually repaid on a much lower  value. Is there a difference? No, by the “transitive property” both transactions amount to a transfer from European taxpayers to Greece.

If Greece had partially defaulted on “Banks”, rather than Europe, as it did with the Private Sector Involvement of 2012, the only difference would be that part of the transfer would be paid by Banks, rather than by EU taxpayers: but “the Greek people” would always have pocketed the transfer.