It’s all Greek to me: a glossary of eurozone crisis jargon
What does it mean to 'reprofile debt'? What’s the difference between the ECB, ESM and ELA? We unscramble all the jargon of the Greek debt crisis so you too can talk like you’re in the Troika.
With all due acknowledgement to Sophie Jamieson at The Telegraph, United Kingdom on Tuesday 14 Jul 2015.
Trying to understand the Greek financial crisis can feel like learning a whole new language. Be prepared to enter a world where a haircut is not just cosmetic and confusing acronyms are a way of life. We explain the complex vocabulary of Greece’s economic woes in one handy dictionary.
- Bail-out: The act of rescuing a failing business or country to save it from collapse. A bail-out can be delivered in a number of ways, with a number of conditions. Greece has struggled to agree the terms of its sorely-needed third bail-out with the rest of Europe.
- Bank Recovery and Resolution Directive (BRRD): A directive is essentially a law produced by the European Union — the EU issues a rule and member states are left to apply it in their own countries. This particular directive, which Greece has been told to implement, relates to laws designed to make it easier to wind-up failed banks so that they don't need to be bailed-out by taxpayers.
- Bridge financing: An interim way of borrowing money after your last loan has expired and your new one has not yet started. You might have heard the term in the context of buying a house, where you could finding yourself having to buy a new property before you have received the money from selling your current home and therefore need a short-term loan to fill the gap. Greece needs a bridging loan to tide it over until the end of August, worth around €12bn, when the terms of its new loan can be agreed.
- Brussels Group: A relatively new collective phrase to describe the European Commission, the European Central Bank and the International Monetary Fund (the three members of what was formerly known as the Troika).
- Debt forgiveness: The cancellation of debt. If a creditor “forgives” all or part of a debt, the borrower no longer has to pay the money back.
- Debt reprofiling: A slightly more specific form of debt restructuring. It involves extending the length of time given to repay the debt, without reducing the face value (sometimes described as the "nominal value") of the debt.
- Debt restructuring: The process of changing the terms of a loan to make it easier for the borrower to repay. This can take different forms, including extending the time available to repay and reducing the total amount owed.
- Debt write-off: Different to restructuring and reprofiling but the same as forgiveness — when all or part of a loan is written off, so that money does not have to be repaid. A write-off has been ruled out by Greece’s lenders as illegal under the treaties of the European Union
- Default: This is what happens when a borrower is unable to repay its debts, for example when they miss a loan repayment. Especially bad when you default on a €1.5bn payment to the IMF at the end of June. (At the time, however, the IMF called it "being in arrears")
- Drachma: Could soon become both the oldest (goes back as far as, perhaps, 500BC) and the newest currency in the world. The drachma was replaced by the euro in Greece in 2001.
- ECB: The European Central Bank, the eurozone’s equivalent of the Bank of England (and the Reserve Bank of Australia). As the central bank of the euro, the currency shared by the 19 eurozone members, the ECB’s job is to maintain the euro’s price stability. Greece owes the ECB €22bn under its bail-out programme and has to make a €3.5bn payment by the end of July. (Also in debt to its ELA to the tune of €118 billion)
- ELA: Emergency Liquidity Assistance. Emergency loans made by the ECB to banks that are struggling to stay afloat. Used, for example, to provide the Greek banks with extra cash as depositors rushed to withdraw their savings during the negotiations over Greece’s debt.
- ESM: European Stability Mechanism. This is the eurozone's rescue fund. It can provide loans to struggling countries or funds to failing banks. The ESM is a genuine organisation based in Luxembourg. The ESM borrows money from the financial markets in order to fund the loans it makes.
- European Commission: Based in Brussels, the European Commission is the executive body of the EU, meaning it prepares legislation, enforces European law and manages EU policies. The European Commission is designed to represent the collective interests of the EU, not the interests of individual member states.
- European Council: Unlike the European Commission, the European Council does not develop EU laws. It is made up of the heads of state or government of the 28 EU member states, along with the European Council President (Donald Tusk) and the President of the European Commission (Jean-Claude Juncker). Its role is to set out the EU’s overall political priorities.
- Eurozone: The group of 19 countries that all use the euro. Could potentially lose a member if Greece is forced (or decides) to return to the drachma.
- Grexit: A handy portmanteau for “Greek exit”, this is the buzzword you will have seen being thrown about as shorthand for a Greek departure from the eurozone.
- Haircut: A haircut is a financial term for when a borrower’s debt is reduced. Greece has already felt the benefit of haircuts in the past, but more recently Angela Merkel has insisted that “a classic haircut” — or a debt write-off — for the troubled country is out of the question.
- IMF: The International Monetary Fund. With 188 member countries, the IMF is designed to promote economic cooperation, ensure financial stability and foster international trade. Set up in 1945 (at the time of the United Nations), the IMF was created to help avoid a repeat of the Great Depression. It has helped hundreds of struggling countries with rescue loans, other financial aid and technical assistance, advising central banks and governments on monetary and fiscal policy. The IMF, or 'the Fund', has also helped bail out Greece.
- The Institutions: The alternative but no less ominous name for the Troika, a collective term for the International Monetary Fund, the European Commission and the European Central Bank. The Troika were renamed at the Greek government’s request when it came to power in late January. These are the three most important bodies in determining Greece’s future as they are the international lenders responsible for negotiating the bail-out deal with Greece and monitoring the country's austerity measures.
- Liquidity: Liquid assets — cash, so an organisation's or country’s liquidity is essentially a measure of how much access they have to cash. If you have assets that can be easily liquidated (converted to cash) then you are more able to fulfil your financial obligations, such as paying your debts.
- Oxi: The Greek for no — the way 61pc of Greeks voted in the recent referendum, as opposed to “Nai” (yes). The referendum asked the Greek people if they would accept the terms of a proposed international bail-out.
- Privatisation fund: This has emerged as one of the most controversial parts of Greece’s new agreement with its lenders. The country will have to privatise national assets worth €50bn and place them in a fund used to pay back part of its debt. Around €12bn of this will be invested back into the country’s economy. The money will come from either selling off Greek assets or making a profit from them. Those assets could include large public companies, such as utilities and airports. Germany wanted the fund to be located in Luxembourg, but Alexis Tsipras insisted that it be based in Greece.
- Syriza: The Greek ruling party, led by Prime Minister Alexis Tsipras. Syriza is an acronym for "Coalition of the Radical Left" in Greek. As the name implies, it started as a group of smaller Marxist parties. The party won the Greek elections in January on an anti-austerity platform.
- Troika: The term Troika has now fallen out of favour, replaced by the Institutions. From the Russian meaning “group of three”, the Troika refers to the European Commission, International Monetary Fund and European Central Bank. These are the lenders responsible for negotiating Greece’s bail-out and monitoring the country’s economic problems.
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