The disastrous effect of German and French arms sales to the Greek debt

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The pundits of the world media and the Eurotrash elite of the European Union have announced that Sunday 12 July is the day in which the Greeks have to make their final decision on debt repayment or face a "Grexit". They cite the failures of the Greeks to pay the interest on the loans made to the country by the Troika as evidence of Greece's inability to avoid bankruptcy. What they leave out, to their everlasting shame, is their complicity in creating such an unsustainable debt burden for the Greeks.

The key element in their hypocrisy is that a substantial part of the Greek debt went directly to Germany, and some to France, for the purchase of military equipment which the Greeks felt they needed in the wake of the Turkish invasion of Cyprus. The corrupt practices involved in these military sales by Germany to Greece are a paradigm example of how the irresponsible elites of two countries interact with an impunity which is dazzling when exposed.

Greece became the first battleground in the Cold War, with the British and the U.S. backing anti-Communists in the Greek civil war in the late-1940s against Communist insurgents. This struggle led Harry Truman to announce his pledge for unlimited military support for nations under Communist threat (the Truman Doctrine). This was in addition to the massive sums sent to Europe under the Marshall Plan to rebuild the destruction of the continent caused by the Second World War. While the rest of Western Europe used U.S. aid to rebuild its economy Greece used much of the U.S. aid to rebuild its military and fight the Civil War.

When, at the end of the 1950s the U.S. reduced its aid to Europe, the burden of Greek military expenditures was returned to Athens. Although both Greece and Turkey are members of NATO they remain bitter enemies with ongoing conflicts over oil, boundaries like the Dodecanese Islands, the security of Cyprus (whit which Greece once sought 'Enosis') and similar conflicts.

The U.S. over the years catered to the two NATO members under a 7:10 ratio, meaning for every $7 million dollars of equipment it sold to Greece it sold $10 million to the more populous Turkey.

It was in that environment that Greece in 1998 went shopping for submarines. It decided on three German-built class-214 submarines, a state-of-the-art diesel-electric powered vessel, with the option of buying a fourth--for a total of 1.8 billion. The first was to be built at the Kiel headquarters of Howaldtswerke-Deutsche Werft GmbH, with the others built at the affiliated Hellenic Shipyards SA, in Skaramangas, Greece. The arrangement, called the Archimedes Program, would preserve thousands of jobs at the Greek shipyard.[i] The total cost of the new and renovated subs: 2.84 billion.

This was not a straight military purchase. At that time the Greeks were trying to make their finances look right so as to join the Euro. The PASOK Government lied about its figures and the New Democrats were even worse. In order to help the Greeks with their ailing economy many European officials have charged France and Germany with making their military dealings with Greece a condition of their participation in the country's huge financial rescue. In other words the Germans and the French made Greek military deals with them the criterion for economic assistance from the European Union.[ii]

As the military expenditures rose, Greece's two main political parties used them as a political football, each trying to make the budget deficit figures look worse when the other was in charge.

When the Socialist government first bought the submarines, it post-dated the accounting for them to the day when the vessels were to be delivered, rather than when they were purchased.
The government at the time was struggling to meet budget criteria for entry into the euro zone, which it joined a year behind other members in 2001. Pushing back the expenses saddled the bill on the Socialists' successors, the conservative New Democracy party, which came to power in March 2004.

The New Democracy government that year then used a similar tactic, by retroactively accounting for the expenditures on the date of purchase. That inflated the budget deficits of the previous government--while making it easier to get on with its own deficit problems.

The Greek judiciary and the military authorities were outraged at this deception by the politicians and in May 2010 instituted an investigation into these military purchases and the vast amount of bribes from Germany and France which lubricated the deals. Even the German government began an investigation of the chief executive of Ferrostal (the German company building the submarines) resigned. Greece's economic crimes unit began investigating all weapons deals of the past decade--totalling about 16 billion--to determine if Greece overpaid or bought unnecessary hardware. In April 2010, Stelios Fenekos, a 52-year-old vice admiral of the 22,000-person strong Greek Navy, resigned his position to protest the Greek defence minister's decisions on these purchases. Meanwhile, not one of the subs had been delivered. When Greek officials travelled to Kiel to test the first sub, called the Papanikolis, they said that they found that in certain sea conditions the submarine listed to the right. "The Navy said we cannot accept this sub," said Mr. Fenekos, "But the politicians did not want to stop it because they needed the production for the workers in the shipyard here." By 2009 Greece had paid the Germans 2.032 billion, about 70% of the total owed without receiving a single submarine. The Germans demanded the remaining 30% of the payment. The Greeks refused and the German companies cancelled the contract. The Greeks and the Germans arranged a variation on the deal but it never was completed because the German courts started to investigate the corrupt activities of the German companies while making the deal.

German prosecutors in Munich began turning up evidence of unsavoury dealings, according to records of their investigation. Ferrostaal executives authorized payments worth millions of euros to politicians to win the initial deal in 2000, through a Greek company called Marine Industrial Enterprises, according to the Munich prosecutor's records. To do this, Ferrostaal used sham consulting contracts, according to the records. That company then distributed payments to "officials and decision-makers" in Greece. The investigation is ongoing. No charges have been filed. However, Former Minister of Defence Akis Tsochadzopoulos was convicted in 2013 of accepting $8 million in bribes connected to these submarines. Meanwhile the Greeks have no submarines and the Germans have about 2.8 billion of Greek funds.

In a similar case the German engineering group Siemens recently reached an out of court settlement with Greece following claims it had bribed cabinet ministers and other officials to secure contracts before the 2004 Olympic Games in Athens. Tassos Mandelis, a former socialist transport minister, admitted he had accepted a 100,000 payment from Siemens in 1998.

The settlement has paved the way for the company to bid for public procurement tenders in Greece, but it has also highlighted the unsavoury business practices of leading German firms. "There's a level of hypocrisy here that is hard to miss," said Dimitris Papadimoulis. "Corruption in Greece is frequently singled out as a cause for waste but at the same time companies like Ferrostaal and Siemens are pioneers in the practice. A big part of our defence spending is bound up with bribes, black money that funds the [mainstream] political class in a nation where governments have got away with it by long playing on peoples' fears."

This submarine purchase was not the only case of German and French pushing military sales on Greece. Since the 1974 invasion of Cyprus, Greece has spent 216 billion euros on armaments. The purchases included German submarines, Mirage fighter jets from France and F-16 jets from the U.S. and 1,300 tanks. Greek military contracts have always been the greatest source of corruption, payoffs, kickbacks and secrecy. The bribery by major military corporations infects every level of the military. Continuing scandals surrounding military contracts have rocked most pre-Syriza administrations.

As a proportion of GDP, Greece spends twice as much as any other EU member on defence. "Well after the economic crisis had begun in Greece, Germany and France were still trying to seal lucrative weapons deals even as they were pushing us to make deep cuts in areas like health,' said Dimitris Papadimoulis, who now represents Syriza in the European Parliament.[iii]

"Just under 15% of Germany's total arms exports are made to Greece, its biggest market in Europe" Papadimoulis said, "Greece has paid over 2bn ( 1.6bn) for submarines that proved to be faulty and which it doesn't even need. It owes another 1bn as part of the deal. That's three times the amount Athens was asked to make in additional pension cuts to secure its latest EU aid package." According to the Stockholm International Peace Research Institute (Sipri), France is not far behind. Some 10% of its total arms sales go to Greece, which is a member of NATO. From 2002 to 2006, Greece was the world's fourth biggest importer of conventional weapons. It is now the 10th. "If there is one country that has benefited from the huge amounts Greece spends on defence it is Germany," said Papadimoulis.[iv]

These military expenditures from Greece to Germany and France were funded by German and French commercial banks. That is why, when the scale of Greece's high levels of indebtedness became apparent the Europeans embarked on a 'bailout' program to assist Greece by using the funds generated by the bailout program to pay off the commercial debts owed by Greece to the French and German commercial banks. That turned the commercial debt into a debt of the European citizens, not the banks.

The burden of these debts are those which haunt the current negotiations. The rest of Europe and the IMF is now paying for the German and French military exports to Greece which have been shifted from the commercial banks to the ECB and analogous institutions. The complicity of the corrupt Greek politicians was instrumental in allowing this to happen which is why PASOK and New Democracy were turfed out of office and Syriza installed in their place. It is a great mistake to view the situation in which Greeks find themselves by examining the elites. The Eurotrash elites of Europe, including the Eurotrash Greek elites, ae not the measure of their countries. They despise democracy and accountability. They live in fear that their greed and lies will be understood by the European populations and that they, too, will be turfed out of office like their Greek counterparts.

The working people in Greece have always known who their enemies were and the Greek unions have raised these issues on many occasions. Now, with a government which might act in redress of their grievances they were willing to cast their "Oxi" vote for a chance to put things right.

It ill behooves the pompous pretenders of Germany and France to pontificate about the feckless behaviour of the Greeks when they are the authors of the plight of the Greek economy. What Syriza should insist upon before and during the negotiations with the Eurocrats this Sunday is not only a "haircut" on the Greek debt but also an enema for the European Union to stop the further spread of self-serving bullshit to the world.

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[iv] ibid

Authors Website: www.ocnus.net

Authors Bio:
Dr. Gary K. Busch has had a varied career-as an international trades unionist, an academic, a businessman and a political intelligence consultant. He was a professor and Head of Department at the University of Hawaii and has been a visiting professor at several universities. He was the head of research in international affairs for a major U.S. trade union and Assistant General Secretary of an international union federation. His articles have appeared in the Economist Intelligence Unit, Wall Street Journal, WPROST, Pravda and several other news journals. He is the editor and publisher of the web-based news journal of international relations www.ocnus.net.