The background to the current Greek negotiations with Germany and the EU
The Greek economic crisis is continuing to have dramatically negative effects on the Greek economy, its long-term prospects and the delicate domestic political balance which has been achieved under the Syriza Government. By the fourth of May 2017 extended and acrimonious talks between the Greek Government and the 'Troika' of the EU had produced a new agreement on how much more the Greek economy would have to suffer in return for another tranche of the EU 'bail-out' to be released. Greek ministers emerged from 12-hour talks in Athens to announce a deal had been reached with the country's leaders. They were supported in their reporting by European Union commissioner Pierre Moscovici who issued a statement lauding the apparent agreement. Moscovici said: "The agreement reached overnight in Athens on the Greek Stability Support Programme is a very positive development following months of complex negotiations".
However, the following morning German Finance Minister Wolfgang Schäuble clarified the situation saying that for Germany no deal had been reached. He gave Greek Prime Minister Alexis Tsipras an ultimatum that no deal could be reached until Greece passes laws to mandate up to 18 per cent in pension cuts and continue an arduous program of cuts and austerity. Schäuble told Tsipras that he must do what Germany ordered him to do or the deal would be off. The crisis had been precipitated by Greece notifying its creditors in December 2016 that it was struggling to meet the EU demands and that it feared it could not repay --6 billion of debt by a July deadline. The economy had picked up and the earlier restrictions, pension cuts were working and producing growth but the enormous debt burden on the Greek economy allowed for little savings to pay the Euro debt. Greece needed debt relief, not further impediments. The IMF agreed that the Greek debt must be rewritten but Germany and the EU refused. This is while the European Central Bank has allowed money to be printed in Germany and France to keep their economies afloat.
Greece is at a crossroads where Greece's latest economic reforms is supposed to be a key to winning debt relief that will unleash years of pent-up investment and finally ends its economic crisis. If it doesn't get debt relief the austerity will crush the economy and send the government cap-in-hand for another bailout. The terms of the new budget agreement insisted upon by the EU is that Greece will have to continue its budget surplus for a longer term. The Dutch Finance Minister, Jeroen Dijsselbloem, who chairs the group of euro-area finance ministers, demanded that the Greek primary budget surplus should be at least 3.5 percent of GDP for five years from 2018, something the IMF has said will exact a huge price on the Greek economy, if it can be achieved at all; especially as there are very few EU countries which fulfil this criterion. The proposed budget package included 5.4 billion euros ($6 billion) of stimulus measures for 2019 and 2020 to offset the pension cuts and tax hikes demanded by creditors. But the catch is that this stimulus will only kick in if Greece maintains or exceeds the 3.5 percent of GDP target. There has never been a non-energy exporting country able to sustain a 3.5 per cent growth over a long period so the Greeks are unlikely to deliver this and qualify for the stimuli. They are back in recession and likely to decline further despite the harshness of the cuts and the severe austerity.
Despite the protests and demonstrations by Greek unionists, students and political figures outside the Parliament the Syriza Government voted to accept the harsh austerity and a further two per cent pension cut in the hope that talks on the reduction of the debt burden could take place. That hope is being abandoned as Germany and Austria have elections soon which prelude them from any concessions to Greece. There seems no way out of the hole.
Germany's Role In Greek Debt
Although the PASOK and New Democracy governments which were in place before the recent crises the demise of the Greek economy was not entirely their own fault. When the crisis first started the PASOK government failed to pay the interest on the loans made to the country by the Troika, The EU blamed the Greeks for failing to keep the terms of the first bailout. What the Germans and the EU leave out of the analysis, 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 inability of the Greek government to pay its debt was because a great deal of the money 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 (with 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. 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. 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.
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) who 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 still 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 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.
"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.
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 is 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 only examining the Greek elites. The Eurotrash elites of Europe, including the Eurotrash Greek elites, and their banks are generally to blame, not the suffering Greek people.
Germany's Special Role In Greece's Plight
An important reason for Greece's penury, beyond Greek corruption and mismanagement over its economy in the post war years, is the failure of Germany to pay to Greece the money its owes Greece for is actions during the Second World War. German activity in Greece resulted in two kinds of debt -- a massive program of crimes against humanity and mind-boggling barbarism by the German occupying forces against Greek civilians and villages and by taking money from Greece's Treasury as a forced loan to cover the costs of the German Occupation. Neither of these sums has been repaid to Greece. The Greeks have ended up paying for the German occupation during the war.
It might be useful to examine a few of the German attacks on the Greek people to understand the depth of German depravity in the 1940s. There ae many more.
The Massacres of Kondomari, Alikianos and Kardanos in Crete:
The first of these massacres occurred early in the war. On the second of June 1941, General Oberst Kurt Student ordered his paratroopers to execute all the male inhabitants of the town of Kondomari in Crete as punishment for opposing the German attack on the island two days earlier, where the local inhabitants fought alongside the 21st and 22nd New Zealand Infantry Battalion in defence of Crete. While the New Zealanders were treated as prisoners of war, the Germans decided to set an example to the Greeks. They gathered all the citizens of the town (men, women and children) and machine-gunned all the men; about 60 in all. They then razed the town and burned the fields. The next day the Germans killed another 180 residents of nearby Kardanos and slaughtered all the livestock; all houses were torched and razed Nearby villages such as Floria and Kakppetro a similar fate Two months after the first execution, the Germans gathered 118 more civilians at a bridge over the Keritis River near Alikianos and shot them after forcing them to dig their own graves. The commander of the paratroopers, Horst Trebes was awarded the Knight's Cross for his actions that day and General Student went before a British military tribunal after the war and was sentenced to five years in prison but was given a medical discharge so he had to serve no time. No reparations were ever paid for any of this despite a series of Greek appeals.
The Viannos and Amari Massacres:
At the Cretan Resistance continued the Germans pursued their policy of atrocities against the civilian population of Crete. On September 14-16 1943 Lt.-General Friedrich-Wilhelm Mueller ("The Butcher of Crete") ordered the mass extermination of the civilians in twenty villages in the Viannos region of Crete. Over 500 civilians were killed in a two-day period and the villages were looted, burned and the crops destroyed. The German soldiers killed everyone over the age of sixteen. General Mueller was captured at the end of the war and tried and executed by the Greeks in 1947. No one else was tried for these killings and the German Government refused to pay any reparations. General Mueller also was held to be the man who commanded the Holocaust of Amari in Crete ion August 22, 1944 when German troops massacred 164 of the males in nine villages in the Amari region and razed and burned all the buildings, killed the livestock and destroyed the crops.Ne reparations have ever been paid.
The Massacres of Mousiotitsas, Kommeno and Lingiades:
On the 16th of August 1943, General Hubert Lanz whose troops were based in Phillipada in Epirus in Western Greece ordered his men to destroy the village of Kommeno, claiming the civilians had threatened two German officers. The Germans started off by massacring one hundred and fifty-three men, women and children between the ages of one to seventy-five in Mousiotitsas on July 25th because of the discovery of a cache of weapons near the village. They then moved to Kommeno. Under the command of Lt. Koviak the German soldiers arrivedvery early in the morning at the town of Kommeno and surrounded it. They blocked the roads, and erected machine guns at the entrances and exits of the village. The mountain troops then murdered anyone who could not flee: 317 people, 172 women and 145 men were killed. Ninety-seven were under fifteen years of age and fourteen were over sixty-five. Thirteen were only one year old. Thirty-eight people were burnt in their houses. One hundred and eighty-one houses were destroyed. At the end of the slaughter, the German soldiers assembled in the town square where they ate their lunch and had their beers surrounded by the corpses of the civilians They left their empty beer cans and rubbish next to the bodies.
They then moved to neighbouring villages. Over 200 people were massacred. Among them were all those inhabitants of Lingiades who had not fled to the mountains. In this single village 87 civilians were killed, including year-old babies and old people over the age of ninety. Eventually General Lanz was tried at the Nuremburg Court and given a short sentence. When he left jail, he became a prominent figure in post war Germany. No reparations were ever paid.
The Massacre at Kalavryta:
In December 1943, the German Army's 117th Jaeger Division led by General Karl von Le Suire ordered harsh and massive reprisal operations across the region for Resistance activity. He personally ordered killing of the entire male population of Kalavryta on 10 December 1943. Wehrmacht 'Kampfgruppe Ebersberger' troops burnt villages and monasteries and shot civilians on their way to Kalavryta.
When they reached the town, they locked all women and children in the school and marched all males 12 and older to a hill just overlooking the town. There, the German troops machine-gunned them all down. There were only 13 male survivors. Over 500 died at Kalavryta. The survivors told their story of survival, saying that after the Germans machine-gunned the crowd, some falling bodies were covered by the dead. This way, when the Germans went through again to finish off those still alive, the few lucky ones escaped the coup-de-grace. The women and children managed to free themselves from the school and the town was set ablaze.
The following day the Nazi troops burnt down the Monastery of Agia Lavra, a landmark of the Greek War of Independence. In total, nearly 700 civilians were killed during the reprisals during Operation Kalavryta. Twenty-eight communities - towns, villages, monasteries and settlements were destroyed. In Kalavryta itself about 1,000 houses were looted and burned and more than 2,000 livestock were seized by the Germans.
Despite the fact that the Federal Republic of Germany has publicly acknowledged the Nazi atrocity at Kalavryta, war reparations have not been paid. On 18 April 2000, the then-president of the Federal Republic of Germany, Johannes Rau, visited the town of Kalavryta to express his feelings of shame and deep sorrow for the tragedy; however, he didn't accept responsibility on behalf of the German state and did not refer to the issue of reparations. As reparations, the federal Government of Germany has only offered free school books and scholarships for orphans of this particular massacre and they have also built a senior citizens home. To this day, Germany has yet to compensate the few survivors. Also, no German commanders, (e.g. Major Ebersberger who supervised the massacre and the destruction of Kalavryta and others like Hauptmann Dohnert who led the firing party), were ever brought to justice .
The Distomo Massacre:
On June 10, 1944, the Waffen-SS troops of the 4th SS Polizei Panzergrenadier Division under the command of SS-Hauptsturmfuhrer Fritz Lautenbach went to Distomo, a small Greek town near Delphi to punish the Greek civilians for supporting the Resistance. For over two hours they went door to door and massacred Greek civilians. A total of 214 men, women and children were killed in Distomo. According to the testimony of survivors the SS forces "bayoneted babies in their cribs, stabbed pregnant women, and beheaded the village priest."
In the case of Distomo, four relatives took the German Government to court in Livadeia, Greece. The court found in their favour on October 30, 1997 and awarded damages of 28 million Euros. In May 2000, the Greek High Court confirmed this decision which was being appealed by the Germans, but the plaintiffs could not enforce the judgement in Greece. They went to the German courts for enforcement.
The plaintiffs brought the case to court in Germany, demanding the aforementioned damages be paid to them. The claim was rejected at all levels of the German judicial system, citing the 1961 bilateral agreement concerning enforcement and recognition of judgments between Germany and Greece, and Section 328 of the German Code of Civil Procedure. Both required that Greece have jurisdiction, which it does not as the actions in question were sovereign acts by a state. According to the fundamental principles of international law, each country is immune from another state's jurisdiction.
In November 2008, an Italian court ruled that the plaintiffs could take German property in Italy as compensation that was awarded by the Greek courts. The plaintiffs were awarded a villa in Menaggio, near Lake Como, which was owned by a German state non-profit organization, as part of the restitution. In December 2008, the German government filed a claim at the International Court of Justice in The Hague against this action. The German claim was that the Italian courts should have dismissed the case under the international law of sovereign immunity.
In January 2011, the Prime Minister of Greece, George Papandreou, announced that the Greek Government would be represented at the International Court of Justice in relation to the claim for reparations by relatives of victims. In its 2012 final judgment, the court ruled that Italy had violated Germany's state immunity, and directed that the judgment by the Italian courts be retracted. In the end no reparation was ever paid.
Despite these massacres the Germans have not only not paid the reparations due but have fought in all the courts in Europe to absolve itself of any liability for it vicious and barbarous behaviour. During the German occupation of Greece more than 460 villages were completely destroyed and approximately 60,000 civilian men, women and children were massacred. Germany has refused to pay them the reparations it was adjudged to have owed these people.
The Ultimate Hypocrisy:
In addition to the Germans' refusal to pay any reparations for its actions in Greece the Germans have placed the cost of their occupation of Greece on the Greek people. During the war the Nazi Government forced the Greeks to make a loan to the Reichsbank to pay for the costs of occupation; about 500 million Reichsmarks.
After the Allied invasion and the collapse of the Nazi regime, the first thing the occupation authorities did was to block all kinds of claims by and against the German government, under the legal fiction that that the German government and the German state didn't exist anymore. Moreover, any country wishing to receive Marshall Aid from the Americans under the Marshall Plan had to sign a waiver waiving all kinds of financial claims against Germany from World War II against Marshall Aid. This means that it would not be entirely blocked, but it would have to [be] put on hold until post-war Germany had paid off its Marshall Aid from the United States. In technical terms, what that did was to make reparation and credit claims against Germany from World War II junior, second rank, lower in rank to Marshall Assistance to Germany. And since everybody wanted to get Marshall Aid from America, everybody grudgingly signed these waivers. So the situation during the Marshall Plan period was that all these debts still existed on paper, but they were worthless in the sense that the debt was blocked.
Since then the Germans have refused any claim for reparations. It was put most clearly by Helmut Kohl when pushed for an answer about Germany's debts. He said" "look, we claim that we cannot pay reparations, because if we open this Pandora's box, then given the viciousness and brutality of Nazi warfare, the genocides - there were several genocides that the Nazis carried out - given these absolutely horrific facts and the unbelievable scale of these horrific crimes, any attempt to quantify this and translate it into claims against Germany will either come up with ridiculously low compensation or it is basically going to eat up all of Germany's national wealth." Germany has never budged from that position.
This stance is truly beyond all capacity to understand. The Conference on German External Debts (also known as the London Debt Conference) was held between February 28, 1952 and August 28, 1952 The Agreement reached at the Conference was ratified by the United States, France and United Kingdom on September 16, 1953, at which point the agreement came into force. This Agreement wrote off 50% of German foreign debt and its internal debts were restructured. A special system was established to assist in German exports to help it recover. So Germany had half of its debts written off by its allies and trade incentives proposed to assist its economy. In addition, it didn't pay the reparations to the many countries it occupied and destroyed. But now, the Germans are blocking any debt relief to Greece.
So, the Greeks are owed massive sums for reparations. They are owed massive sums for the forced debt the Nazis imposed on Greece to offset the costs of the Occupation. Now they are being hounded by the Germans to press on with an austerity program which will permanently enfeeble Greece and lead to tremendous social friction in the country. Surely it is now time for the Greeks to say that they will not pay a drachma or a Euro to the new German and EU economic gauleiters which have been impoverishing their country; that they will pay out of the massive sums accruing to it from Germany.
The Chinese are standing by ready to assist Greece and have been doing so in investing in key Greek assets. China is pouring money into Greece's infrastructure sector, viewing Greece as a strategic gateway to Europe. Foreign investment may be the best hope for the Greek economy. China has thrown Greece a lifeline as part of its Belt and Road Initiative -- Beijing's plan to build an economic zone stretching all the way to Europe and Africa by land and sea. Cosco has been at the vanguard of the march to Europe since it acquired operating rights for the Port of Piraeus container terminal in 2008. The company hired more than 1,000 new workers and invested 600 million euros ($634 million at current rates) to introduce state-of-the-art cranes and construct a new quay, among other projects. Under the 368.5-million-euro purchase agreement reached in April 2016 the Greek government initially sold Cosco a 51% stake. The additional 16% is to be transferred provided the Chinese company invests 300 million euros in the facility over the first five years. Accepting to work with non-EU nations appears to be Greece's best chance to break the cycle of austerity and pain imposed by Germany, the Troika and the EU.
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.