Tag Archives: Bank of Greece

Signs of the times

Today is the last weekend before Christmas. One last little hope for the shop owners to make up for the losses of another year of depression. Shops are going to be open on Sunday too. The city centre must be clean to cater for the shoppers, the army of consumers who are actually more like starving animals looking for offers, discounts, credit, installments, anything.

The centre must be clean, the image of the city is what counts. We’re in such a bad situation that we can’t be bothered with what’s behind the curtain. At least we can look well. I was talking with a hotel owner at the neglected areas below Omonia square. About two years ago, despite the crisis that was already there, he had spent more than 2 million euros to turn an old building to a boutique hotel. Last year when I first interviewed him complaining about the area being neglected, about immigrants, crime, few tourists would dare to go the demo-stricken Athens and even fewer would choose his hotel for their stay. This year he sounded much happier, the immigrants were gone, the police is doing a good job patrolling the streets, none of his clients reported any thefts and, above all, tourists increased. I guess he didn’t care about the immigrants’ detention camps or the police abuse, as long as the centre is good for his business, as long as Greece’s image abroad is polished. “Tourists returned to Athens. It’s simple. We had a riot-free year as far as the Athens centre is concerned” he explained while some blocks away, in Exarchia, this very riot-free year has been certain people’s biggest disappointment. Not that they indeed hoped for a real socialist, communist or anarchist revolution but at least there should be some show of resistance, they shouldn’t look as defeated as they do now. Above all it’s the image.

So they city must be clean. The Mayor of Athens, who only a couple of days ago called one of the city’s most vibrant, creative, young and colourful areas [Exarchia] a hub of organised crime, sent out the municipal workers on their eternal crusade against graffiti. The wall of the Bank of Greece HQ should be clean by now. This is how it looked when I passed by this morning.

bank of greece

A municipal worker is cleaning a wall from a graffiti. A bitter orange tree next to the Bank of Greece HQ has flourished. (photo Kostas Kallergis)

The graffiti was saying “Solidarity to all the immigrants”.

It’s winter. The bitter orange trees that decorate the Athenian streets have showed us their fruits. A sweet orange colour on the outside but extremely bitter inside. The naive tourists often mistake them for tangerine and occasionally try to eat them. Nature is teaching us, not everything is as good as it looks. The bitter oranges, the centre of Athens, the Greek economy…

Athens, 21 December 2013. These are the signs of these times.

The run-up to the Greek economic crisis (Part 2)

This is the 2nd part of Greek journalist Pavlos Papadopoulos’ article on the run-up to the current Greek economic crisis, published by “To Vima” newspaper (16/10/2011). To read the first part of the article, click here.

“George knew everything” admits to “Sunday’s Vima” newspaper a top government official. “Since February 2009, eight months before the elections, we knew that Greece was technically bankrupt. The actual bankruptcy was a matter of time”. In February 2009, there was a sudden increase in the difference of the interest rate (spread) between the Greek and the German state 10-year bond. That development, which panicked the Karamanlis administration, didn’t go unnoticed by the PASOK leader and his close associates.

After talking with Greek and mostly foreign experts (Economics Nobel Prize recipient Joseph Stiglitz and investor George Soros, to name but a few) Mr. Papandreou is said to have concluded that the dynamics of the public debt was so powerful that a catastrophic bankruptcy was certain. According to the same source, the PASOK chairman then thought the obvious thing: the states which are on the verge of bankruptcy address to the International Monetary Fund (IMF). However he realized that the capital which was necessary for Greece to avoid bankruptcy was five times more than what the IMF could offer. So he concluded that Greece needs an “international solution” and he started examining the initiatives that he could take.

“Our mistake was that we didn’t prepare the people” says the same party member, “and the Party either”. Mr. Papandreou underestimated the “domestic front” even though he knew that Greece was heading towards bankruptcy. He didn’t abandon his vision of “Green Development”, neither did he direct his Financial advisors to more “careful” declarations. In the summer of 2009, the total cost for benefits was 30 bn euros. A lot of the MPs have called 2009 as the “new ‘81”.

Mr Papandreou stubbornly insisted in a vague rhetoric. He reckoned that a combination of green development, institutional reforms and a (completely unspecified) international initiative would solve the debt problem without targeting the people. This is why the warning by George Provopoulos, Governor of the Bank of Greece, that the 2009 deficit would be a double digit figure didn’t mean much for the wannabe Prime Minister. What he actually believed was that Greece would go from over-borrowing to prosperity without walking the distance in between. And some accused him that, had he taken tough measures back then, he could have avoided the worse that followed.

There was no “socialist allergy” at the Finance Ministry when it came to austerity measures. The Minister often called confidential meetings. “Think of shock measures” was his request to his associates . He believed that the austerity measures were necessary to restore the international markets’ trust. One of his most radical and risky ideas that was heard in those meetings was the “10% haircut of the savings” for all the bank accounts which had more than 100.000 euros. They would implement it at the same time with the (French inspired) freezing of any account which would be instructed to send more than 100.000 euros abroad, in order to proceed to a tax details check.

These proposals, as many others, were triumphantly rejected. Mr. Papaconstantinou did not possess the political prowess to enforce a different policy, while he never recovered the control over the tax-collecting mechanisms. He was good enough abroad. Domestically he achieved the minimum while he didn’t avoid deficiencies and the equivocations which increased the insecurity and the uncertainty. The measures that were announced were like aspirins and even them were causing reactions. Like the reaction by Christos Papoutsis when they announced the freezing of salaries in the public sector for those whose paycheck was more than 2.000 euros (which was rejected by the Prime Minister too).

During the early period of his administration Mr. Papandreou visited Moscow and Paris in order to “surround” Berlin, since Angela Merkel didn’t want to accept, especially after her alliance with the Liberals, a “European solution” in co-operation with the IMF. Mr. Papandreou reckoned that, if he could convince Moscow and Paris, he could then take Berlin. Having his mind in an “international solution” he kindly avoided Vladimir Putin’s proposal of geopolitical significance for an interstate loan to Greece.

While waiting for the international solution to mature, it was preferred to flirt with Goldman Sachs and Deutsche Bank. According to banking sector sources, the Greek government appointed these two banks at the same time with the order to investigate the possibility of a 25 bn euros loan (private placement) from the markets. However the international practice necessitates that such orders are given only to financial institutions. At the end of 2009 Gary Cohn, CEO of Goldman Sachs, met Papandreou at the Pentelikon hotel in Kifissia suburb. At the beginning of 2010 the head of Deutsche Bank, Josef Ackermann, visited the Greek Prime Minister’s office. The players who were involved in these initiatives were having preferential access to the core of power. The initiatives failed. The two banks (and their middlemen) lost important commissions. And the markets’ lack of trust against the Greek government increased.

End of Part 2  – To read Part 3 click here.

Who is Loukas Papadimos?

Here’s a short CV of Loukas Papadimos, the name which is discussed more for the seat of the new Greek Prime minister in the coming national unity government. He has been the No1 choice in the theoretical discussions for a possible national unity government for months now. He is also respected by George Papandreou who actually appointed him as an unpaid Economic advisor in 2010. Reports on the backstage political tug-of-war which preceded the Greek government reshuffle back in June 2011 were mentioning that he was offered to succeed George Papaconstantinou in the Ministry of Finance, a post that Papadimos has denied.

He was born in 1947 and graduated from the high-profile elitist Athens College (Hellenic American Educational Foundation). The school is often referred to as a power hub, due to its numerous influential alumni who remain closely connected after graduation. He later studied at the MIT earning a BA in Physics, a Master’s degree in Electrical Engineering and a Phd in Economics.

In 1980 he worked as an economist for the Federal Bank in Boston and in 1985 he was appointed as a chief economist for the Bank of Greece. In 1988 he became a Professor of Economics at the University of Athens. In 1993 he was appointed by Andreas Papandreou (George’s father) as Vice Chairman of the Bank of Greece and he became its Chairman a year later. From that post he worked for Greece’s preparation to join the euro zone, a project which was continued under Prime Minister Kostas Simitis until the end of the 1990s.

Between 2002 and 2010 he worked as Vice Chairman of the European Central Bank in Frankfurt.

A funny historic trivia is that the last national unity government in Greece was formed in 1989 under another banker, Xenofon Zolotas, who was Greece’s former representative to the IMF and the European Economic Committee. Zolotas was also a former Chairman of the Bank of Greece (1974-1981). That government, which was called Ecumenical Government, was also formed in order to avoid the  bankruptcy of the Greek state and lasted for less than 6 months. Current President of the Greek Republic, Karolos Papoulias, and New Democracy leader, Antonis Samaras, had also participated in that government.

Less than two weeks ago, Loukas Papadimos has written an article for the Greek Sunday newspaper To Vima saying that he preferred a wide restructuring of the Greek debt than a generous haircut.

You can also read a profile of Loukas Papadimos here (The Telegraph newspaper)