Tag Archives: George Papaconstantinou

Like a virgin

This is a great example if you want to see how a responsible Greek politician behaves in times of crisis. In May 2010, when Greece was about sign the IMF/EU/ECB Memorandum, Michalis Chrysochoidis was not just another Socialist MP but the Minister for Citizen Protection (one of the high profile government posts). Yesterday he was invited to talk to a news program at SKAI TV. The discussion was around a recent criticism on the terms of the Memorandum, highlighted by former Prime Minister Kostas Simitis’ speech at a conference in Berlin. This is the video excerpt from SKAI TV and below a quick translation.

Journalist: Let me ask you directly. How many hours did it take you to read the Memorandum? Because Mrs [Louka] Katseli (the then Minister for the Economy, Competitiveness and Shipping) said yesterday that she was given the Memorandum on Saturday night and spent two hours on reading it and this is how she went to vote on it. Have you read what the creditors have written down and did you have a different opinion than theirs? Were you aware of what you were about to sign?
Chrysochoidis: Are you serious?
Journalist: Absolutely.
Chrysochoidis: These things were discussed in the Parliament… No, I haven’t read the Memorandum at that time because, simply, I had other obligations. I had other duties…
Journalists: Excuse Mr. Minister, this is very serious. How did you sign it? Did you sign a text that commits the country for an eternity and that is responsible for the mess in which we are now and you are telling us that you didn’t read it? How can you say this so easily?
Chrysochoidis: Look, in politics things are not like that. 
Journalist: How are they?
Chrysochoidis: Some of my colleagues had negotiated, some of the responsible members which represented the government had negotiated and brought that legislation into the Parliament and, as you remember, it was voted by the majority of the Parliament, by PASOK and LAOS if I remember well.
Journalist: Is there a direct responsibility on the economic staff of the then government [i.e. the Minister of Finance George Papaconstantinou]?
Chrysochoidis: As I told you before, it was done so under a state of panic in view of a possible suspension of payments which was a threat over our head. My job at that time was to re-organize the Police, the Fire Brigade, to create the DIAS team [a Police group which patrols in motorbikes], to fight crime. It was not my job to study the Memorandum.

So Mr. Chrysochoidis just said that he signed one of the most important legislation passed in this country without even reading it. He just went the next day to the Parliament and voted for it like an amateur politician. Like a virgin! He didn’t have the time because he was re-organizing the Police which indeed showed a great zeal to crush the demonstrations taking place in the center of Athens. It was the same days when three people were burned in the fire of Marfin Bank, a collateral damage of that day’s violent chaos. The DIAS team were roaming the streets like horses of the Apocalypse, attacking protesters. And yes, crime, there wasn’t much of it that day because the political head of the Police devoted all his time on the issue rather than having a look at the Memorandum.

Katseli & Chrysochoidis

Louka Katseli and Michalis Chrysochoidis getting bored during some speech (it was probably an important one)

Some key things to note which will make some (more) sense. There is a widespread criticism on the terms of the Memorandum even by PASOK MPs, now that the old PASOK (that of George Papandreou) is crumbling. Everyone one is trying to clear his/her name, to distance themselves from the shame of “having been part of it”, preparing for the next day, or simply for the coming elections. Let’s not forget that Mr. Chrysochoidis has declared that he intends to challenge for the PASOK leadership which will be decided very soon. But let’s not be in a hurry and put all the blame to Chrysochoidis for simply telling us the truth. Most, if not all, of the MPs had literally a few hours to read the Memorandum. Among the virgins, there were some prostitutes too.

Here’s an excerpt from an older post that I’ve wrote (The run up to the Greek economic crisis) – it is a translation by an article of To Vima’s journalist Pavlos Papadopoulos.

“We were like prostitutes after their first time” a top government official confessed in his attempt to describe the Cabinet member’s psychological situation during their meeting to sign the Memorandum, on the 5th of May 2010. “We were looking at each other and we were all pale” he says. “We felt very ashamed since we couldn’t believe that we, PASOK, led Greece to the IMF, having chopped the salaries and the pensions”. And then he concludes “Since then we have been completely prostituted. We’ve done the same things over and over again without feeling any shame”. Almost all PASOK politicians admit in private that the Memorandum, despite its provision of some necessary reforms, is synonymous at the same time with the sentencing of the economy to a prolonged depression and with the mortgaging of the country to its lenders. However they recognize that it was the last choice in order to avoid bankruptcy and to secure the savings and the pensions, especially since the government had previously failed to implement the prior solutions.

“The Memorandum was hastily written by us and the troika” admits a high-ranking government official who participated in the (so-called) negotiations. “We had no idea of what we were writing and the troika experts were equally confused, working under great pressure from the European Commission and the IMF”. According to first hand accounts, the slightest preparation hasn’t been made and simply, on the last moment, they isolated part from older IMF Memorandums as those with Turkey, Mexico or Hungary and they would hurriedly adapt them to form the Greek Memorandum. “It’s a bad compilation, a Frankestein-styled Memorandum” says a Minister who admitted that he had less than three hours to read, understand, evaluate and approve the part of the agreement which would commit his Ministry for the next four years.

Obviously this Minister was not Chrysochoidis.

Michalis Chrysochoidis is currently Minister for Development, Competitiveness and Shipping.

Did the trial of Papandreou begin?

It seems that the investigation on the alteration of Greek Statistics (in 2010) has bumped into some sort of political involvement. The case began last September after the complaint of Zoe Georganta, a professor of Econometry at the University of Macedonia (Thessaloniki) & a member of ELSTAT (the Greek Statistical Authority), who said that the 2009 deficit was artificially augmented. She underlined that in November 2010 ELSTAT accepted pressures from Eurostat and produced a higher number for the country’s 2009 deficit, at 15,4% instead of 12-13% which was the real number. The goal was to make it politically more feasible to pass further economic reforms (cuts in salaries & pensions as well as taxes).

Financial prosecutor Grigoris Peponis

Financial prosecutor Grigoris Peponis has collected testimonies from 17 people who were involved in the case. His conclusion was included in the letter accompanying the case file on its way to Greece’s Supreme Court (Areios Pagos, the descendant of ancient Areopagus). In this letter Peponis says that there is evidence concerning criminal offences (under the Law on Ministerial Responsibility) by members of the the Greek government. He also wrote that in the testimonies there is explicit reference to an augmentation and an arbitrary determination of the 2009 public debt. The blame for this, according to the testimonies submitted to Mr. Peponis, is targeting the then Prime Minister, members of his government and the respective Finance Ministers.

After the Supreme Court, the case file will be transferred to the Greek Parliament which will decide on possible political responsibilities. In other words, this could be the beginning of a Special Investigative Committee and, if responsibilities are found, a Special Court for George Papandreou and his administration.

The names of those who testified were also made publicly available. Mr. Peponis had also invited current ELSTAT chairman, Andreas Georgiou, to testify but the latter did not provide a sworn testimony. In addition, George Papaconstantinou, Finance Minister during the examined period, rejected any claims against himself. In a public statement, he concluded that “there is an attempt to penalize the truth about the grave situation Greece was in 2009“. Mr Papaconstantinou is now Greece’s Minister for the Environment.

The run-up to the Greek economic crisis (Part 4)

This is the 4th 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). The first part of the article is here, the second part is here and the third part is here.

“Neither Papandreou nor any of us believe in the Memorandum” says a Minister. “I’ll remind you that the Medium-Term Program was fifth in the row when discussed at the Cabinet, right after the legislation for companion dogs. The whole government is in denial”. This denial led to a blackmail, using the drachma. On Friday 6 May 2011 Papaconstantinou traveled to Luxembourg for a secret meeting with several powerful euro zone Finance Ministers, presided by the Eurogroup head, Jean Claude Juncker.

According to the most probable version the cause of that meeting was that, some days earlier, Papandreou had implied at a talk with German officials that the Memorandum’s policy and the German strictness on its implementation could make Greece return to the drachma. This indirect threat annoyed the Germans. It is alleged that Wolfgang Schaeuble himself leaked the information to Der Spiegel Magazine, which posted it in its web edition that Friday evening, after the closure of euro zone banks, in order to drag the Greek government into a disorderly retreat.

Despite the upheaval that was caused in Athens, Papandreou delayed for two hours (!) to allow the then government spokesman Giorgos Petalotis to issue a rudimentary rebuttal. He first wanted to learn the European partners’ reaction to the “Greek ultimatum”. The reaction was not a polite one. Papaconstantinou was attacked by Juncker and and Schaeuble, while Jean Claude Trichet left the meeting within a few minutes. The “Greek blackmail” collapsed but it inspired Schaeuble to examine the famous “Plan B”, which is a “euro zone without Greece”. Despite all these, the Greek demands for a new bailout program with decreased interest rates and a prolongation of the deadlines for loan repayments were accepted. It was exchanged with a deeper “domestic devaluation” (of prices and incomes) through a Medium-Term Program which almost led to the fall of the government.

George Papandreou with Dominique Strauss Kahn

Papandreou maintained a secret communication channel with Dominique Strauss Kahn, looking for a platform for IMF intervention in Europe. Within the Papandreou family the IMF is thought to be an organization with a positive impact around the world. Papandreou’s brother, Nikos Papandreou, who participates decisively in the administration of the country (though always in backstage), was a supporter of the recourse to the IMF. The Papandreous believed that an advanced “international” model of administration should be applied to Greece. They have underestimated the fact that IMF means submission.

The Pushkin Cafe in Moscow

While the prime ministerial mind was lying in Washington D.C., where the IMF headquarters are, Moscow brought Greece closer to… Tel Aviv. The first secret meeting between Papandreou and the Israeli PM, Benjamin Netanyahu, took place at the Russian capital’s Pushkin Café. Greece would provide Israel an alliance and the gateway it needed to push the Leviathan deposit’s natural gas towards Europe. The energy diplomacy with Israel (which couldn’t start paying off but in 5-10 years) was considered a basic component of the strategy for the avoidance of bankruptcy (!). So this is why time was passing by and the government was taking zero efficiency measures, the government’s staffing was carried out through open.gov (unless Nikos Papandreou was intervening in order to promote persons of his own influence into key-posts) and the Ministers were in a constant state of confusion when it came to strategy and responsibilities.

George Papandreou in Davos (January 2010 - photo by Reuters)

The real shock for the Prime Minister came at Davos, at the end of January 2010. “The Hungarian Prime Minister approached me and told me to take measures” Papandreou said to the Cabinet meeting that he called right after his return. “Things are different compared to how they were a month ago” added Papaconstantinou. The Social Democrat Hungarian Prime Minister, Ferenc Gyurcsany, had recent experience with the IMF and wanted to share it with Papandreou. Some time later, he would be defeated at the elections by the Right. After Davos, the atmosphere within the Greek government was like a funeral. They had realized that they “lost” the time. Likewise they also lost the banks. “For a long time they believed that the warnings from bankers were only about the banks’ interests” say sources from the banking sector. They were too late to realize that the state’s exclusion from the markets is accompanied by a similar exclusion of the banks, having as a result the postponing of lending to individuals and corporations which slows down the economic activity, spreads poverty and increases unemployment.

The European Mechanism which was presented in 25 March caused the markets’ attack to Greece instead of making them not to do so. Why would the markets lend a state when they can much more safely lend the Mechanism that would then lend the state? Greek bond yields skyrocketed in mid-April 2010. On Friday 23 April, the Prime Minister had a planned visit to the tiny island of Kastellorizo, which had to do with issues of regional development. During Wednesday and Thrusday before the trip the telephones in the Maximou Mansion and the Finance Ministry didn’t stop ringing. Heads of governments and Finance Ministers of big states were calling Papandreou and Papaconstantinou. They were demanding that Greece recourses to the Mechanism because the crisis was hitting bank trust towards their own countries jeopardizing their future.

“Are we going to cancel the trip to Kastellorizo?” Papandreou was asked by his associates. “Why should we cancel it? Life goes on” he replied and added “I will make the announcements from Kastellorizo”. The circumstances necessitated a purple tie. In a surreal scenery, with a small fishing boat sailing in the picturesque port, the Prime Minister called forth metaphors from the Odyssey.

He wasn’t wrong. The odyssey for Greece had just started and he was aware of it. This is why he avoided signing the Memorandum. He wanted to avoid an odyssey of an agreement which could chase him forever. The new “social contract” was signed only by Finance Minister Papaconstantinou. Probably the only Minister who really believed that the Memorandum could actually save Greece…

The Memorandum was signed only by George Papaconstantinou

End of Part 4 of 4.

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)