Tag Archives: Greek Parliament

Politics, media and pimps

Yesterday the socialist party leader and ex-Prime Minister, George Papandreou, made another confusing move. Attending PASOK’s political council, he stated that he will quit politics by not setting himself as a candidate for PM in the next elections and either for the leadership of his party. Paradoxically Papandreou suggested that the Socialists’ internal election to chose their leader should take place after the general elections. Which means that Papandreou will lead the party in the elections but, in case of a victory, he is not going to be the Prime Minister.

Funnily, that wasn’t the most interesting part of his speech. Among other things, he made a short account of his administration and accused the Lambrakis Media Group (DOL) of undermining his government. The reason for DOL’s behaviour, according to Papandreou, was that the former prime minister had advised the National Bank of Greece not to lend the media group 10 million euros. As he said, the issue shouldn’t have reached him in the first place and, after being informed that DOL didn’t satisfy the economic criteria for the loan, he instructed NBG not to proceed in the lending.

DOL’s chairman, Stavros Psycharis, replied immediately to the accusation with this short announcement.  “It’s true that DOL asked for a loan from the National Bank of Greece, of which it is a customer for the past 90 years. The National Bank rejected the request officially. Unofficially they told us that it was not approved by the Prime Minister’s office. It’s obvious that any intervention from banks against newspapers which don’t satisfy government interests, is a fascist mentality. Obviously, when power is lost, memory is lost too, even for very recent events. The PASOK leader-in-retirement is kindly requested to state the circumstances under which we met for the last time at the Prime Minister’s office and the reasons for which we were asked to enter the building through the back door. He should also say who asked what from whom!”

This is the beautiful and prudent world of Greek politics and media, an interwoven set of business and political interests which, for decades, were serving one another forming the so-called establishment. Of course, he was not the first Prime Minister who ever said such a thing publicly. Back in 2004, his predecessor, Kostas Karamanlis, gave his famous speech on Greece’s five “pimps” who were thought to undermine his project. An article of that day describes the event in a very detailed way and I found it twice interesting to read it under today’s circumstances in Greece.

“We will not allow five pimps and five interest groups to push us around… They can easily be dealt with,” Karamanlis told a gathering of about 30 of his party’s members of Parliament in a Monastiraki restaurant best known for its kebab and ebullient owner and namesake, Bairaktaris. The meeting on Wednesday, in which generous portions of food and wine are said to have been consumed, was a private affair. It was, of course, not as private as a chat in his home or office, meaning that what was said could find its way into the public domain. And so the next day Karamanlis’ purported declaration had been leaked to the media. The government commented half-heartedly that the prime minister does not use such language and actually confirmed the gist of what he had said.

In a country where politics never sleep, where words are cheap and where memorable and colorful statements become slogans, Karamanlis’ purported words soon took on a momentum of their own. It was not only as if he had actually used these particular words at the dinner at Bairaktaris but as if he had declared them in full view of the public. He could, of course, always deny paternity but the statement will stick to him and will be part of his legacy. What now remains to be seen is what he meant by this statement. But what is even more significant is whether this signaled the start of a clash of titans or whether it was a verbal flare sent up into the dark sky to illuminate public life for a while before disappearing into the sea of grand, meaningless gestures.

On the surface, the meaning of the declaration is clear. Karamanlis was telling his troops that they should be ready to kick some enemy butt as part of an irresistible force.

Here you can read more about that event. In the meantime, a question instead of an epilogue. If the ruling elite is the pimp, who are the whores?

 

Now I know what they did last summer

I just read a detailed account of the backstage negotiations during last Spring and the dramatic, for the EU and especially for Greece, months that followed. It’s a must read for anyone interested. It is the product of a Wall Street Journal investigation, based on more than two dozen interviews with euro-zone policy makers. It reveals how the currency union floundered in indecision—failing to address either the immediate concerns of investors or the fundamental weaknesses undermining the euro. The consequence was that a crisis in a few small economies turned into a threat to the survival of Europe’s common currency and a menace to the global economy. Enjoy the reading. It’s long, even though slightly reduced by me, so go get some coffee and a couple of cigarettes.

At a closed-door meeting in Washington on April 14, Europe’s effort to contain its debt crisis began to unravel.

Inside the French ambassador’s 19-bedroom mansion, finance ministers and central bankers from the world’s largest economies heard Dominique Strauss-Kahn, then-head of the International Monetary Fund, deliver an ultimatum.

Greece, the country that triggered the euro-zone debt crisis, would need a much bigger bailout than planned, Mr. Strauss-Kahn said. Unless Europe coughed up extra cash, the IMF, which a year earlier had agreed to share the burden with European countries, wouldn’t release any more aid for Athens.

The warning prompted a split among the euro zone’s representatives over who should pay to save Greece from the biggest sovereign bankruptcy in history. European taxpayers alone? Or should the banks that had lent Greece too much during the global credit bubble also suffer?

The IMF didn’t mind how Europe proceeded, as long as there was clarity by summer. “We need a decision,” said Mr. Strauss-Kahn.

The dispute at the Washington meeting divided two of the Continent’s grand old men, both of them born in 1942 and both among the fathers of the euro.

Wolfgang Schäuble, Germany’s ascetic and irascible finance minister, understood the IMF’s ultimatum. The euro zone would have to draw up a second bailout package for Greece by summer, just a year after a loan deal for €110 billion, or $140 billion.

But this time, Mr. Schäuble said, “We cannot just buy out the private investors” with taxpayer money. That would reward reckless lending, he said, and it would never get through an increasingly impatient German parliament. Greece’s bondholders would be required to lend more money, Mr. Schäuble proposed, rather than take payment for their bonds at maturity.

Jean-Claude Trichet, the urbane French head of the European Central Bank, warned against forcing bondholders to put in more money, which would effectively delay repayment. “This is not a good way to go in a monetary union,” Mr. Trichet said. “Investors would avoid all euro-area bonds.”

Mr. Trichet, in the twilight of a 36-year career as a finance official, feared that if Greece didn’t honor its bond debts on time, the implicit trust that kept credit flowing to many weak euro-zone governments would shatter. More countries and their banks would lose access to capital markets, in a chain reaction with incalculable consequences.

The April meeting ended inconclusively.

Meanwhile, the cost for fixing Greece was rising. The Athens government’s budget deficit was stuck at a stubbornly high level.

Italian and Spanish borrowing costs were still affordable and stable. The yield on Spain’s 10-year bonds hovered around 5.3%; on Italy’s, around 4.6%.

The debate over making bondholders contribute to the new funding package for Greece—known as private-sector involvement, or PSI—divided euro-zone countries.

Germany had allies. In the Netherlands and Finland, new governments had promised voters they wouldn’t pay for problems in less-frugal Mediterranean countries. Breaking those promises would risk rebellions in parliament.

But France joined the ECB in resisting burden-sharing by bondholders. France’s banks had lent more heavily than Germany’s to Greece and other indebted euro nations, and France fretted about a Lehman Brothers-style banking-system meltdown. Italian officials also feared that a precedent for losses in Greece would scare investors away from Italy’s bonds.

Three weeks after the Washington gathering, on Friday, May 6, panic erupted. German news weekly Der Spiegel reported that Greece was thinking of leaving the euro zone, with policy makers heading to a secret meeting that night in Luxembourg.

The report was half-right. There was a meeting, but Greece was staying put.

Inside a country chateau, top euro-zone officials told Greece’s finance minister they expected deeper austerity and faster reforms in return for a new aid package.

Then Mr. Schäuble said he wanted to discuss how bondholder burden-sharing would work. The usually smooth-mannered Mr. Trichet lost his patience. “I want to put my position on the record,” he said: “I don’t agree with private-sector involvement, so I won’t take part in a discussion about the practicalities.” He stormed out.

Mr. Trichet’s assent was vital. If the ECB were to stop accepting Greek bonds as collateral for its lending to banks on the grounds that the bonds were in default, then Greece’s banks, which were stuffed full of their government’s bonds, would quickly run out of cash and collapse. That would radically drive up the cost of a rescue.

In Greece, a new wave of mass strikes and demonstrations was starting. Protesters, angry about Europe’s imposition of extra spending cuts and tax hikes, clashed with police in front of the Athens parliament in the biggest and most violent protests in a year.

Spanish and Italian bond prices remained stable. But Europe was at a dangerous impasse over Greece.

Many euro-zone governments hoped Mr. Strauss-Kahn could find a way to relax the IMF’s summer deadline. The IMF chief was due to discuss the matter with German Chancellor Angela Merkel in Berlin on May 15, and with euro-zone finance ministers in Brussels the next day.

Mr. Strauss-Kahn couldn’t attend. Police in New York pulled him off his Paris-bound flight and charged him with sexually assaulting a hotel chambermaid. (The charges were later dropped, and prosecutors said they doubted the maid’s reliability.) An aide phoned Ms. Merkel at her central-Berlin home that Saturday and told her the news. The astonished chancellor responded with a German idiom that translates roughly as: “You couldn’t make this up.”

The IMF sent a lower-ranking official to Brussels in his place who had no latitude to deviate from the IMF’s deadline.

In Athens, meanwhile, a tent city of the “Indignant” protest movement—a groundswell of anger at the country’s impoverishment—sprang up outside parliament. Spain’s bond prices began to wobble as investors worried that other countries might also face debt restructuring.

On June 1, Mr. Schäuble’s deputy, Jörg Asmussen, presented a German plan at a meeting of finance officials in Vienna, at the Hofburg palace of the former Habsburg emperors. It involved pressuring Greece’s bondholders to swap their Greek debt for new IOUs that would come due far in the future. That would cut the amount of European taxpayer funding Greece would need.

After a meal in a palace banquet hall, the officials quarreled into the wee hours.

For the ECB, Mr. Trichet’s deputy Vitor Constâncio, of Portugal, denounced the German plan as “dangerous.” Credit-rating agencies would declare Greece to be in default on some of its debts—a so-called selective default. In that case, Mr. Constâncio warned, the ECB would refuse to accept Greek government bonds as collateral, dealing a death blow to Greek banks. France, Italy and Spain all supported Mr. Constâncio.

Germany’s Mr. Asmussen shot back with a threat of his own. Europe needed Germany’s money to fund a new program of Greek loans. “Without private-sector involvement,” he said, “there will be no program.”

Greece was descending into chaos. Embattled premier George Papandreou’s slender majority in parliament was fraying. On June 15, a swelling demonstration in Athens’s central square veered out of control.

Alone in his office, Mr. Papandreou phoned the parliamentary opposition leader and offered to make way for a national-unity government. Talks broke down, and the Greek government limped on badly wounded.

Even Ms. Merkel had some doubts about her finance ministry’s hard-line insistence that Greece’s bondholders take a loss. On June 17, she discussed a softer plan with French President Nicolas Sarkozy: a gentleman’s agreement under which Greek bonds would be honored but the bondholders would volunteer to buy new ones.

Mr. Schäuble pushed back. The veteran conservative politician was Berlin’s biggest supporter of the European dream, but he was also the keeper of Germany’s purse. He was determined to make banks share the burden with German taxpayers, and he didn’t trust them to keep a gentleman’s agreement.

When finance ministers met again on June 20, Mr. Schäuble pushed harder. Greece’s bondholders should be told not merely to accept a delay in repayment, he said, but also to forgive some Greek debt—a so-called haircut.

As Greece’s economy moved toward free fall, its debts were soaring beyond the country’s ability to pay, the Germans and their northern allies argued. Mr. Trichet and the southern countries resisted. Talks dragged on for hours. The ministers knew they couldn’t leave without some agreement.

They tried to please everyone: Greece would get more aid. Bondholder losses would be substantial, to placate the Germans, Dutch and Finns. But as the ECB insisted, they would avoid pushing Greece into selective default.

Investors knew you couldn’t have it both ways. As the threat of a Greek debt restructuring sank in, Southern Europe’s bond markets grew volatile. Spain’s 10-year bond yield rose above 5.6%. Italy’s reached 4.9%.

Greece’s parliament debated the extra austerity measures that Europe demanded. Central Athens erupted in violent protests. Anarchist youths tore up chunks of paving stone and threw them at riot police, who fired back with tear gas and stun grenades. Café parasols burned.

Europe hadn’t resolved how to keep Greece afloat. The IMF—whose demand for a decision had set off the whole argument—softened its ultimatum. IMF officials said they were satisfied that Europe would sort out some kind of new bailout, and wired Greece its summer aid payment on July 8.

It wasn’t enough to calm markets. Spain’s bond yield hit 6.3%. Italy’s rose to over 5.8%. Such borrowing costs, if sustained, would make it hard for both countries to rein in their debts.

The selloff in bond markets forced leaders to call an emergency summit for July 21.

Determined not to let the summit pass without an agreement, Ms. Merkel invited the French president, who objected to the German push for bondholder losses, to Berlin. The pair and their advisers met for dinner in the German chancellery the night before the meeting.

Few of them had time to touch the duck breast and vegetables on their plates as they searched for a compromise. Finally, Mr. Sarkozy said he would accept the private-sector involvement—if Ms. Merkel dropped her resistance to giving the euro-zone bailout fund broad new powers to buy debt of weak countries directly and move to protect such countries as Spain and Italy from bond-market contagion. Ms. Merkel agreed.

One more person needed to sign off. Ms. Merkel phoned Mr. Trichet at his Frankfurt office. He took the last Lufthansa flight to Berlin and arrived at the chancellery around 10 p.m.

Reluctantly, Mr. Trichet gave his OK. But he set conditions. Governments would have to insure Greek bonds against default so that the ECB could continue to accept them as collateral. And they would have to make plain that no other euro country but Greece would have its debts restructured.

The trio’s deal was both complicated and vague. Their staffs had little time to flesh out details before the next day’s summit in Brussels. As leaders trickled into the European Union’s boxy headquarters, Ms. Merkel faced a challenge to placate the euro zone’s south, which thought private-sector involvement was dangerous, and its north, which thought it didn’t go far enough.

When the leaders assembled at the sprawling summit table, Ms. Merkel admitted that the specter of bondholder losses was causing market unrest. But, she said, some Greek debt relief was essential. Without it, the bailout’s tough austerity conditions—made tougher by Greece’s missing its budget goals—would be seen as unbearable.

“If Greece had met its program parameters in April,” she snapped, “that would have helped.”

All 17 euro nations had to agree to private-sector involvement. But presented with a calculation that the plan would reduce Greece’s debt by only about €19 billion out of more than €350 billion total, Dutch Prime Minister Mark Rutte balked. If it’s only €19 billion, he said, “I’m out. I need more.”

Finnish premier Jyrki Katainen also complained. His parliament wanted collateral in exchange for more Finnish lending to Greece. “No collateral, no agreement from me,” he said.

Mr. Sarkozy was peeved. “All our parliaments can cause problems,” he said.

Then it was Slovakia’s turn. Prime Minister Iveta Radičová was fighting to keep her coalition together over aid for Greece—a richer country than her own. Adding more powers to the bailout fund “would be suicide,” she said.

Greece’s Mr. Papandreou pleaded for help. “If we can’t solve even Greece, we won’t be seen as being able to solve anything else,” he said.

Hours later, the leaders had a communiqué. To appease the holdouts, it left key points broad and noncommittal, offering the possibility of collateral to Finland and describing the complex bondholder deal in a few strokes, vague language that would return to haunt the bloc.

Officials struggled to explain the new Greek bailout and the bondholder losses. Amid the confusion, Mr. Rutte dispensed muddled numbers. Bank analysts put out flawed reports.

Investor confidence faltered as it became clear that Europe’s compromise achieved the worst of all worlds. Greece would be pushed into a historic default—the first time in nearly 60 years that a developed, Western country wouldn’t honor its debts. But the default was so small that Greece was still left with a crushing debt burden.

And then official Europe went on vacation: Ms. Merkel to the Italian Alps, Mr. Sarkozy to the French Riviera.

Bondholders didn’t. They went on a rampage.

This article was written by Charles Forelle and Marcus Walker. Stephen Fidler, David Gauthier-Villars, Sudeep Reddy and Brian Blackstone contributed to it.

Wall Street Journal also produced this documentary, called “Europe at the Brink” in which WSJ editors and reporters examine the origins of Europe’s debt crisis and why it spread with such ferocity to engulf much of the continent and threaten the entire world.

Teargas in the Parliament

Most Greek demonstrations usually end up in fron of the Greek Parliament. Sooner or later the riot police starts spraying people with tear gas after the usual and occasionaly suspicious scuffle between anarchists and the police. In the past year I have heard a lot of people shouting “Try throwing ONE tear gas canister inside the Parliament to let them know how it feels!”. Well, this is how it would look like…

The run-up to the Greek economic crisis (Part 3)

This is the 3rd 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 and the second part is here.

“The Prime Minister regretted for not insisting to have the Memorandum voted by 180 MPs” says a Minister. This was a proposal that came from Mr. Venizelos and Mr. Pampoukis but the rest of the Cabinet members disagreed. Papandreou regretted for not adopting that proposal because, if he had done it and New Democracy wouldn’t vote for it, he could call for an early election. According to converging sources, Papandreou thought that the Memorandum couldn’t be implemented by a one-party government. This is not what he expected when he was counting on an “international solution” (see Part 2 for an explanation of the international solution).

The extraordinary political and social circumstances tested his psychological strength, his close associates were well aware of that. He was feeling trapped in power. In many occasions the men of his security team tried to prevent him from appearing in public which was something he could never think of. He gave considerable thought to the idea of calling an early election at the same time with the local elections in November 2010 but he hesitated once more due to the tight time constraints for the disbursement of the bailout installments.

On the morning of 15 June, the day the Medium-Term Program (the so-called Memorandum No2) was brought to the Greek Parliament, while the prime ministerial car was heading to the Maximou Mansion, some gathered citizens welcomed him with a rain of eggs (see video above). For Papandreou, that experience was decisive. He was personally hurt. He reckoned that the attack was an indisputable sign of destabilization, given the fact that at the same time in Syntagma riots were reaching a climax. When he arrived in his office he called Antonis Samaras. “The country is being dissolved. We must form a government of cooperation” he suggested. “The PM should be a third person” was the answer of New Democracy’s leader. “I have no problem” replied Papandreou with an emotionally charged voice and added “I will not become an obstacle to my country’s salvation”. For New Democracy it was a sudden “cold shower”. They didn’t want this development and they were not ready to govern. They leaked the information in order to provoke the expected reactions which would cancel the deal.

The Prime Minister’s associates called Nikos Papandreou who rushed to the Maximou Mansion and discussed with his brother. They were just the two of them for quite some time. Nobody knows what was discussed. People who know them insist that they are totally aligned politically and they always act after mutual consultation. According to some sources, the Andreas Papandreou’s second son also called Antonis Samaras, whom he knows personally through the friendship of the New Democracy leader with the Prime Minister. “If you form a government of cooperation, you’ll share the price” he allegedly said to Samaras. However, this specific information has not been officially confirmed.

While the drama of a soon-to-resign Prime Minister was evolving at the Maximou Mansion, the hesitant coup of Mr. Venizelos was unfolding at the Ministry of Defense. Already by Tuesday 14th of June, those who had visited the Minister of Defense were left with the impression that he was about to resign. An MP who visited him had the impression that the secretaries were collecting the Minister’s folders. Venizelos himself was implying in his discussions that he could even resign. Of course, he would never mention the word “resign”. “You tell me. What should I do?” was his meaningful question to his interlocutors. This stance inspired other PASOK MPs, as Paris Koukoulopoulos, Kostas Spiliopoulos, Nikos Salagiannis and Dimitris Lintzeris, who were promoting at the Parliament the idea of a government’s overthrow. This “rebellious atmosphere “ is said to have influenced PASOK MP Yannis Floridis who finally decided to resign irrespective of what the Venizelian wing would do. The day after Papandreou’s failure to form a government with Samaras, several MPs who were loyal to the Prime Minister were ordered to appear in front of tv cameras and remember the “ghost of Apostasy” (read more about the history of Apostasy/July events/Royal coup) in order to restrain the Venizelians’ attack. The 46-year-old ghost has once more served the Papandreou family. At the same time Papandreou proceeded to a government reshuffle and at 4am of the 17th of June, he appointed Venizelos to take the responsibility of the economy since, for the second time in two years, Lucas Papademos had declined to head the Ministry of Finance. A historic member of PASOK said for Venizelos: “An apostate in the morning, a vice-president in the evening”.

Greek Minister of Finance, Evangelos Venizelos

Venizelos was reassured by the Prime Minister that night that he could have as Deputy Minister the chairman of the National Bank of Greece, Vasilis Rapanos. However, instead of him, he got Pantelis Oikonomou who, as soon as he accepted the post, took all his speeches off his website. He was against the Memorandum in all of them. Another important point is that Venizelos demanded from the Prime Minister to strip Theodoros Pangalos from his responsibilities. He wanted to be the only vice-president in the government. The Prime Minister invented a “Solomon solution”: he formed a governmental commission without the participation of Pangalos. In that way, Venizelos was “first vice-president”. Thanks to his special political weight, his popularity and his rhetorical prowess, he “passed” the Medium-Term Program from the Parliament. Even if that was partly because he “checked” the intra-PASOK dissident MPs who he himself controls.

The “first vice-president” accepted the Ministry of Finance because he estimated that the Prime Minister would later be obliged to call for elections in which PASOK would be defeated and thus he would substitute Papandreou as the party leader. “I know that Evangelos wants elections but I won’t do him the favor” Papandreou is said to have commented to one of his associates during the summer. Most Ministers in their personal discussions they accuse Venizelos of postponing the implementation of the Medium-Term Program’s commitments while waiting for elections. With the possibility of having him as their leader in the near future though, they are very careful in their public statements. When, on the 2nd of September 2011, the troika demanded the immediate implementation of the reforms, Venizelos unexpectedly suspended the negotiations. The heads of the troika left Athens within a few hours.

The troika’s embargo against Greece lasted for 27 days. The delay of the bailout’s sixth installment was in no way agreed and the responsibility for bringing the state on the verge of a domestic cessation of payments lies completely to the Minister of Finance. Highly respected European sources say that the deviation from the agreed commitments has overthrown the, generous for Greece, deal of 21 July. The new negotiation, with an uncertain and (probably) worse outcome, is under way. According to Greek and foreign officials, Greece has been ostracized from that deal. Two years after PASOK’s election victory, the improvisations are continued and the uncertainty keeps intensifying…

End of Part 3 of 4 – to read the fourth part click here.