Tag Archives: public debt

On the Greece Debt Free campaign and other charitable initiatives

I was reading about a new Greek beer that is produced on the island of Santorini, famous for its volcano and magic scenery. The beer is, not surprisingly, called Volkan and is brewed with rare Cycladic ingredients. Its brewing method includes the conditioning of the water using Santorini basalt in a so-called “Lava Rock Filter”.

Volkan beer

I visited their website and noticed that the brand is part of a campaign called “Greece Debt Free” (GDF). It means that for every euro spent on their products, 50 cents will be donated to reduce the Greek national debt. So far the only member of the GDF campaign is Volkan beer. Here’s their Facebook page and below you can watch their promo video.

The whole campaign is aiming either to the patriotic feeling of Greek consumers (help your country while sipping your beloved beer) or to the charitable feeling of tourists (while you’re having your holidays in Greece, help this poor country). My excitement about a new creative Greek product, at a time when Greece is obviously producing less and less, has been compromised by the whole idea behind campaign like GDF. What’s the point? Are we supposed to get drunk in order to help Greece get out of the mess? What is the GDF-supported company’s role in this chaos? And what if we manage to save Greece with the GDF campaign, as their vision suggests? The wrongdoings of those in power who mismanaged Greece for all these years will be forgotten. They, not just Greece, will be saved. No justice will be done. And, of course, it will be repeated. Simply see the criticism on charities to understand what I mean.

My objection to such initiatives is that there is no reference to responsibilities. Who brought us here? According to the mainstream narrative, we face the crisis as a natural catastrophe. Well it’s not. There have been people in power (and behind it) who took decisions and hold a part of the responsibility. And if Greece’s financial problem will be solved by offerings and donations, nothing will change.

On another similar occasion I remember, last Spring, when I passed by the Greek Embassy in Belgrade, Serbia. There was a notice board where people were invited to donate money in order to reduce the Greek public debt. Like a charity’s box over the counter of a grocery store. “This is where we’ve ended” we said with my friends. Where has this country’s dignity gone?

"We love Greece - We support Greece" says the poster outside the Greek embassy in Belgrade, Serbia.

Apparently, there was no funds for a special printing of the poster in Serbian, so the poster is fully in Greek. I guess these posters were printed by the Ministry of Foreign Affairs and were distributed in Greek embassies worldwide. I wonder how much money this campaign managed to raise.

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 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.

When Greece joined the euro

My friend Dame reminded me yesterday of the article at the BBC website the day Greece joined the euro. The date was Monday, 1 January, 2001.

Some investors have said they are worried the decision to allow Greece to join the euro will send out the wrong signal to financial markets – suggesting that in future other, weaker economies may be allowed in without complying fully with membership conditions.

Greece has one of the highest inflation rates in Europe. Public sector borrowing is also much higher than would be permitted normally under the EU rules governing entry to the project.

Greece had hoped to join the euro with the first wave of member countries in January 1999, but failed to meet the economic tests of low inflation and government debt and deficits – the so-called Maastricht criteria.

The full article can be found here.