Greece goes to the polls again on Sunday June 17th 2012, in one of the most crucial general elections for generations.
At stake are huge issues: should they stay in the euro, has the financial crisis meant that they've ceded control of their country to the un-elected European Central Bank and powerful northern European countries like Germany, how do they pull their country out of the death spiral the austerity imposed by the troika has created, and how to do they deal with corruption in their system when the two main political parties are complicit with it.
This page aims to provide sources of information from within Greece if possible, plus as much objective reporting as can be found from around the world.
It's hard to get good unbiased information about Greece - most of the reporting done in the UK, Germany and USA betrays the biases of the reporting countries. So American newspapers assume the Greek welfare state must be the problem, even though the US welfare state is immensely bigger than the Greek one (in Greece, the family is expected to be the support system, with minimal state support for unemployment and disability and none for child poverty). In Germany, the newspapers assume that Greeks don't work as hard as Germans, even though OECD statistics show that Greeks work the longest hours in Europe. In the UK, the newspapers ascribe fault to the euro - the currency was a mad idea and it was ceding control of the Greek economy to the unelected bureaucrats of Brussels and Frankfurt that caused the problem according to the British.
The British point of view is probably the closest to the truth, but there are other causes too - the reluctance of Greek business people to pay tax, the massive military commitments Greece has because of it's pivotal strategic location, and the austerity conditions imposed by the "Troika" which have shrivelled up demand.
Greece is important - not only did they invent democracy and are the source of western civilization, but this election will be testing whether democracy can withstand the assault from the financial markets and other nations. The answer affects us politically and economically. If Greece decides enough is enough and re-asserts democratic imperatives over the needs of the markets, we could be seeing a turbulent six months in the world economy, as nation states all over the world have not really done much to protect their countries from the markets even though four years have passed since the 2008 financial crash.
Sunday night is the end of something and the beginning of something - one of those epochal events that signal a change in the direction of history.
What's wrong with the Greeks?
This Swedish documentary in Swedish, English and Greek (with English sub-titles) is one of the best I've seen about the Greek situation and how Greeks are coping.
Background to the Crisis
The crisis came to light in 2009, when the new Pasok government opened the books and found the level of debt was immensely higher than that which had been officially reported.
The previous government, faced with the horrendous cost of preparing for the Olympic games (too much for a small nation like Greece), while at the same time qualifying for euro-membership, had appointed Goldman Sachs to help.
Goldman came up with a loan swap that helped it make a 600 million euro profit on the transaction. Here's what Bloomberg had to say about it:
The Goldman Sachs transaction swapped debt issued by Greece in dollars and yen for euros using an historical exchange rate, a mechanism that implied a reduction in debt, Sardelis said. It also used an off-market interest-rate swap to repay the loan. Those swaps allow counterparties to exchange two forms of interest payment, such as fixed or floating rates, referenced to a notional amount of debt.
The trading costs on the swap rose because the deal had a notional value of more than 15 billion euros, more than the amount of the loan itself, said a former Greek official with knowledge of the transaction who asked not to be identified because the pricing was private. The size and complexity of the deal meant that Goldman Sachs charged proportionately higher trading fees than for deals of a more standard size and structure, he said.
"Greece actually executed the swap transactions to reduce its debt-to-gross-domestic-product ratio because all member states were required by the Maastricht Treaty to show an improvement in their public finances," Laffan said in an e- mail. "The swaps were one of several techniques that many European governments used to meet the terms of the treaty."
Cross-currency swaps are contracts borrowers use to convert foreign currency debt into a domestic-currency obligation using the market exchange rate. As first reported in 2003, Goldman Sachs used a fictitious, historical exchange rate in the swaps to make about 2 percent of Greece's debt disappear from its national accounts. To repay the 2.8 billion euros it borrowed from the bank, Greece entered into a separate swap contract tied to interest-rate swings.Falling bond yields caused that bet to sour, and tweaks to the deal failed to prevent the debt from almost doubling in size by the time the swap was restructured in August 2005
The world financial crash of 2008 blew the deal apart as yields fell to record lows, and the new government reported all the sorry details to the ECB and the European Commission. A rescue package was constructed - but it had draconian conditions attached which hammered ordinary Greeks (who had been unaware of the complicated deals their govt was making, indeed most of the Greek Parliament had been kept in the dark).
Who is up for re-election?
The two main political parties, New Democracy (centre-right) and Pasok (centre-left) have held power between them for the forty years since the junta fell. Both however are tainted - voters feel they let the country down with their complicated debt swaps, inability to collect tax and inability to tackle corruption.
For example, Pasok, charged by the EU to raise some money to pay the debts, focused entirely on raising taxes from salaried people - people who have taxes deducted at source and have therefore always paid their taxes in full. Those who evaded tax - small businesses, the self-employed, the large shipping magnates (Greece controls 15% of the world's shipping) were left untouched. Shipping magnates pay no tax at all in Greece and have threatened to stop sailing under the Greek flag and switch to sailing under the Bermudan flag if they are taxed.
The reason for this inactivity is that both Pasok and New Democracy have supporters amongst these "special interests". Pasok and New Democracy are also committed to the austerity package, so the Greeks are in the position of being told by the EU that they must get rid of corruption, but at the same time that they will be punished if they don't return to power the two parties that have done so much to corrupt the public finances.
Opposing the memorandum and pledging to clean up Greek finances are a myriad of parties - Independent Greeks (right wing), Golden Dawn (neo-Nazis), DiMar (democratic left), Syriza (left wing), and KKE (Communists).
Of these, Syriza is the most popular, and if they get the largest amount of votes in the election they will get a bonus 50 seats, which should be enough to allow them to form the government. Syriza have been labelled as "dangerously left-wing" by the Greek press, and this has been repeated by western newspapers. However, in his article for the Financial Times, Alex Tsipras, the Syriza leader, wrote that the goal of his government was to reform the tax regime so that taxes due were actually collected, corrupt tax inspectors who accepted bribes to ignore taxes were jailed, and tax evaders would be jailed.
Across the western world, that view is standard, amongst both the right and the left. For the Greek business community however, used to a situation where they could evade tax at will, a government that pledged to crack down on tax evasion was "dangerously left wing". Eurostat estimates that revenues of at least 4% of GDP are lost by tax evasion, and that Greece did not really need to raise tax rates, they just had to collect what was due.
Greece won't be able to pay it's debts unless it collects taxes, it's as simple as that, so they need a government that will deliver on that front. The last time we saw a nation where the top people paid no tax at all was France just before the French revolution.
Greek is strategically located at the junction between East and West. Here's an article by geopolitics experts Stratfor, which explains why Greece is important to NATO. One big danger is that a Greece strapped for cash asks the Russians for loans in return for granting the Russians port facilities in Greece (part of the reason the Russians are standing by Syria despite their atrocities is that Russia's only port access in the Mediterranean is in Syria). The Chinese too have been making overtures based on getting port access.
Sometimes the emphasis on the military is overdone - Greece spends 4% of GDP on the military, more than any other EU country, and up there with the Americans - and one scandal was how the EU memorandum on the bailout insisted that Greece could not cancel arms purchases. According to the Guardian:
It has claimed by some that the EU bail-out was explicitly tied to burgeoning arms deals. In particular, there is alleged to have been concerted pressure from France to buy several stealth frigates. Meanwhile Germany sold 223 howitzers and completed a controversial deal on faulty submarines, leading to an investigation into accusations of bribes being given to Greek officials.
This is pretty shocking given that Greece is cutting pensions, cutting the minimum wage, hasn't paid some of it's public servants for nine months, has no food stamp program (as in the USA) and no child benefit and free school meals for poor children (as in the UK and Germany).
Greece, with it's thousands of islands and 8500 mile coastline, is also the main entry point into the EU for illegal migrants, who seek to enter Greece and then go to other EU countries. Every time there is some problem in the Mediterranean, such as conflict in Syria and Libya, there is a surge of desperate migrants.
However, the EU treaties say that if countries find illegal immigrants, instead of sending them back to their place of origin or offering them asylum, they get sent to the EU country in which they entered. Greece hasn't the money to deal with these people or even feed them, which means the migrants resort to drug-dealing to earn enough to live. The following article is the best I've seen detailing with the migrant problem and the connection with the rise of the neo-Nazis in Greece.
Corruption, Bribery and Greek Public Officials
As the German magazine Der Spiegel says,
Greece's rampant corruption is one of the reasons why the country's economy is in such a mess. German companies have taken advantage of the system for years in order to secure lucrative deals
This is particularly evident in infrastructure projects.
According to Der Spiegal,
Germany's national railway operator Deutsche Bahn apparently resorted to bribes to win an underground railway contract in the run-up to the 2004 Olympic Games in Athens. To clinch the deal, a six-digit sum was reportedly given to a Greek decision-maker via an adviser. Transparency International rates Greece as the one of the most corrupt countries in Europe.
Such business deals are highly lucrative -- even with miza. "Anyone who pays bribes to get a government contract can pad his margin with a few extra million," says one investigator. "The excessive prices are of course shouldered by taxpayers."
The biggest public scandal involved the German firm Siemens, which was recently settled out of court between the Greek govt and Siemans. But Siemens isn't the only one involved, German arms manufacturers are also in the bribery business according to Der Spiegel:
German arms manufacturers have reaped the greatest benefits from these sales. Between 2004 and 2008 alone, they delivered roughly a third of Greece's defense imports.
Munich's state prosecutor is currently investigating whether everything was done by the book during the sale of four submarines. The order amounted to nearly €3 billion, and €2 billion had to be paid in advance -- which is unusual for such deals.
This isn't just about Greek taxpayers being swindled, it's about European taxpayers losing out too. EU funds (which are about 3% of EU GDP - small compared to US federal funds) are meant to be a sort of solidarity transfer from the rich nations (Germany, France, Britain, Belgium, Netherlands, Denmark, Sweden etc) to the poorer nations to help them with infrastructure. The receiving country also chips in half the money for the project. The idea is that the poorer countries get much needed roads and airports built (which should make it easier to get goods to market), and the construction of these will also provide jobs in those countries.
However, because in Greece most of the contracts have been awarded to German companies thanks to bribes from Germans to Greek officials, it has meant that Britain, France and others have been subsidizing Germany via EU funds, rather than the real targets. And the Greek taxpayer, which chipped in half the money, has also sent funds north.
Echos of History
People tend to assume that classical Greece invented democracy (and philosophy, medicine, arithmetic, geometry, theatre and much else) out of sheer goodness while standing around in the agora looking noble.
The truth is much more interesting. Classical Greece like modern Greece had an oligarch problem. People who were staggeringly, immensely rich, surrounded by people who were poor and in debt to the oligarchs. But then this situation was typical across the world in about 500BC.
What happened next was not typical though. The Athenians ran riot, chasing the oligarchs to the top of the Acropolis, and holding them there in a siege. Several aristocrats and oligarchs died. The rest agreed to come to a deal with the common people - they would appoint Cleisthenes, whom both sides trusted, as Archon (ruler) for a year and leave it to him to hammer out a compromise.
What Cleisthenes came up with was a revolutionary new constitution. In just a year, he had set up a system that broke the power of the oligarchs, spread it evenly across all sections of society, and put in a series of checks and balances to ensure no tyrant could take control of the city again. We know all this because Aristotle documented it in his Politics, along with a copy of Cleisthenes constitution.
Athens prospered mightly after that. Not only did the city get rich, but the new atmosphere of freedom was conducive to people thinking new ideas without fear of reprisal from some narrow-minded king. Pretty much everything we think of as western civilization has it's roots in the 140 years of the democracy.
However after Athens got conquered by the Macedonians (and later many others including the Romans, Venetians and Ottomans), the spirit of creativity died along with their constitution.
But here is Greece again, with an oligarch problem. Will the citizens put them in their place and rescue their country - or will they cave meekly to the dictats of the self-appointed elites of the EU?
The official count in Greece, based on 91.41pc of votes: New Democracy is at 29.83pc, Syriza 26.78pc and Pasok 12.4pc. This isn't enough to give New Democracy an overall majority even with the 50 seat bonus that they will get. They have formed a coalition with Pasok and DiMar with Syriza in opposition. (Pasok wanted a national unity government but Syriza wouldn't play). The new government has a short time frame to prove it can make a difference - if it can't we may be seeing another set of elections in November.
Related article: Why the eurozone crisis has barely begun according to Martin Wolf