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<\/p>\nBy CHRISTOPHER RHOADS<\/p>\n
ATHENS–As Greece slashes spending to avoid default, it hasn’t moved
\nto skimp on one area: defense. The deeply indebted Mediterranean
\nnation, whose financial crisis roiled the global financial system
\nthis year, is spending more than a billion euros on two submarines
\nfrom Germany. It’s also looking to spend big on six frigates and
\n15 search-and-rescue helicopters from France. In recent years,
\nGreece has bought more than two dozen F16 fighter jets from the
\nU.S. at a cost of more than EU1.5 billion.<\/p>\n
Arne Lutkenhorst Among Greece’s questioned costs is more than a
\nbillion euros on new submarines.<\/p>\n
Much of the equipment comes from Germany, the country that has had
\nto shoulder most of the burden of bailing out Greece and has been
\nloudest in condemning Athens for living beyond its means. German
\nChancellor Angela Merkel has admonished the Greek government “to
\ndo its homework” on debt reduction. The military deals illustrate
\nhow Germany and other creditors have in some ways benefited from
\nGreece’s profligacy, and how that is coming back to haunt them.
\nGreece, with a population of just 11 million, is the largest importer
\nof conventional weapons in Europe–and ranks fifth in the world
\nbehind China, India,<\/p>\n
the United Arab Emirates and South Korea. Its military spending is
\nthe highest in the European Union as a percentage of gross domestic
\nproduct. That spending was one of the factors behind Greece’s
\nstratospheric national debt. The German submarine deal in particular,
\nannounced in March as the country lurched toward bankruptcy, has
\ncast a spotlight on the Greek military budget and<\/p>\n
on the foreign vendors supplying the hardware. The deal includes a
\ntotal of six subs in a complicated transaction that began a decade
\nago with German firms. The arms sales are drawing heat from Turkey,
\nGreece’s neighbor and arch-rival. “Even those countries trying to
\nhelp Greece at this time of difficulty are offering to sell them
\nnew military equipment,” said Egemen Bagis, Turkey’s top European
\nUnion negotiator, shortly after the sub deal was announced. “Greece
\ndoesn’t need new tanks or missiles or submarines or fighter planes,
\nneither does<\/p>\n
Turkey.”<\/p>\n
Greece’s deputy prime minister, Theodore Pangalos, said during an
\nAthens visit in May by Turkish Prime Minister Recep Tayyip Erdogan
\nthat he felt “forced to buy weapons we do not need,” and that the
\ndeals made him feel “national shame.” Other European officials have
\ncharged France and Germany with making their military dealings with
\nGreece a condition of their participation in the country’s huge
\nfinancial rescue. French and German officials deny the accusations.
\nA spokesman for German Chancellor Merkel says the submarine transaction
\nwas the culmination of an old contract signed long before Greece’s
\ndebt crisis. In May, France’s defense ministry said Greek authorities
\nhave confirmed their willingness to pursue talks on several
\narm-procurement deals.<\/p>\n
In May, Greece’s economic crimes unit began investigating all weapons
\ndeals of the past decade–totaling about EU16 billion–to determine
\nif Greece overpaid or bought unnecessary hardware.<\/p>\n
Bloomberg News Prime Minister George Papandreou and his government
\nhave been chided over spending by Germany’s Angela Merkel. German
\nprosecutors are investigating whether millions of euros in bribes
\nwere paid to Greek officials in connection with the sub deal. In
\nMay, the chief executive of one of the German companies helping to
\nbuild the submarines, called<\/p>\n
Ferrostaal AG, resigned amid the probe. For some prominent Greeks,
\nthe latest submarine deal was the last straw. In late<\/p>\n
April, Stelios Fenekos, a 52-year-old vice admiral of the 22,000-person
\nstrong Greek Navy, resigned his position, bringing a three-decade
\nNavy career to an end. He says he did so to protest the Greek defense
\nminister’s decision to purchase the subs, as well as other decisions
\ntaken in recent months that Mr. Fenekos considers “politically
\nmotivated.” “How can you say to people we are buying more subs at
\nthe same time we want you to cut your salaries and pensions?” says
\nAdm. Fenekos, in his first interview with a reporter. He was referring
\nto the government’s 5% cut in most pensions and even deeper slashes
\nto public-sector wages enacted in response to the crisis. The Greek
\nNavy, he says, cannot afford to maintain the additional submarines.
\nIt currently has eight subs. A spokesman for the Greek Ministry
\nof Defense said Mr. Fenekos’ resignation was accepted. In stepping
\ndown, “Mr. Fenekos did not refer to the submarine deal,” he said.
\nGreece became the first battleground in the Cold War, with the U.S.
\nbacking anti-Communists in the Greek civil war in the late-1940s
\nagainst Communist insurgents. The conflict led U.S. President Harry
\nTruman, in 1947, to pledge unlimited military support for nations
\nunder Communist threat, known as the Truman Doctrine. While the
\nrest of Western Europe used U.S. aid to rebuild its economy from
\nthe second World War, in Greece, the emphasis was on building up
\nthe military.<\/p>\n
“Greece became the front line in the Cold War, and that began, right
\nthen and there, the Greek economic crisis of today,” says Andre
\nGerolymatos, a professor of Hellenic studies at Simon Fraser
\nUniversity in Vancouver. By the mid-1950s, the U.S. pulled back
\naid, much of which had been in the form of military hardware,
\nshifting much of the burden for Greek military spending to<\/p>\n
Athens.<\/p>\n
By this time, Greece’s worsening relations with Turkey led to yet
\nmore arms spending. Despite being fellow members of the North
\nAtlantic Treaty Organization, the two nations are bitter rivals.
\nThe discovery of oil in the northern Aegean Sea and disagreements
\nover territorial waters and airspace became the source of numerous–and
\nexpensive–altercations between the two countries.<\/p>\n
An incident in 1996, involving a Turkish ship running aground on a
\nrocky, uninhabited Greek islet, almost led to war. Greece later
\nthat year announced a 10-year modernization program of its armed
\nservices, costing nearly $17 billion. The U.S. over the years
\ncatered to the two NATO members under a 7:10 ratio, meaning for
\nevery $7 million dollars of equipment it sold to Greece it sold $10
\nmillion to the more populous Turkey. It was in that environment
\nthat Greece in 1998 went shopping for submarines. It decided on
\nthree German-built class-214 submarines, a state-of-the-art
\ndiesel-electric powered vessel, with the option of buying a fourth–for
\na total of EU1.8 billion. The first was to be built at the Kiel
\nheadquarters of Howaldtswerke-Deutsche Werft GmbH, with the others
\nbuilt at the affiliated Hellenic Shipyards SA, in Skaramangas,
\nGreece. The arrangement, called the Archimedes Program, would
\npreserve thousands of jobs<\/p>\n
at the Greek shipyard. Greek officials in 2002 expanded it to
\ninclude the modernization of three older class-209 submarines–work
\nto be done at the Skaramangas shipyard using materials<\/p>\n
and help from the Germans. The increase would cost another EU985
\nmillion.<\/p>\n
The German side consisted of a company owned by German truckmaker
\nMAN SE, called<\/p>\n
Ferrostaal, and Howaldtswerke-Deutsche Werft, now owned by ThyssenKrupp
\nMarine Systems AG. (MAN has since reduced its stake in Ferrostaal
\nto 30%.) The total cost of the new and renovated subs: EU2.84 billion.
\nAs the military expenditures rose, Greece’s two main political
\nparties used them<\/p>\n
as a political football, each trying to make the budget deficit
\nfigures look worse when the other was in charge. When the Socialist
\ngovernment first bought the submarines, it post-dated the accounting
\nfor them to the day when the vessels were to be delivered, rather
\nthan when they were purchased.<\/p>\n
The government at the time was struggling to meet budget criteria
\nfor entry into<\/p>\n
the euro zone, which it joined a year behind other members in 2001.
\nPushing back<\/p>\n
the expenses saddled the bill with the Socialists’ successors, the
\nconservative New Democracy party, which came to power in March 2004.<\/p>\n
The New Democracy government that year then used a similar tactic,
\nby
\nretroactively accounting for the expenditures on the date of purchase.
\nThat inflated the budget deficits of the previous government–while
\nmaking it easier for the New Democracy government to meet its own
\ndeficit goals.<\/p>\n
Both accounting methods at the time were allowed by the European
\nUnion. The resulting massive deficit revisions made in 2004 for the
\nprevious years–4.6% of gross domestic product versus 1.7% for
\n2003–triggered an investigation in 2004 by Eurostat, the European
\nUnion’s statistics agency, to understand what caused the revisions.
\nThe findings did not result in any sanctions.<\/p>\n
Military spending accounted for nearly a quarter of the difference
\nin the 2003 figures, and even more in revisions made on the deficits
\nfor preceding years.<\/p>\n
After the Socialist party, PASOK, returned to power in October 2009,
\nit made a similar maneuver: It announced the federal deficit was
\nmuch worse than the outgoing government had let on, mainly due to
\npublic hospital debts, setting in motion the financial crisis.
\nMeanwhile, not one of the subs had been delivered. When Greek
\nofficials traveled<\/p>\n
to Kiel to test the first sub, called the Papanikolis, they said
\nthat they found<\/p>\n
that in certain sea conditions the submarine listed to the right.
\n“The Navy said<\/p>\n
we cannot accept this sub,” said Mr. Fenekos, the admiral who
\nrecently resigned.<\/p>\n
“But the politicians did not want to stop it because they needed
\nthe production for the workers in the shipyard here.” ThyssenKrupp
\nMarine Systems said the criticism was baseless and was made to delay
\npayment. By last fall, Greece had paid EU2.032 billion, about 70%
\nof the total owed. With the deal at an impasse, the German companies
\ncancelled the contract. Finally, in March, the two sides announced
\nthey had begun negotiating a new deal. Instead of having three older
\nsubs modernized, just one would be modernized, and Greece would buy
\ntwo additional new ones, bringing the total to six new submarines–costing
\na total of EU1.3 billion.<\/p>\n
Abu Dhabi MAR LLC, a shipbuilding company in Abu Dhabi, would buy
\n75.1% of the Greek shipyard, with the expanded submarine deal a
\ncondition of the sale. The Greek government finally accepted the
\nsub, with the understanding it would immediately resell it. No deal
\nhas been finalized.<\/p>\n
Greece’s defense minister, Evangelos Venizelos, speaking to the
\nGreek parliament<\/p>\n
in March, explained that the deal was an attempt to end the mess,
\nto “sever the Gordian knot” that the new government had inherited.<\/p>\n
With 1,200 shipyard jobs at stake, Germany demanding concessions
\non the complex deal, and Greece having already paid two billion
\neuros without receiving a single sub, the new arrangement was
\nnecessary, he said.<\/p>\n
But in February, just as a solution appeared to be at hand, German
\nprosecutors in Munich began turning up evidence of unsavory dealings,
\naccording to records of their investigation.<\/p>\n
Ferrostaal executives authorized payments worth millions of euros
\nto politicians<\/p>\n
to win the initial deal in 2000, through a Greek company called
\nMarine Industrial Enterprises, according to the Munich prosecutor’s
\nrecords.<\/p>\n
To do this, Ferrostaal used sham consulting contracts, according
\nto the records.<\/p>\n
That company then distributed payments to “officials and decision-makers”
\nin Greece, according to the records. The investigation is ongoing.
\nNo charges have been filed.<\/p>\n
Adamos Seraphides, chairman of MIE Group Limited, a successor company
\nto a division of Marine Industrial Enterprises, said he doesn’t
\nbelieve that the company’s prior leadership was involved in bribery.
\nIn March, police searched Ferrostaal offices, in Essen, seeking
\nevidence of bribe payments. In May, several executives stepped down.<\/p>\n
“Ferrostaal will continue to pursue the intensive dialogue with the
\nstate prosecutor’s office in Munich and has pledged full and
\ncomprehensive support and<\/p>\n
cooperation,” says a Ferrostaal spokesman.<\/p>\n
A ThyssenKrupp spokesperson says the company got into the business
\nonly in 2005,<\/p>\n
when it bought Howaldtswerke-Deutsche Werft. Despite the tortuous,
\ndecade-long journey of the submarine deal–and Greece’s precarious
\nfinancial standing–Germany stands ready for more business. Guido
\nWesterwelle, the German foreign minister, in February told a Greek
\nnewspaper that Germany doesn’t want to force Greece to buy anything.<\/p>\n
But “whenever it comes to the point when it’s ready to buy fighter
\nplanes,” a European fighter-plane consortium, which Germany represents
\nin Greece, “wants to<\/p>\n
be considered in the decision.”<\/p>\n
A spokesman for Mr. Westerwelle says the minister didn’t discuss
\nfighter sales with the Greek government during the visit.–Alkman
\nGranitsas, David Crawford and<\/p>\n
David Gauthier-Villars contributed to this article.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Wall Street Journal JULY 10, 2010 By CHRISTOPHER RHOADS ATHENS–As Greece slashes spending to avoid default, it hasn’t moved to skimp on one area: defense. The deeply indebted Mediterranean nation, whose financial crisis roiled the global financial system this year, is spending more than a billion euros on two submarines from Germany. It’s also […]<\/p>\n","protected":false},"author":83,"featured_media":783513,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[89],"tags":[956,3188],"class_list":["post-20654","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-turkey","tag-council-of-europe","tag-the-european-commission"],"_links":{"self":[{"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/posts\/20654","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/users\/83"}],"replies":[{"embeddable":true,"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/comments?post=20654"}],"version-history":[{"count":0,"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/posts\/20654\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/media\/783513"}],"wp:attachment":[{"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/media?parent=20654"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/categories?post=20654"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/tags?post=20654"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}