Tag Archives: Ministry of Finance

Why Rapanos denied the FinMin post

Now that Vassilis Rapanos is officially not the new Finance Minister of Greece, here’s a translation of a possible backstage explanation of why he took that decision.

Vassilis Rapanos, almost Greece’s new Finance Minister

First of all, Rapanos did not resign, he simply denied the post, since he hasn’t managed to take office yet. According to enikos.gr, Rapanos has asked to work with several colleagues of him with whom he has worked in the past. According to Greek journalist Nikos Chatzinikolaou’s portal, these colleagues were Yiannis Stournaras, Tasos Giannitsis and possibly Alekos Papadopoulos. Up until the meeting of the three political leaders (New Democracy, PASOK and Democratic Left) in which Rapanos participated, he had the idea that his demands were going to be satisfied.

However, new government spokesman Simos Kedikoglou informed Rapanos of the final team of Finance Ministry officials. Rapanos was enormously pressed by this move and his health, already troubled by a previous health issue, deteriorated. He even discussed with some people the possibility to deny the post but haven’t done so because such a move would have catastrophic impact to the image of the new Samaras administration, especially in its image towards Europe. On Friday morning he visited the Ministry where he was supposed to officially take office but, under the pressure of the circumstances, he fainted and was transferred to the hospital.

Enikos.gr mentions people close to Vassilis Rapanos as the sources for the above information.

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.

Mindmapping Greece’s tax evaders

One of the biggest problems of the Greek economy is tax evasion. If you ask any ordinary Greek he’ll tell you several cases of tax avoidance that he knows. I recently read the story of Professor Diomidis Spinellis of Athens University of Economics and Business. In 2009, the Greek Ministry of Finance hired Spinellis in an attempt to organize the approach to tackle the problem.

Spinellis tackled the problems like it was programming challenge. He made something called a mind map. A mind map looks like a tree, and it maps how your brain works. And Spinellis’s mind map illustrated in a precise, clean manner why Greece is missing so much of its tax revenue.

An example of a mind map (By Paul Foreman)

First on the mind map. Locate the tax evaders, he thought, and improve tax collection. It should be easy, because wherever he looked in the data, he saw tax evasion.

Spinellis’s program found hundreds of thousands of cases of potential tax fraud.

Greece has three hundred regional tax offices. Spinellis thought the solution was simple. Share the data with all of them and wait for the revenues to come flowing in.

Nothing.

Most Greeks will tell you there is widespread corruption in the tax offices. Collectors take bribes. So Spinellis added a new item to the mind map. Management issues at regional tax offices.

Spinellis wrote a small program that would extract each day’s performance data from every single tax office. It recorded information on how much revenue was collected, how many cases were closed, the number of days it took to close a case, etc. It also kept a list of the tax offices that had not closed a single case that day. There were hundreds of them.

The program sent an email every single afternoon to the finance minister and every tax collection office, reporting which offices did absolutely nothing that day. And still, days passed with no action.

The whole idea behind Spinellis’ project was so simple that one can wonder why the Greek Finance Ministry hasn’t thought of it until now. Why wait until 2009 to organize the country’s tax income? And why hire someone outside the Ministry for something so simple when the Ministry and the Tax Offices employ several thousands of people?

It is around this point, two years in, that Spinellis had a disturbing thought. A new item on his mind map. Fixing Greece’s tax system, and ultimately making the Greek economy work, was not a matter of tweaking his computer programs. It was not an information problem. It was a culture problem.

If the people don’t want to pay taxes, the collectors don’t want to collect, and the politicians don’t want to punish them, perhaps Greece needs more than a mind map.

At the end of 2011, Spinellis resigned from his government job. He’s back to teaching.

Greece, a Baklava Republic

An interesting overview of today’s Greece, by Vanessa Andris for the Huffington Post.

It is not at all unreasonable that any intelligent person trying to make sense of Greece’s recent maniacal antics is now desperately asking, “What is this, a banana republic?”

Well my friend, no, not exactly. This is a Baklava Republic.

Welcome to a country stuck in its own syrup. A place where a prime minister, Mr. Papandreou, calls for a public referendum on a bailout deal without even notifying the finance minister who has spent months negotiating the deal with the lenders and his fellow Greek ministers. A republic where one egomaniac, Antonis Samaras, can autocratically hold an entire terrified nation and trembling world markets hostage by refusing to sign an agreement- which he publicly says he agrees to.

Greece, a country which a year ago seemed centuries ahead of the Arab Spring is now regressing so quickly into the most hideous practices of Baklava Republics that any kind of spring for them seems light years away.

The Greeks have exasperated their supporters and all but exhausted even the EU, the stakeholder with maybe the most to lose from their demise. They have displayed such primitive responses to difficulties that no one in the global community really wants to deal with them anymore.

In one year, and particularly in the last month of unpredictable counter-productive episodes, the Greeks have virtually alienated themselves from the civilized world they themselves fathered centuries ago.

If you think that what Sarkozy and Obama said about Netanyahu while their microphones were on was bad, imagine what they and the EU and IMF might rightfully be saying about the Greeks. And note the Baklava parallels between the Greek and Israeli leadership, starting with a lack of transparency and ending with complete impossibility.

Since the debt crisis began, we have watched our beloved Greece, dizzy with fatigue and despair, teetering on the fulcrum of its future, leaning first northwest like an insecure sophomore posturing to fit in with the polished seniors of the EU.

Then suddenly like all people under stress, reverting to her primal training on how to survive. Swooning now east to circle around the Mediterranean tragically re-identifying herself with cousins from ancient civilizations that have made minimal progress in their development; Turkey, Iran, Iraq, Syria, Lebanon, Israel, Palestine, Jordan, Egypt, and even Libya.

These are the Baklava Republics, a continuum of countries related by variations on one pastry, characterized by a pathetic lack of process skills, rule of law as it serves individual agendas, leaders incapable and disinterested in self-regulation, and proud of their willingness to destroy any and everything in the name of defending their dignity.

A string of countries differentiating themselves from the rest of world with a combination of primary commitment to face-saving, a need to create drama, and a defiance of reality so insanely illogical and destructive that people world-wide see them as nuts.

Not sure whether a given country could be considered a Baklava Republic? Here’s a litmus test: Are the leaders instantly insulted by anything that can be construed as questioning their honesty or good intentions? Is their best defense acting as if they have been monumentally offended? Do they regularly elevate issues to fight or flight dramas?

From Samaras to Ahmadinejad, we see the masters of Baklava Republic tactics regularly enact a predictable but no less maddening three-act drama.

Act One: Outrage: A question about duplicitous behavior is met with incredulous anger; “You dare to question me?”

Act Two: Arrogance: “You have insulted me and anyone who would be so ill-mannered is so far beneath me that they are unworthy of my cooperation.”

Act Three: Threat: “I am a victim, rightfully volatile now because of your behavior. Either provide me a face-saving way to get out of this or I will sabotage this process, set fire to the whole country, commit mass invasions, and/or make my child a suicide martyr. It’s dignity or death.” (Additional Baklava Republic specialty: Add concocted conspiracy theory and implication that the alleged perpetrator is evil, sinful, or crazy to Act Two).

To read the whole article click here.

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 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.

A threat, some confidence and a couple of news

Yesterday I received the first threat targeting the author of this blog. Some far right supporter was angry with what I wrote about Mr. Voridis and Mr. Georgiades. I was threatened, among other things, that once the “revolution” takes place, my throat will be one of the first to be slit (if you wonder about the use of the word “revolution”, have in mind that Greek dictator Georgios Papadopoulos has famously characterized the imposition of the military junta as a “revolution”). Of course the post was not a result of my own research, the Greek blogosphere is full of this story (actually it’s even more detailed). I have merely translated and summarized what is written in Greek blogs and newspapers. Not that I feel like being apologetic for the post but it just strikes me how stupid and narrow-minded some people are. Unfortunately the threat was anonymous and thus I couldn’t reply to its author and it was written in Greek. I thought of translating it and posting it here but my limited translation skills are not enough to fully and rightfully translate the richness of Greek obscenity that was used. I was also embarrassed to translate the detailed knowledge that the commentator had about some of my female relatives’ genitalia.

Time for today’s news. Greece’s eyebrows are going to turn to the Parliament tonight for the vote of confidence of Lucas Papademos’ government. No surprises are expected though as the majority of the three parties that formed the national unity government will vote for it. Some MPs expressed concerns but overall I feel no suspense.

DEI trade unionists outside the Greek Ministry of Health

The Public Power Corporation’s (DEI) trade union, GENOP-DEI, has thrown another symbolic act today. Several trade unionists visited the Ministry of Health in downtown Athens and have cut the electricity supply. They said that the Ministry owes more than 141 million euros to DEI in unpaid electricity bills.

DEI trade unionists cutting the electricity supply at the Ministry of Health

If that looks strange for you, here’s the background. Last September the Greek government announced that the recently decided tax on property would be sent to the citizens through their electricity bills. In that way, paying your electricity and paying the property tax would be connected and if you would deny to pay the latter you would have your electricity supply cut off. That decision was taken despite Mr. Venizelos’ reassurances in June that they wouldn’t use the electricity bills for such a cause. Of course people were furious about it and DEI’s trade union, who were already under governmental and public pressure for a series of accusations and scandals, initially denied to print the bills in question. That rebellious announcement by the union leader Nikos Fotopoulos, which of course wasn’t implemented (I know a lot of people who received their electricity bill together with the new property tax), was followed by today’s show which aims to regain the people’s sympathy towards the trade union. If you want to find out more about the developments in DEI and the trade union’s reaction you can read this. Here’s a short video of today’s show.

Finally, 17 people have been identified for their participation in the events during the cancelled military parade for the Ohi Day, on 28 October. According to the Police, eleven of them come from the far left political spectrum, two from the far right and four have been identified as football fans (probably supporters of the delegated Iraklis F.C. team of Thessaloniki). They will be tried shortly.

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.

The reasons for Venizelos’ indigestion

There has been some discussion about the unfortunate event that Greek Finance Minister, Evangelos Venizelos, had to be hospitalized for a minor appendicitis problem. I have been going through reports and tweets by Greek journalists and there is indeed a mistrust on the medical event. I decided to translate a report published in Greek journalist Kostas Vaxevanis’s website, To Kouti tis Pandoras (Pandora’s Box) about the possible backstage politics concerning Mr Venizelos’ illness.          *the text in italics is mine

“As it is well-known ill people and travelers cannot be blamed for a sin (Greek quote which forgives sick people and travelers for not attending the religious fasting). Evangelos Venizelos is ill since Tuesday early morning. He went to a (private) hospital having abdominal pains. Those who have been in the army, they know well that when you want to avoid doing a task you just tell the camp’s doctor that you have “abdominal pain” and you are considering sick even if you are not. You just say “it hurts”, making it sound as if they should treat you seriously. If they can’t find anything wrong, they usually conclude that it’s indigestion. In the meantime, your goal is achieved.

However, Mr Venizelos’ pain is not such a pain. He suffers from indigestion for quite a time. He is pregnant. He is trying to give birth to the developments that will benefit him. These are: elections.

Papandreou gave Venizelos the Ministry of Finance in order to make him harmless in the intra-PASOK political struggle and, at the same time, makes him a hateful Minister in the eyes of the public. The PM has bet on Venizelos’ political ambitions in the same way you place cheese on a mouse trap. However, he made a fatal mistake. He gave Venizelos Prime Ministerial powers and a veto right. For the sake of Venizelos, Papandreou got rid of all those people who constituted his political entourage. He neglected that, apart from his own political ambitions, Venizelos had a team of MPs who were following his orders.

The political goal of Venizelos was to hold elections so that Papandreou’s era is over with a defining defeat. When he returned from the haircut’s negotiations, Venizelos said it clearly. “The agreements need a consensus of 180 votes in the Parliament”. Since such a consensus couldn’t be achieved, that practically meant elections

Once more Papandreou did not see it coming. He accepted Venizelos’ proposal to exchange the idea of elections for the its tactical substitute, a referendum. Evangelos Venizelos endorsed the referendum in a live interview with ANT1 on Monday night and managed to inflate the popular and the political reaction. And today, he got sick.

Milena Apostolaki, a Venizelian (i.e. supporter of Venizelos in the years-long Papandreou Vs Venizelos intra-PASOK struggle) who matured politically in the (political) hands of Evangelos Venizelos, disagreed with the idea of a referendum. The political guilts and the political conscience will soon be transmitted as a disease, as an epidemic actually, many other members of PASOK. I assume it will transmit mainly to the ladies who also matured politically in the (political) hands of Mr. Venizelos”.

What will Mr Papandreou do? He will adopt a rhetoric of a domestic intra-PASOK mutiny and, possibly, he will talk of a possible coup d’etat by members of the Army. But it’s too late for tears. If he wants to do something useful, he should read the hundreds of emails who were sent to him by friends and PASOK members, who were predicting the political illness of Mr Venizelos when Papandreou gave him everything. And he should go for elections before they drag him there.