Wednesday, 24 December 2008

2008 - A year of scandals and faltering government

2008 was a momentous year for Greece. It marked a critical mass of corruption scandals in government that brought Pasok ahead of New Democracy in opinion polls for the first time since 2004. It was also a year in which the international financial system seemed to totter, favouring the cash-rich and striking at the indebted Greeks.

The government, re-elected in September 2007, made a few valiant attempts at reform in the first half of the year, particularly in social security, land zoning and the full privatisation and strategic partnering of OTE. But the weight of the Zahopoulos, Vatopaidi and Siemens scandals, coupled with the backlash against reform and the international credit crisis, proved more than New Democracy could handle. It is now a weak and faltering government, facing an unpopular and fraught opposition. That leaves Greek society with a widening power vacuum and a lack of leaders, a recipe for social unrest in 2009.

January - Finally, a sex scandal

After years of financial scandals, New Democracy opened the year with a juicy sex scandal.

The attempted suicide on January 4 of lawyer Iraklis Koutelidas fanned the media flames surrounding a December suicide attempt by Christos Zahopoulos, the general secretary of the culture ministry. Koutelidas said he had been wrongly accused of assisting Zahopoulos’ secretary, Evi Tsekou, to blackmail him with a sex video.

Yannis Andrianos, head of the prime minister’s press office, had handed the video over to a prosecutor on December 21, a day after Zahopoulos’ suicide attempt. He said he had received it from a journalist four days earlier. Yannis Angelou, head of the prime minister’s office, had also seen it and had asked for Zahopoulos’ resignation immediately. Pasok said the government was trying to dress up a financial scandal as a sexual one.

The first opinion polls since the Zahopoulos scandal broke showed that three-quarters of the Greek electorate agreed with Pasok. They also showed a sudden drop in ruling New Democracy’s popularity, which still managed to retain a tiny margin above Pasok.

To Vima newspaper brought to light letters Deputy Culture Minister Petros Tatoulis had sent to Karamanlis seriously questioning the integrity of Zahopoulos. The letters had gone unanswered. Rightwing LAOS said it had evidence of six billion euros’ worth of receipts issued by bogus companies to the culture ministry.

At a book presentation on January 9, Foreign Minister Dora Bakoyannis said that the political profession was in crisis largely because ministers refuse to tell hard truths. The remark was widely interpreted by the media as a jab at Prime Minister Costas Karamanlis’ inability to make good on a promise of transparency.

On January 13, Sunday newspaper Proto Thema published stills from the sex video showing Zahopoulos and Tsekou having intercourse on a couch. The following day the co-publishers of Proto Thema, Makis Triantafyllopoulos and Themos Anastasiadis, openly accused each other of being the purveyor of the video.

The fallout of this duel was momentous for the government. Triantafyllopoulos alleged that Anastasiadis had received five million euros from undisclosed sources. He also alleged that the head of the financial crimes squad, Spyros Kladas, had approached him through an intermediary to ask for an end to the newspaper’s probing the Zahopoulos affair. In return, Triantafyllopoulos said, the squad would refrain from investigating Anastasiadis’ five million.

Alpha channel revealed on January 22 that the intermediary between Kladas and Triantafyllopoulos was New Democracy MP Costas Koukodimos. Koukodimos was forced to resign from the conservative parliamentary bloc for a few months, leaving the government with a majority of one seat.

A first instance court brought felony charges against all involved in the Zahopoulos scandal on January 23, but only Tsekou was held in pretrial custody.

Opposition Pasok was embroiled in troubles of its own. Former culture minister Evangelos Venizelos had famously lost a leadership challenge to George Papandreou two months after the September 16 election. The media discussed the likelihood of his forming a breakaway socialist party. Instead, Venizelos returned in January with a proposal to form a think tank within Pasok.

Papandreou perceived this as a direct threat and in a January 24 meeting warned that he would strike him. Five days later Venizelos withdrew the proposal “in the name of party unity”.

On Janaury 23 Prime Minister Costas Karamanlis went on a scheduled visit to Ankara, the first by a Greek premier in 49 years.

Earlier in the month, Turkish coastguard vessel 302 was reported to be harassing fishermen in the Imia islets area. The standoff resulted in demarches between the Greek and Turkish foreign ministries over territorial waters.

Archbishop Christodoulos, who had been sick with cancer, died on January 26 at the age of 69 and was buried after a four-day wake on January 31. Christodoulos had always been polled as one of the most popular public figures in Greece. He broke a taboo to address contemporary social and political issues and was credited with bringing the church closer to young people. Metropolitans Efstathios of Sparta and Anthimos of Thessaloniki seemed to emerge as the strongest candidates for the succession.

Oil briefly reached $100 a barrel, and Greek bankers told this newspaper that they saw no significant prospects for a major recession in 2008.

A 6.5 Richter earthquake shook Leonidio at 7.14 on the morning of Janaury 6. The Institute of Geodynamics came under fire for taking 25 minutes to issue information on the temblor.

The Athens News celebrated its 56th birthday with a glittering reception for 700 people at the Megaron. The guests included readers, journalists, diplomats academics, artists, politicians and businesspeople.

February -The power vacuum emerges

The Zahopoulos scandal began to have measurable effects on New Democracy. Its approval rating fell to a low of 30.7 percent in an early February GPO poll. That was more than 11 points lower than its election margin less than five months previously. However, Pasok also fell to an all-time low of 26.8 percent (from 38.1 percent at the election) as voters judged that it did not form a credible alternative to the ruling conservatives. Thus began the theme on which the year has ended - that the accumulated corruption and incompetence of the two power parties over three decades has not escaped voter memories and led Greece to a political vacuum in which no sure winner can emerge.

The Siemens international bribery scandal came to complement the Zahopoulos scandal. Depositions to German prosecutors revealed that 100 million euros’ worth of bribes had gone to Greek bank accounts in 32 offshore accounts under Pasok governments. New Democracy tried to use the Siemens scandal to counter Pasok’s attacks over the Zahopoulos scandal.

Three Greek prosecutors prepared their bags for a mid-month trip to Zurich and Munich, where they were to collect evidence for a Greek probe that was expected to call the managers of Siemens Hellas - particularly Prodromos Mavridis, head of telecoms, who maintained independent ties to German executives. Dionysis Dendrinos, former head of the Olympic security project, and Mihalis Christoforakos, former CEO of Siemens Hellas, were also expected to testify.

Justice Minister Sotiris Hatzigakis submitted a bill on February 6 promoting the offering and taking of bribes from a misdemeanour to a felony for sums over 73,000 euros.

Evi Tsekou and her lawyer, Christos Nikoloutsopoulos, were slapped with felony charges of violating the confidentiality of personal data and blackmail. There was evidence that Tsekou had asked Zahopoulos for 200,000 euros not to release the sex video featuring the two of them, and that Nikoloutsopoulos had shopped the video at Mega TV and Proto Thema newspaper for 100,000 euros and 50,000 euros, respectively.

In her first deposition on February 25, Tsekou countered that the hiring round in which she was supposed to be given tenure in return for sex with her boss was rigged to hire the relatives and associates of other politicians. Nikoloutsopoulos had already alleged as much.

Kosovo unilaterally declared independence on February 17, leaving Serbia in a wake of fury and denial. “As long as we live, Kosovo is Serbia,” Serb Prime Minister Vojislav Kostunica told a crowd of about 200,000 in Belgrade four days later.

Also on February 17, Cypriot incumbent President Tassos Papadopoulos was eliminated in a first round of voting that gave a third of the vote each to the runoff candidates, Dimitris Christofias and Ioannis Kassoulides. Christofias would prevail in the second round on February 24. Papadopoulos had led a rejection of the Annan Plan for political reunification of the island in 2004, and his elimination was widely seen as a renewed appetite on the part of Greek-Cypriots for rapprochement.

UN mediator on the Macedonia name issue presented Athens and Skopje with five name proposals leaked to the press on February 21. The included Constitutional Republic of Macedonia, Republic of Upper Macedonia, Democratic Republic of Macedonia, Independent republic of Macedonia and New Republic of Macedonia. Greece leaned towards Republic of Upper Macedonia, since it sought a geographical qualifier that sat next to the M-word.

The proposal was a last-ditch attempt to seal the dispute ahead of an April Nato summit that the US hoped would bring the Former Yugoslav Republic of Macedonia (Fyrom) into the club with Greece’s blessings. The following day, February 22, Karamanlis declared in parliament that Greece would not hesitate to use its veto in Nato if Skopje did not meet Greece half way. Greece had, over the previous several months, grudgingly accepted inclusion of the term Macedonia in Fyrom's new name but only as part of a composite term. This position would be repeated with growing emphasis all the way to the Nato summit.

On February 25 Environment and Public Works Minister George Souflias unveiled a national zoning plan which he termed “one of the most important structural changes to have taken place in this country in decades”. The plan, which would have to be supplemented with a national forest registry that would likely take years to complete, would greenlight areas for industrial, tourism or renewable energy development.

On February 15 the Athens News exclusively reported that Norway had decided to suspend political asylum procedures and examine applicants who had first alighted in Greece. Under the Dublin II process, applicants may not shop around for political asylum within the European Union, but Greece’s record for rejection had become notorious. This newspaper reported that Germany, too, considered following suit. On the last day of the month European Commissioner for Justice and Home Affairs Franco Frattini voiced concern at Greece’s record.

On February 29 the Athens News exclusively published a detailed proposal from the Hellenic League of Human Rights to the interior ministry on overhauling Greek citizenship law to include the children of immigrants.

Metropolitan Ieronymos of Thebes came from behind to win election as Archbishop of Athens and all of Greece in a February 7 runoff vote. He beat out Efstathios of Sparta 45-to-27.

March - Greece closed for business

On March 6, Social Security Minister Fanni Palli-Petralia rolled out the government’s long-awaited pension reform bill. It consolidated the 133 pension funds which came under the government’s purview to 13 - five primary pension funds, six auxiliary pension funds and two welfare funds. The announcement sparked strikes that kept Greece largely at a standstill for the month.

The Public Power Corporation held a four-day strike leading up to the bill’s unveiling, and then continued it until March 20. PPC workers feared that the consolidation of funds would be a first step to downward streamlining of benefits. They were also unhappy about EU-mandated plans to liberalise the electricity sector. At the height of the labour action 16 power plants were offline, shutting down 40 percent of the nation’s generating capacity and causing rolling blackouts.

Their strike was compounded by a one-day strike by dock workers in Athens and Thessaloniki container ports protesting against privatisations under discussion. Finally, workers at the Bank of Greece led a strike that lasted almost the whole first week of March to overturn their inclusion in the pension bill. The strike brought trading on the Athens bourse to a halt and brought calls for governor Nikos Garganas’ resignation. Employees were unhappy that the bill demanded their fund pay out 345 million euros to IKA over 15 years in return for benefits. Central banks are supposed to be financially and institutionally independent, and the European Central Bank’s president, Jean-Claude Trichet, wrote to the prime minister asking for an audit of the Bank of Greece’s pension fund to discover whether it would end up overpaying IKA.

The country’s largest unions, the General Confederation of Workers in Greece (GSEE) and the Civil Servants’ Union (ADEDY) both held a one-day strike and protest against the bill on March 12. Athens municipal workers left thousands of tonnes of rubbish on the streets of Athens for days, prompting Mayor Nikitas Kaklamanis to ask that sanitation workers be included among hazardous professions, which enjoy earlier retirement.

At the height of the strike action on March 19, about three million workers across the country - more than half the workforce - walked off the job, and an estimated 100,000 marched through Athens.

The government passed the bill on March 20 along party lines, against a critical nationwide climate. A VPRC opinion poll showed three-quarters of Greeks in favour of rescinding the bill, which Pasok leader George Papandreou pledged to do. Its main provisions, apart from the consolidation of funds, were to:
- abolish pensions at 55 for women who had worked 35 years
- abolish pensions at 58 for men who had worked 35 years
- raise the retirement age from 50 to 55 for mothers with minor children
- set a ceiling for auxiliary pensions at 20 percent of the primary pension
- raise retirement in hazardous professions from 55 to 57
- offer a 9.9 percent incentive to retirees to stay in the workforce for three years longer than the law requires

The effectiveness of these provisions was somewhat dampened by the fact that they only applied to people entering the workforce after 1992.

Pasok tabled a surprise vote of no confidence in the government on March 26, a week after the pension bill was voted through. It was defeated, but gave Papandreou an opportunity to channel national rage and unite his party.

Opinion polls showed a continuing malaise for both power parties. A Kapa Research poll showed 58 percent of the electorate believing Karamanlis should not be given a third term, and 67 percent believing that Pasok would either continue to bleed voters to small leftwing parties or split in two.

It was under this overcast sky that Pasok held a long-awaited convention on March 13 - an attempt by leader George Papandreou to translate his re-election by the party base into unity. He surprised the party and the media by excluding from the shadow cabinet anyone who had served as a minister. Left Coalition Synaspismos, which had been invited to the convention, snubbed overtures for collaboration. Synaspismos leader Alexis Tsipras told his own party convention two days later that the socialists were “seeking to regain one-party rule”.

On March 25 UN mediator Matthew Nimetz disappointed Greece by replacing his February name proposals with just one - Republic of Macedonia (Skopje) - something Karamanlis and Foreign Minister Dora Bakoyannis said they would not accept.

A victory was won for the environment with the final phase of the capital’s sewage treatment plant on Psyttaleia. That put paid to a series of false starts that included vaporisation (which offended the noses of Piraeus residents) and composting (which offended the noses of Ano Liosia residents).

In an interview with the Athens News on March 14, Spyros Amourgis, head of the Hellenic Quality Assurance Agency, revealed that only 114 university departments out of about 500 were on track to complete their external assessment by the end of the year - a necessary precondition for European funding beginning in 2010.

On March 21 the Athens News exclusively published details of an interior ministry circular, which offered non-EU residents clear, EU-harmonised rules to apply for the legal residence of their dependents. It also abolished the residence permit for EU nationals, and replaced it with a one-off registration.

April - No to Skopje in Nato

Greece made good on its threat to veto Fyrom’s entry into Nato at that August body’s Bucharest summit on April 2-4. In contrast to the rabid nationalism it had displayed in 1992-93, Greece was measured. It demanded a geographically-qualified Macedonia, universally applied to all its bilateral relations and sanctioned through a United Nations Security Council Resolution. Also in contrast to 1992-93, Greek political parties rallied round the government position and even gained six allies and five declarations of sympathy from among Nato members.

The veto was only one American frustration at the summit. Members refused to admit Ukraine and Georgia into the alliance, although they did approve a European missile defence shield based in Poland and the Czech Republic.

Skopje’s prime minister, Nikola Gruevski, called for elections on April 17. Voters were asked to choose between the Macedonian National Unity Party and Gruevski’s nationalistic hard line of non-compromise with Greece over the constitutional name Republic of Macedonia, and the realpolitik approach of President Branko Crvenkovski and the Social Democratic Union of Macedonia. The first camp argued that Greece’s true aim was not compromise but the eventual dissolution of Fyrom; the latter warned of strategic diplomatic failures owing to intransigence, and another Greek veto to European Union membership.

A historic Cypriot barrier - the Green Line wall - was torn down at the commercial Ledra Street on April 3, giving Greek- and Turkish-Cypriots a checkpoint there for the first time since the July 1974 invasion.

Greece was criticised by foreign correspondents and visiting journalists for restricting media access to a Beijing Olympic flame-lighting ceremony atop the Acropolis at the end of March. Only state television was allowed on the Acropolis and at a departure ceremony at the Panathenaic stadium, following protests at another torch-lighting event at ancient Olympia ten days earlier.

Christos Zahopoulos, the culture ministry’s former general secretary, was well enough after attempting suicide in December 2007 to testify on April 4. He claimed that a blackmail attempt by his secretary was solely due to his failure to give her a tenured job in return for sex, helping to dampen judicial probing into his financial dealings at the ministry.

But even as the Zahopoulos scandal began to cool, New Democracy found a new nemesis in Petros Tatoulis. The former deputy culture minister had been at loggerheads with Zahopoulos when in office over who would control European Union handouts. He now launched a broadside at the government’s social and development policy, criticising corruption, political patronage and what he saw as a lack of strategic direction for Greek society.

Greece won more bad publicity for its political asylum procedure, which according to the UN has the lowest admission rate in Europe (0.61 percent). The United Nations High Commission for Refugees (UNHCR) and the European Council on Refugees and Exiles (ECRE), an umbrella refugee NGO, sent letters to European leaders asking them not to return asylum applicants to Greece for processing, as the law demands. Opposition Greek Euro-MPs launched an effort to spread awareness of Greece’s stance, and said the European Commission had launched legal action against Greece.

Interior Minister Prokopis Pavlopoulos finally reacted to the growing chorus of disapproval. In late April he told his EU counterparts that Greece had received 112,000 asylum applications in 2007 alone, and was unfairly burdened due to its location. He asked for more financial assistance to house and process refugees.

The immigration debate heated up internally, too. Labour Minister Fani Palli-Petralia ordered labour inspectors to the strawberry fields of Nea Manolada in the Peloponnese, after media reported upwards of 2,500 undocumented fruit pickers there. The media attention was sparked by a two-day strike by the workers, who demanded better pay. Farmers agreed to a slight raise, bringing pay to between 25 and 28 euros a day, which GSEE said was still below the legal minimum of 30.4 euros a day.

On April 17 the UN suspended Greece from its carbon emissions trading scheme set up under the Kyoto Protocol, as punishment for inaccurate reporting of emissions. Greece would be readmitted in November.

The government reached a preliminary agreement with Deutsche Telekom to privatise OTE fully. Under the scheme DT and the government would jointly own 50 percent plus one share.

On April 29 Greece and Russia signed an agreement on the portion of the South Stream gas pipeline Russia wants to build in Greece. The pipeline, whose viability in terms of gas reserves is in doubt, was widely seen as an outflanking manoeuvre against Europe’s planned Nabucco pipeline, which would erode Russian control over Europe’s piped gas imports.

May - OTE’s privatisation

Despite its tribulations the New Democracy government maintained a lead of 2.6 points in a March opinion survey published on May 4. Synaspismos continued to threaten Pasok with an astronomical 15.6 percent, and a majority of Greeks began to voice support for a coalition government rather than one-party rule, which has been the standard form of government since the restoration of democracy in 1974. The view was widely interpreted as discontent with corruption in both power parties.

The new club with which to beat the government came in the form of the third attempt in the year at a major reform (after the land zoning bill and pension reform), which was the privatisation of the Hellenic Telecommunications Organisation (OTE). The government had stopped a stealth buy of a controlling stake in OTE by Marfin Investment Group in 2007. On May 14 Finance Minister George Alogoskoufis announced that he was brokering the sale of Marfin’s 19.56 percent stake to Deutsche Telekom for the premium rate of 26 euros a share totalling 2.55 billion euros. In addition, the government would sell DT three percent for 29.75 euros a share, to make 442.3 million euros. DT would purchase a further two percent on the open market to come up to 25 percent.

On May 27 parliament defeated a motion to amend article 16 of the constitution, which required a two-thirds majority to pass. Thus the liberalisation of higher education was left to a reinterpretation of the article, which says that “tertiary education is provided exclusively by foundations falling under the purview of public law and are fully self-governing” (paragraph 5). That theoretically leaves open the door for public foundations allied with private colleges to fight for state recognition.

University teachers went on strike on May 20-21, coinciding with rectors’ elections at the Athens and Crete polytechnics. Some students tried to disrupt these, as they were the first to be held in accordance with a new law passed in February 2007, whereby students voted directly for rectors rather than party electors. More student demonstrations followed at Thessaloniki’s Aristotelian University on May 28. Students stormed a board meeting, resulting in the hospitalisation of rector Anastasios Manthos. On the same day students reportedly affiliated with leftist parties clashed with pro-government factions at the University of Piraeus.

Consumers threw out their bottles of sunflower oil after a Ukrainian shipment was found to be tainted. A 40,000-tonne shipment had gone to France and been distributed to another thirteen EU members thence. A 2,970-tonne batch was traced in Greece in March, and another 3,060 tonnes in May.

June - Siemens burns Pasok

The Siemens bribery probe unexpectedly tainted New Democracy MP Kyriakos Mitsotakis, after unpaid invoices totalling 140,000 euros made out to him were uncovered in Siemens’ accounts on May 30 during a probe. Mitsotakis denied that he had ever received free equipment from Siemens.

The probe flushed a confession out of Pasok former MP Theodoros Tsoukatos, once a close confidant of former prime minister Costas Simitis. He volunteered that Siemens’ CEO in Greece, Mihalis Christoforakos, had approached him to contribute a million marks (420,000 euros) to Pasok’s campaign war chest. Tsoukatos said he directed Christoforakos to an overseas bank account in the name of Stelios Vios, the son of Pasok’s Hios MP.

Coming on top of ND’s accumulated scandal, the Siemens affair seriously rattled public confidence in the two power parties because it implicated both. In July, Conservative backbencher Yannis Manolis suggested both parties might benefit from dissolution and re-establishment. Pasok’s Tilemahos Hytiris called for “a complete renewal of the political system”.

Pasok leader George Papandreou expelled former prime minister Costas Simitis from the party on June 12 for opposing his call for a referendum on the Lisbon Treaty. The treaty, a resurrection of the European Constitution defeated by French and Dutch voters in 2005, should be ratified by parliament, Simitis, a Euro-federalist, advocated. It became a moot point after Ireland, the first EU member to hold a referendum, voted no.

Inflation hit a 10-year high in May with 3.9 percent, followed by four percent in June, and began to take a bite out of Greek consumption figures. Private consumption dropped by 0.02 percent in the three months February-March-April, according to figures released by the Greek Statistical Agency on June 3. That was the first quarterly decline in at least seven years.

Mayor Anastasios Aliferis of Tilos united Greece’s first same-sex couples in a civil ceremony on June 3. The landmark ceremonies, one marrying two women and one marrying two men, produced a circular from Justice Minister Sotiris Hadzigakis to mayors across the country notifying them that such unions are illegal. Not so, said Aliferis, who pointed out that a 1982 family law did not specifically ask for separate genders.

The ceremonies sparked a lawsuit from three people on the island of Lesvos. They wanted to prevent a Greek lesbian group, and by extension lesbian groups elsewhere, from using the word lesbian which, they say, insults their island.

French President Nicolas Sarkozy visited Athens on June 6 - the first French head of state to visit since Francois Mitterrand in 1981 - to discuss the upcoming French presidency. He and Prime Minister Costas Karamanlis signed a joint declaration pledging to strengthen a European defence and security scheme. It was believed that the sale of four French frigates to the Hellenic Navy was sealed. France is also said to be keen to sell its Rafale fighter to Greece, which is in the market for a fourth generation jet.

Fyrom Prime Minister Nikola Gruevski was returned to power on June 1 in a vote favouring his strong nationalistic stance.

July - The Siemens fire spreads

The Athens prosecutor probing the Siemens corruption scandal named Aristeidis Mantas, an aide to Pasok former transport minister Tasos Mantelis, as the author of a note directing 10 million marks from a Siemens slush fund to a Swiss account. Pasok expelled both men, who protested their innocence. Socialist party leader George Papandreou requested a full parliamentary investigation into Siemens. Karamanlis counter-proposed an inter-party committee to make recommendations on campaign finance reform. The opposition rejected that as weak.

The Athens News unveiled on July 25 an internal OTE memorandum detailing the telco’s concern at a possible loss of credibility resulting from its dealings with Siemens. The memo showed that numerous requests for information to Greek and German courts had gone unanswered. It showed that OTE planned to sue Siemens for disclosure.

On the government side, Culture Minister Mihalis Liapis found himself in the line of media fire when a 2005 trip to Germany and Austria he undertook as transport minister was found to have been arranged, and possibly paid for, by Siemens.
Former deputy culture minister Petros Tatoulis strengthened his identity as government gadfly with a July 7 interview to daily Eleftheros Typos, in which he criticised politicians’ ties with business.

Any talk of the political system cleansing itself was dealt a serious credibility challenge on July 23. That is when George Zorbas, the man New Democracy appointed to head a brand new money-laundering agency, testified that the party had undermined him. He accused Supreme Court Chief Prosecutor George Sanidas and Justice Minister Sotiris Hadzigakis of colluding to prevent him from obtaining information on North Asset Management from UK authorities willing to hand it over. North Asset was one of the brokerages involved in the trading of a controversial government bond that ended up in four Greek pension funds, after making party faithful middlemen rich on the way. Zorbas also said the government had illegally locked out of sight his two reports on the bond scandal.

The government added to its flagging popularity on July 31 with an amendment that effectively removed the right of arbitration from workers at some state companies. Unions at the companies have relied on arbitration to give them at least a portion of the annual pay rise they demand. The amendment made it necessary for management to agree to arbitration if the company was not turning a profit.

Education Minister Evripidis Stylianidis unveiled legislation to regulate private colleges on July 15. Among other things, the bill provided that:
  • private colleges had to be licensed by the education ministry on the basis of infrastructure, teaching staff, library size and curriculum
  • they could not carry a foreign franchise without the ministry licence
  • they could not call themselves universities
  • they could not issue recognised degrees
  • colleges would have an annual academic reporting obligation to the education ministry

Private colleges seemed unsure of how to react. On the one hand, their unrecognised status was being confirmed; on the other hand, the ministry was recognising them as educational institutions, and that might pave the way for liberalisation.

The entire bill’s legality would be undermined by an October 23 ruling by the European Court. According to EU law, member states may not validate the qualifications issued by the accredited institutions of another member state. Many of the private colleges operating in Greece are subsidiaries or franchises of EU universities. Another European Court decision would be issued to the same effect on December 4.

Greece brought some form of closure to its poor asylum record on July 11. Interior Minister Prokopis Pavlopoulos followed up on Greece’s poor asylum record with a presidential decree, which incorporated new EU-mandated procedures ahead of other EU members. Among other things, the decree provided that asylum applicants had to be informed of their rights and obligations in their native language, would be guaranteed a personal interview with an interpreter and access to the UNHCR, and would have to be processed within six months.

A committee set up by the interior ministry delivered its recommendations on how to cut red tape in the issuing of residence permits to non-EU nationals. The Central Committee on Streamlining Bureaucracy (KEAD) was set up in 2004.

August - A brutal killing and a tax burden

On August 1, twenty-year-old Australian Doujon Zammit succumbed to his wounds at Errikos Dynan hospital in Athens. He had been beaten by two bouncers outside a Mykonos nightclub three days earlier. It was unclear what had provoked them. His father, Oliver Zammit, donated his son’s heart, kidneys, liver and lungs to at least four people, helping to save and improve the lives of others. The killing sparked a nationwide debate over Greece’s image in the world, and over the kind of tourism its binge-drinking havens are cultivating.

The Council of State, Greece’s top administrative court, ruled in favour of the development ministry in an exclusion of non-EU nationals from street vendor licences in 2006. Hundreds of African vendors had challenged the ministry in court.

A summer bribery scandal erupted in mid-August when shipowner Fotis Manousis testified that he had paid the office of conservative MP Aristotelis Pavlidis a million euros to win a passenger shipping route. Manousis said the recipient of the money in that office was blackmailing him for more. Pavlidis said it was Manousis who was blackmailing him for subsidised routes. It was, after all, Pavlidis who had gone to the prosecutor about the case. The prime minister supported Pavlidis in the matter.

Finance Minister George Alogoskoufis tabled one of his most wide-ranging and controversial bills on August 28. Keen to bolster the 2009 budget, he raised taxes for the self-employed and stock-holders. He pointed out the discrepancy between wage earners’ average declaration of 14,969 euros in 2006 and the average declared earnings of the self-employed - 7,300 euros. “That’s a sure sign of tax evasion,” he said. He stipulated that the self-employed would lose tax-exempt status on the first 10,500 euros of earnings, and pay 10 percent.

A 10 percent tax was also levied on stock dividends and on the sale of stocks earned as options and then sold on the market. In a measure that also hit at wage-earners and pensioners, the bill raised road tax on cars by 20 percent. The government hoped to raise 1.1 billion euros from the three measures.

The tax hikes demonstrated clear frustration on Alogoskoufis’ part, who has been unable to meet projected budget revenues while in office.

In a countermeasure, the government said income tax would go down to 20 percent from 25 percent over five years. In doing so, it was building on a credible base. When New Democracy came to power, it reduced corporate and then personal income tax from 35 percent to 25 percent over three years.

A Kapa Research poll taken during the tax announcements and published on August 31 found New Democracy’s lead narrowed to 1.2 points, down from four points in April.

September - The Vatopaidi malaise crowns an unbelievably bad month for New Democracy

On September 1, Pasok released a video showing questionable goings on during a parliamentary vote to amend the constitution. The video showed a New Democracy ballot counter, MP Constantine Agorastos, stuffing ballots into his pocket. It also showed New Democracy MP Fevronia Patrianakou, who had no official role in the ballot counting, exchanging sheaves of papers with Agorastos.

Patrianakou denied she handed Agorastos Ballots. The media happily chewed on the story for about 48 hours, but ultimately no one lost their seat. Even if fraud had been committed, it would not have changed the outcome of the vote, New Democracy and Pasok agreed.

Prime Minister Costas Karamanlis gave his annual keynote speech to the Thessaloniki International Fair on September 6. The mood had already been set by August’s tax bill. Karamanlis said there would be no handouts because of budget constraints. A Metron Analysis poll released on September 15 found that two-thirds of Greeks had a “poor view” of the prime minister’s comments.

Making matters worse, socialist leader George Papandreou delivered a highly acclaimed speech at the TIF a week later. He hit a nerve with his emphasis on transparency, accountability and meritocracy - the areas in which New Democracy had promised to make the country excel when it won power in 2004. He also promised a series of handouts and a revocation of the unpopular August tax hike.

The government suffered another storm in the second week of September, when Education Minister Evripidis Stylianidis effectively locked 43,000 pre-schoolers. A lightning change to the licensing rules of daycare centres on August 28 meant that thousands of private centres were unlicensed for five-year-olds with almost no notice.

The worst was yet to come, however. Supreme Court Prosecutor George Sanidas launched a probe into what he declared to be highly questionable dealings between the government and Vatopaidi Monastery.

In a 17-page legal opinion, Sanidas questioned the recognition of Vatopaidi’s title to 2,500 hectares of land surrounding Lake Vistonida in eastern Macedonia. He called attention to a 2000 decision by the Legal Council of State that denied Vatopaidi ownership of Vistonida. He also questioned the exchange of that land with prime properties in Attica and Halkidiki. State assessors seemed to have vastly underestimated the value of land Vatopaidi was receiving. A 3,300-hectare parcel in Attica’s Kato Souli, for example, valued at about 10 million euros, was awarded a value of 1.4 million euros in the exchange.

The Association of Greek Archaeologists added a cherry to the cake on September 22, when they announced that one of the tracts given to Vatopaidi was an archaeological site in Ramnous, eastern Attica. Another bit of land was part of the ancient Lavrion silver mines. Yet a third was a designated Byzantine site in Ouranoupolis.

The land exchanges were made possible by a 2005 ministerial decision by then agriculture minister Evangelos Basiakos, and countersigned by then deputy finance minister Petros Doukas.

Also implicated was a third New Democracy cadre, Merchant Marine Minister George Voulgarakis, whose wife, Katerina Peleki, acted as notary public to the land exchanges. Even more unfittingly, her father and brother acted as legal counsel for the government. Voulgarakis resigned on September 12.

Last but not least, in a GPO poll released on September 16, 63 percent of Greeks thought government spokesman Thodoris Roussopoulos was morally implicated, because of his close ties to Vatopaidi Monastery. Roussopoulos readily admitted that its abbot, Efraim, was his confessor, but denied any extra-spiritual dealings.

New Democracy was then thoroughly disgraced on September 22, when former minister and aide to Prime Minister Costas Karamanlis Yannis Kefaloyannis was convicted in a Rethymno court of attempting to harbour a criminal. Kefaloyannis was accused of asking two policemen to alter their testimony in 2003 so that a constituent could avoid conviction for drug offenses. Kefaloyannis was suspended as an aide the following day.

Three polls published on September 21, before the Kefaloyannis conviction, gave the sum of the government’s loss of credibility. For the first time since it lost power in 2004, Pasok was shown to lead New Democracy by between less than a point and two points. The poll results would signal the pattern for the rest of the year. They ran as follows:
  • Opinion (for To Vima): New Democracy 27.1 percent, Pasok 29.7 percent.
  • MRB (for Eleftheros Typos): New Democracy 26.8 percent, Pasok 27.9 percent.
  • ALCO (for Proto Thema): New Democracy 26.1 percent, Pasok 28.1 percent.
  • One poll alone, by Rass (for To Paron), maintained a slim majority of 0.6 percent for New Democracy.
On September 29, a day after a GPO opinion poll also gave Pasok a 1.2 point lead, Karamanlis sacked Drama MP Stavros Dailakis for disobeying a gag order. That brought New Democracy back to a 151-seat majority (it had, during the year, restored the disgraced Costas Koukodimos).

October - The credit crunch strikes Greece

The credit crunch became real for the Greeks after months of being told that the Greek economy’s parochialism and its refusal to dabble in subprime products rendered it relatively safe. Greeks began to get nervous about the safety of their bank deposits. The government announced on October 6 that it would guarantee all deposits, becoming the second EU member after Ireland to do so. The following day, the state bound itself legally to guarantee deposits up to 100,000 euros, five times the normal legal guarantee offered by banks.

Bank of Greece governor George Provopoulos rushed to assure the public that the move was largely psychological, and that banks were not in danger. But banks were being affected in three ways: they were suffering a rise in nonperforming loans, the interbank lending system was freezing up and raising their cost of borrowing, and the international crisis was causing institutional investors to pull out of their stocks, sending their value tumbling.

Finance Minister George Alogoskoufis unveiled a bank bailout scheme on October 15, in line with what other European governments were announcing. He offered 15 billion euros in loan guarantees and five billion euros in capital injections to banks. He also authorised the Bank of Greece to sell eight billion euros’ worth of bonds to prop up banks if the government money should prove insufficient.

The catch for bankers was that the state aid would come at the price of selling the government shares and a seat on the board. Bankers, deregulated only in the late 1980s and early 1990s, were wary of the terms of the aid. Some larger bankers also resented the potential in the aid package to help small banks avoid being bought out.

They were also loath to touch it in case it should tarnish their bank as insecure.

Marfin led the charge with a refusal to touch the money. National Bank of Greece followed. Eurobank executives made noises about doing the same. A seminal interview with one of Greek banking’s most respected figures, Alpha chairman Yannis Kostopoulos, seemed to sober the atmosphere. He said it was clear that everyone had to take the money. The month ended with a return to the Vatopaidi theme. 

Karamanlis accepted the resignation of government spokesman Thodoris Roussopoulos on October 23. Although his name appeared nowhere on the land exchange documents, the perception was ineradicable that he had godfathered the deal. In an acidic speech to parliament the previous day, he accused Pasok leader George Papandreou of attacking the government with lies because he was too incompetent a politician to formulate a position of his own.

Rounding up a dreadful week for the government, parliament voted in a committee of inquiry into the Vatopaidi scandal on October 24. The committee was empowered to depose witnesses and ask for classified information, but it was preferable to Pasok’s idea of a full-blown parliamentary criminal investigation, which would have the judicial power to prosecute.

The combination of the Vatopaidi scandal and the economic crisis proved too much for New Democracy’s approval ratings. For the first time in a decade, an opinion poll showed more voters expecting a Pasok victory than a New Democracy one (44 percent to 37.7 percent according to the Metron Analysis poll, which aired on Antenna TV.)

November - Gloomy predictions for the Greek economy

The European Commission’s predictions for the Greek economy, unveiled on November 3, were less rosy than the government’s. It foresaw the slowest rate of economic growth in 12 years, and a rise in unemployment for the first time since 2004, to 9.2 percent in 2009 (from 8.3 percent in 2007).

The commission did not seem to believe that Greece had the budgetary resources to stimulate the economy. Greece’s 2007 budget deficit of 3.5 percent left its economy “fragile”, the commission said.

On November 21, Finance Minister George Alogoskoufis unveiled the 2009 budget. Its 2.7 percent growth prediction and forecast 2.0 percent budget deficit were seen by domestic analysts and international monitors as optimistic.

Prime Minister Costas Karamanlis sacked an MP for the third time in the year. Former culture minister Petros Tatoulis found himself an independent on November 10, after national daily Ethnos published an interview in which he criticised the government for failing to crack down on corruption. Tatoulis had become an increasingly vocal critic after the Zahopoulos scandal.

December - The young vent frustration - but whose?

Testimony emerging from the parliamentary committee of inquiry into the Vatopaidi scandal seemed to deepen it. For instance, Vatopaidi’s financial advisor revealed that the monastery was a partner in some of the development companies that bought tracts of land it had sold. Vatopaidi-owned Rassadel is a 30 percent stakeholder in Anthemias, the company building Thessaloniki homes on land exchanged for Vistonida and subsequently bought from Vatopaidi.

The inquiry also revealed how frail was the ministers’ defence. Former agriculture minister Savvas Tsitouridis blamed the transactions on his deputy, Evangelos Basiakos. Former labour minister Vasilis Magginas blamed his predecessor, Tsitouridis.

The committee would wind up its work on December 15, submitting one report for each of the five parties in parliament. They broadly blamed the same ministers: Theodoros Roussopoulos because of his seniority; Evangelos Basiakos and Petros Doukas for signing the land exchanges; George Voulgarakis who, as culture minister, should have prevented the exchange of archaeologically sensitive land; and former deputy agriculture minister Alexandros Kontos, who ordered a list of properties for exchange purposes.

But the biggest story to come out of Greece in 2008 was the December 6 shooting death of a teenager and the riots that followed it. Two Special Guards elite policemen testified that they fired a service revolver in the air to frighten Alexis Grigoropoulos and about 30 friends, because they were acting in a threatening manner. The bullet ricocheted into Grigoropoulos’ chest, they said.

News of the shooting, which took place in the anarchic downtown neighbourhood of Exarheia, created a wave of protests throughout central Athens for the following week. Thousands of youths, some wearing balaclavas or scarves to hide their faces, torched cars, shops and banks. None seemed to believe the police story. When interviewed, they said they believed the police murdered Grigoropoulos in cold blood.

The disturbances, originally centred on the campuses of the Athens Polytechnic and Athens Economics University, quickly spread to Syntagma and - in milder form - other neighbourhoods. More alarmingly, they also spread to most major towns in Greece. Miraculously, there were no serious injuries until December 18, when a protester was said to have been shot in the hand. Police did not release concentrated figures for damage caused, but the government pledged a 10,000 euro subsidy and a suspension from tax and social security obligations to businesses that had suffered. At least four buildings in downtown Athens were torched, and hundreds of shops and cars were estimated to have been destroyed or damaged. Police arrested over 100 people for looting.

Opinion polls found that large majorities blamed the government and the police for their handling of the crisis.

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