Tuesday, 23 February 2010

Greece's new witch hunt begins
In December 2004, before they had completed a year in power and just after they had got the Athens Olympics out of the way, the conservatives launched a parliamentary committee of inquiry into socialist defence procurements. The socialists are now doing the same. Last night, the government of Yiorgos Papandreou introduced a motion to launch an inquiry into conservative financial mismanagement over the past six years.

The inquiry is sure to end the vague consensus that has so far existed between government and opposition on the economy. Last week, in expectation of the launching of this inquiry, the conservatives began to distance themselves from government policy by issuing a list of 23 economic development policy points they believe need to be immediately implemented.

Conservative opposition leader Antonis Samaras followed up with a fiery speech on Sunday to his party's congress. He echoed much of the socialist pre-election platform, advocating a new economic revolution on the back of renewable energy, and spoke of releasing the dynamic Greek spirit much as Papandreou had done.

The government's response has been to escalate the tension further. The government spokesman said yesterday that "we realised yet again how much hypocrisy there is in the words of the leadership and members of New Democracy." Deputy Prime Minister Theodoros Pangalos called Samaras' warnings of new humiliation for Greece through the revelations of the committee "nonsense".

These latest exchanges confirm what has been apparent since Papandreou announced his intention to call the inquiry a week ago, that the gloves are off and the domestic political scene will now enshrine the traditional acrimony that has bedevilled any attempt at long-term policymaking in Greece for decades.

See the story in The Irish Times.

Goldman banker critical of Greek transparency, but defends deal
The BBC and Financial Times today generated diametrically opposite headlines from the same story. Goldman Sachs chairman Gerald Corrigan told a UK parliamentary committee of inquiry that Greece's 2001 credit swap was in keeping with standard practice at the time, but that further controls should have been implemented internationally.

The Financial Times led with the banner headline, "Goldman Banker Hits at Athens Swaps". It hangs the title on Corrigan's statement that, “with the benefit of hindsight . . . the standards of transparency could have been and probably should have been higher”.

The BBC billed the story "Goldman defends Greece debt swaps" and led with Corrigan's statement that the swap "was "consistent" with the regulations of the time."


Corrigan was commenting on a swap that took place in 2001 to help defer public deficit after Greece's entry into the eurozone. Goldman Sachs posted the following details of the transaction:
“In December 2000 and in June 2001, Greece entered into new cross-currency swaps and restructured its cross-currency swap portfolio with Goldman Sachs at a historical implied foreign exchange rate,” the statement says. “These transactions reduced Greece’s foreign-denominated debt in euro terms by €2.367bn and, in turn, decreased Greece’s debt as a percentage of [gross domestic product] by just 1.6 per cent, from 105.3 per cent to 103.7 per cent.”

Greece threatens the entire EU project
FT comment by Gideon Rachman: "The risk for Europe now is that if the EU does not move forward politically in response to the Greek crisis, it will move backwards – and the long process of European integration could start to unravel." 

Let the Greeks ruin themselves
The Economist carries out a political analysis of why there is such strong opposition within Germany to further assistance to Greece: "A domestic row over welfare makes charity for foreigners a still more awkward subject. This month the constitutional court ruled that the government had erred in setting benefits for the main welfare programme, called Hartz IV. It has until the end of the year to come up with a new formula, which may cost more money. Guido Westerwelle, the FDP leader, lamented the “late Roman decadence” of a society that treats welfare beneficiaries more generously than workers. His outburst, in turn, annoyed Ms Merkel. “I can’t explain to someone on Hartz IV that we can’t give him a single cent more but that a Greek gets to retire at 63”, said Michael Fuchs, a CDU leader in the Bundestag."



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