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12/14/2009

But no one knows if this would be sufficient, or if even these measures would come too late. Greece is up to its ears in debt -- not only to its bondholders, but first and foremost to foreign companies.

One of these is the ThyssenKrupp subsidiary HDW, which specializes in building submarines. On April 22, 2004 Evangelia Vassiliki, a descendent of freedom fighter Dimitrios Papanikolis, launched a high-tech vessel with fuel cell drive technology named after the naval hero who fought the Turks in the Greek War of Independence. Ever since then the sub has remained moored in the port of the German city of Kiel. The Greeks never paid for it.

The Greek state owes HDW over €550 million ($806 million). These outstanding accounts also concern three additional submarines of the same type built in Greece. The government in Athens refuses to certify the vessel in Kiel, and since they lack official permits, the three subs anchored in Athens cannot even be taken out on test runs.

Delaying Tactics

At the German Ministry of Economics, officials who are monitoring the situation say that the Greeks' delaying tactics are designed to doctor the numbers. In March 2006, the EU introduced more detailed accounting rules. According to the new regulations, expenditures for military equipment only become budget entries when the deliveries have been technically certified.

As long as the Greeks refuse to issue certifications, they can keep practically the entire volume of orders out of their official deficit statistics. This concerns not only the outstanding amount of €550 million, but also the sum of €1.5 billion, which has already been financed and disbursed.

German defense contractor Krauss-Maffei Wegmann is also still owed just over €300 million on an order of 170 Leopard tanks. All of the military hardware has been delivered, but a few dozen tanks are still waiting for technical certification.

It's a similar story with the Eurocopter. The Greeks have ordered 20 NH90 helicopters from the German subsidiary of the European aerospace and defense giant EADS, but not paid for them all. The company says negotiations are continuing. The Americans have had similar problems with Hercules aircraft and Apache helicopters.

'At the Mercy of the Greeks'

But it's not just in the defense sector that companies have trouble getting the Greeks to pay their bills. In the health sector Greece's outstanding payments are enormous. A few weeks ago, the European umbrella organization for the pharmaceutical industry informed its members of the appalling backlog of payments from Greek government agencies. The organization said that in late 2008 Greece owed €2.7 billion just for drugs and medications.

"We are completely at the mercy of the Greeks," says a Berlin pharmaceutical lobbyist, "because the deliveries cannot simply be canceled. People's lives depend on them. It's not like with cars where you can say: If you don't pay we just won't deliver."

The situation is very similar when it comes to medical instruments, an area where Greek government agencies owe European manufacturers €5.2 billion. And the numbers keep growing. In 2008, in the pharmaceutical industry, the amount of money owed was 40 percent larger than the previous year.

Meanwhile, the EU has discovered that it takes an average of 165 days for the Greek government to pay its bills -- and that number is rising, too. Barbara Weiler, a Social Democrat (SPD) in the European Parliament, is very concerned about this development. She is the rapporteur to the European Parliament on guidelines for combating late payments in commercial transactions. "The Greeks are in this respect the worst," she says.

The German government is aware of the outstanding payments. "It's simply not right that our companies are operating with government subsidized programs to reduce working hours because the Greek government has not paid for products that were delivered long ago," complains a high-ranking official in the Economics Ministry.

In view of this burden to the German economy, ministerial officials all agree that if Greece is to receive aid payments, prior guarantees must be obtained that the Greeks will pay off their debts to German companies.

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• Part 1: Should the EU Save Athens from Bankruptcy?
• Part 2: Up to Its Ears in Debt