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Euro under Threat: Culture of Corruption Drags Greece Down

By Ferry Batzoglou and Clemens Höges

The Greek government has pushed the country to the brink of national bankruptcy, threatening the whole euro zone as a result. But the elite believes that other members of the EU's currency union will pay up -- despite widespread inefficiency and corruption.

Riot policemen march next to a pile of garbage during a trash collectors strike in Athens. Zoom
DPA

Riot policemen march next to a pile of garbage during a trash collectors strike in Athens.

Ali Sakiroglou and the other sailors in Greece's large commercial fleet have kept their country afloat for many years. But now Sakiroglu can't even help himself, as he sits in his below-deck cabin on the Captain Vasilis, a 2,000-ton freighter. The tiny, 40-square-foot space is sparsely furnished with a bunk, a table and a DVD player.

Sakiroglou presses the start button to watch a German porno film called "Mermaids on the High Seas." He can't understand what the actors are saying, but that doesn't matter. A heavy rain pelts down on the porthole. The ship has been docked at Elefsina, near Athens for a long time. Sakiroglou offers us schnapps from a plastic bottle with a handwritten price on it, indicating that it was probably purchased on the black market, tax-free. These days, who in his right mind pays taxes in a country like Greece?

Photo Gallery

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Photo Gallery: Greek Woes

Sakiroglou, 53, has a wife and six children in northern Greece, where there are many Greek Muslims. Before the financial crisis, the Captain Vasilis shuttled back and forth between the mainland and places like the Cyclades Islands, carrying cement. There was plenty to do and Sakiroglou, earning a monthly pay of €2,200 ($3,150), could afford to visit his wife. There were government construction projects and developers were building hotels, many at an obsessive pace. And everything was being done with borrowed money.

Nowadays no one can afford to buy cement and the ship is usually at dock, where Sakiroglou works as a security guard, earning only €900 a month. And unless the ship gets a new cargo in the next few days, he will probably even lose his current job. Ironically, he has only two years left before qualifying for retirement benefits. "Greece is finished," he says. "Who knows what will happen to my pension?"

When the global economy began to falter, triggered by bankers in New York and London, the cement shipments stopped. But this only highlighted the fact that Greece has little else but tourism and its commercial fleet with which to earn hard currency in international markets. Tax revenues declined sharply, and the government announced that it expected its deficit to be twice as high as initially predicted. But even that initial assumption was twice as high as is permitted under the Maastricht Treaty. The Greeks are now forced to borrow 12.7 percent of their gross domestic product, on top of the €270 billion in debt they have already accumulated.

The financial experts in New York and London reacted immediately. The three main rating agencies -- which rate the creditworthiness of companies and governments worldwide -- downgraded the debt of a euro zone country to "uncertain" for the first time. Moody's moved Greece's government bond ratings to A2 from A1 last week. Then the chief currency expert at the major Swiss bank UBS also advised investors to sell euros, noting that the currency was likely to lose value, partly because of Greece. This, according to the UBS expert, would bring down the euro even further, because "foreign central banks have to assess the risk of a possible collapse of the euro zone."

No Tomorrow

For years, the conservatives and socialists who took turns running the country borrowed as if there were no tomorrow. Through mismanagement and nepotism, they drove their country to the brink of bankruptcy. Citizens, for their part, reacted by engaging in corruption and fraud.

With the euro in place, this sort of situation is no longer merely the problem of a small country with a population of 11 million, but affects all of Europe. A national bankruptcy in a euro country could do tremendous damage to the currency. Moreover, a bailout of the Greek government could trigger a domino effect, with other shaky economies like Italy, Spain and Portugal opting for a "soft landing."

Last week, German Finance Minister Wolfgang Schäuble attempted to bring calm to the situation when he told the tabloid Bild that although Greece has lived "well beyond its means, we cannot pay for the Greeks' mistakes." It was the kind of thing someone says when they know this is precisely what could end up happening.

Before he was elected on Oct. 4, new Greek Prime Minister Georgios Papandreou translated US President Barack Obama's "Change -- Yes, We Can" slogan into Greek. But Papandreou's version was a little more dramatic: "We Must Change -- Or We Will Go Under." On the evening of Dec. 23, he managed to push the most severe austerity budget in recent history through the Greek parliament. The only question is: Will it be enough?

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1. Private property rights are vital.
charlessmyth 12/29/2009
The complication for Greece is that democracy--as in the will of the people, and as expressed at this year's riots--has been employed to literally lead to the logical outcome of democrcay, where the government has been used to destroy everyone's--outside the circle of the elite--rights to private property. So Dina Rovithaki can hardly complain, since she has achieved exactly what she and like-minded others, sought to achieve, but does not like the impact of the outcome. For Greece to have any hope of recovery, the Greeks will have to totally abandon communism, and embrace capitalism and its principles.
2. So what's new?
Clarence De Barrows 12/29/2009
The United States vis-a-vis Greece - same story, different jurisdiction. When will "the people" say enough and take things in hand? As the English philosopher, Herbert Spencer opined, "The ultimate result of shielding men from the effects of folly is to fill the world with fools." It appears there's not too much space left for sanity in either Country!
3. Postmodern pulp
komninos 12/29/2009
Zitat von sysopThe Greek government has pushed the country to the brink of national bankruptcy, threatening the whole euro zone as a result. But the elite believes that other members of the EU's currency union will pay up -- despite widespread inefficiency and corruption. http://www.spiegel.de/international/europe/0,1518,669235,00.html
What a crazy piece. It is quite postmodern pulp First “Sakiroglou”: Ali Sakiroglou and the other sailors in Greece's large commercial fleet have kept their country afloat for many years…..Sakiroglou presses the start button to watch a German porno film called "Mermaids on the High Seas." He can't understand what the actors are saying, but that doesn't matter….Sakiroglou, 53, has a wife and six children in northern Greece, where there are many Greek Muslims…."Greece is finished," he says. "Who knows what will happen to my pension?" Then the ‘Swiss banker” and the collapse of Euro: "Then the chief currency expert at the major Swiss bank UBS also advised investors to sell euros, noting that the currency was likely to lose value, partly because of Greece. This, according to the UBS expert, would bring down the euro even further, because "foreign central banks have to assess the risk of a possible collapse of the euro zone." The Government and corrupted citizens: “conservatives and socialists who took turns running the country borrowed as if there were no tomorrow. Through mismanagement and nepotism, they drove their country to the brink of bankruptcy. Citizens, for their part, reacted by engaging in corruption and fraud.” The wisdom of George Kyrtzos, a schoolmate of prime minister Papandreou back in 1971-- at a private school: “Greece is a feudal society ruled by upper-class families”. Chinese in Piraeus: “Cosco Pacific Ltd., the workers at the port are too expensive for the Chinese, which is why they are to be employed elsewhere, where no one needs them.” Lost schoolteachers: “The Greeks employ about 140,000 teachers…[of which] 18,000 have somehow disappeared into the government bureaucracy -- but no one knows where.” Papadimitriou the Greeks' crisis guru.. sitting in the cafeteria of a publishing house, next to an enormous, gloomy oil painting: “tax evasion is rampant in one third of the entire economy” And finally the Tough Customer: Sorbas 70 years old. By the way: Ferry Batzoglou that wrote the piece probably forgot “Otto Rehagel die Taktik bestimmt und seiner Elf eine "kontrollierte Offensive" verordnet.” (http://www.jurnalo.com/authors/6694?l=d)
4. Another insider's view...
sonical 12/31/2009
I am afraid your reporting and commenting are quite dead on, in contrast to similar articles that surfaced in the (non-financial) UK press, which,in my view, bordered sensationalism. However, to take the point a bit further, one wonders what today's ashtonished EU officials were doing all these years, with the Greek Statistics being accepted at face value. Were the Greeks so cunning, so clever and such geniouses in manipulating the numbers that they had the entire EU fooled for some 28 years? All us Greeks have known that money were been syphoned off all over the place; we just couldn't find the "who" and the exact "how". Thankfully, one case that gave out a few names was the Siemens one; what a strange coincidence it came out of an American Law Firm, just doing their jobs, not the EU gravy train. Your article needs to focus more on opportunity and means, not only on motive, in my opinion.
5. Germany and England needs a corrupted Greece
Desfa 01/03/2010
The article is precise. Yet, an economically healthy Greece is a country were BMW, Siemens, will sell 10 times less than now. Greece is a country of four industries (naval, agricultural, Tourist industry and public service "industry") and nothing else. An example; Germany has a strong car industry and a poor tourist industry. Greece has a poor car industry and a strong tourist industry. Yet, in Germany there are museums, hotels and all the elements of tourist industry while in Greece there is not a single car company to compete Fiat or Wolkswagen in Athens. This has to be changed, if E.U. wants a healthy Greece. And it will. No matter what E.U. wants
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