Greece debt crisis: Tsipras facing eurozone deal revolt

July 15, 2015 – 30 minutes ago

Greek MPs are debating tough economic measures they must approve by the end of the day in order for an €86bn eurozone bailout deal to go ahead.

The new legislation includes tax rises and an increase in the retirement age.

As debate continued, protesters threw petrol bombs at police during an anti-austerity protest close to parliament, and police responded with tear gas.

PM Alexis Tsipras has said he does not believe in the deal, but has urged MPs to agree to the measures.

The vote is expected to pass with opposition help, despite a revolt from some hardliners in the ruling left-wing Syriza party.

Pro-European opposition parties have pledged to vote for the measures.

Hardliners in the ruling left-wing Syriza party are likely to vote against, and the junior coalition party has offered only limited support.

“If I don’t have your support it will be hard for me to remain as prime minister,” Mr Tsipras has told his MPs, as government estimates suggest between 30 and 40 will oppose the measures.

Opponents of the deal took to the streets of Athens ahead of the vote, and unions and trade associations representing civil servants, municipal workers and pharmacy owners held strike action.

More than half of the members of Syriza’s central committee have signed a statement condemning the bailout agreement, describing it as a coup against their nation by European leaders.

The possible bailout was agreed in Brussels on Monday by eurozone members, though one of Greece’s creditors, the International Monetary Fund (IMF), has suggested in a report that it does not go far enough – and that Greece will need some of its debts to be written off.

Greece’s economy has shrunk by 25% in the last five years amid austerity measures designed to curtail its ballooning public sector debt.

In order to begin negotiations over a third bailout worth €86bn (£61bn; $95bn) over three years, Greek MPs need to approve measures including:

  • The ratification of the eurozone summit statement
  • VAT changes including a top rate of 23% to take in processed food and restaurants and; a 13% rate to cover fresh food, energy bills, water and hotel stays; and a 6% rate for medicines and books
  • The abolition of the VAT discount of 30% for Greek islands
  • A corporation tax rise from 26% to 29% for small companies
  • A luxury tax rise on big cars, boats and swimming pools
  • And end to early retirement by 2022 and a retirement age increase to 67

Monday’s announcement of a possible deal was met with anger among many in Greece, who called it a “humiliation”.

The Greek constitution states that a government must have a majority – 151 seats out of 300.

But if it loses a vote, the government can still function in a minority capacity as long as the opposition does not call a vote of confidence and as long as the numbers don’t fall below 121.

The number of anti-bailout MPs is known to be at least 30 within Syriza’s 162-seat coalition.

The question is whether there will be more than 41.

If the numbers go below 121, Prime Minister Alexis Tsipras’s government will be severely damaged and will likely look to opposition parties to join a national unity government.

Mr Tsipras has said he does not believe in the deal, though he agreed to it.

In a television address on Tuesday, he called the proposals “irrational” but said he was willing to implement them to “avoid disaster for the country” and the collapse of the banks.

As parliamentary committees considered the details of the laws, Deputy Finance Minister and Syriza member Nadia Valavani announced her resignation, saying: “I’m not going to vote for this amendment, and this means I cannot stay in the government.”

And tempers flared when former Finance Minister Yanis Varoufakis was heckled with shouts of “You got us here” while addressing one committee.

The jeers came when he said he doubted the deal could work, and compared it to the conditions imposed on Germany in the Treaty of Versailles after World War One.

Meanwhile, French MPs have overwhelmingly backed the Greek bailout deal. Because of their constitutions, several eurozone members, including Germany, must ratify the deal in their parliaments before it can proceed.

Banks stay shut

Greece faces an immediate cash crisis. Banks have been shut since 29 June.

Mr Tsipras has warned banks are unlikely to reopen until the bailout deal is ratified, and this could take another month.

The European Commission has formally proposed a short-term €7bn loan for Greece through the EU-wide European Financial Stability Mechanism (EFSM).

Use of the EFSM for eurozone rescues has been opposed by Britain and other countries which are not part of the euro but are European Union members.

One British official in Brussels told the BBC the UK government had no objection in principle to the use of the EFSM – as long as British taxpayers’ money was ring-fenced from any liability.

Valdis Dombrovskis, a senior European Commission official, said it was working to protect non-euro states from any negative financial consequences should the loan not be repaid.

‘Need for debt help’

The IMF report was written before the eurozone reached a deal with Greece in the early hours of Monday. It was shared with eurozone leaders in advance, but made public only on Tuesday.

It predicts that, in two years’ time, Greek debt will reach close to 200% of GDP (national income) which could “only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far”.

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It recommends a “very dramatic extension” on the maturity of Greece’s debts, “with grace periods of, say, 30 years on the entire stock of European debt”.

“Other options,” it says, “include explicit annual transfers to the Greek budget or deep upfront haircuts (debt write-offs)”.

Germany, the largest contributor to Greek rescue funds, and a number of other eurozone countries have long resisted any talk of haircuts and debt relief.

The European Commission published its own assessment on Wednesday, taking a more optimistic view of Greece’s debt sustainability than the IMF but also suggesting debt relief.

The Commission’s report says rescheduling the debt is possible, but only if Greece implements the reforms being demanded by its creditors. It rules out debt write-offs.

Analysis – by Chris Morris, BBC News, Brussels

The IMF report highlights a massive flaw in the deal hammered out so painfully between Greece and the rest of the eurozone: the numbers don’t add up.

It believes that without a restructuring of the Greek debt, it will keep on rising.

But the point about this deal is – once again in the eurozone, it was a case of politics trumping economics.

The desire to keep the eurozone together was stronger (for now) than the economic forces threatening to pull it apart.

There was plenty of talk about debt restructuring during the negotiating process, but not on the scale that the IMF is suggesting.

Officially, there will be a discussion of restructuring only after a first review of the new bailout is successfully concluded.

That is several months down the line.

But, while the IMF report doesn’t comment directly on Monday’s deal (because the report had already been written by then), it certainly implies that the IMF may feel it is unable to take part in the new bailout programme for Greece.

And that would leave a large hole – both in terms of numbers and political credibility.

Greek crisis will shake IMF

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Nazi Extortion: Study Sheds New Light on Forced Greek Loans

NS-Massaker 1944 im griechischen Distomo

Is Germany liable to Athens for loans the Nazis forced the Greek central bank to provide during World War II? A new study in Greece could increase the pressure on Berlin to pay up.

 

Is Germany liable to Athens for loans the Nazis forced the Greek central bank to provide during World War II?

YES! And an apology to the people of Greece for their suffering during Nazi occupation and FORCED GREEK LOANS!

Published by Spiegel Online International

 By , Katrin Kuntz and Walter Mayr

Loukas Zisis, the deputy mayor of Distomo, a village nestled in the hills about a two hour drive from Athens, says he thinks about the Germans every day. On June 10, 1944, the Germans massacred 218 people in Distomo, including dozens of children. Zisis, who is just 48 years old, wasn’t yet born at the time of the attack.

The massacre, which continues to shape the place today, was one of the most brutal crimes committed by the Nazis in Greece, with the carnage lasting several hours. For decades, a trial over the massacre wound its way through the courts at all levels in Greece and Germany. Greece’s highest court, the Areopag, ruled in 2000 that Germany must pay damages to Distomo’s bereaved.

“But we are still waiting,” says Zisis. “There has been no compensation.”

Last week in Greek parliament, Greek Prime Minister Alexis Tsipras demanded German reparations payments, indirectly linking them to the current situation in Greece. “After the reunification of Germany in 1990, the legal and political conditions were created for this issue to be solved,” Tsipras said. “But since then, German governments chose silence, legal tricks and delay. And I wonder, because there is a lot of talk at the European level these days about moral issues: Is this stance moral?”

Tspras was essentially countering German allegations that Greece lives beyond its means with the biggest counteraccusation possible: German guilt. Leaving aside the connection drawn by Tsipras, which many consider to be inappropriate, there are many arguments to support the Greek view. SPIEGEL itself reported in February that former Chancellor Helmut Kohl used tricks in 1990 in order to avoid having to pay reparations.

A study conducted by the Greek Finance Ministry, commissioned way back in 2012 by a previous government, has now been completed and contains new facts. The 194-page document has been obtained by SPIEGEL.

Outstanding German Debt

The central question in the report is that of forced loans the Nazi occupiers extorted from the Greek central bank beginning in 1941. Should requests for repayment of those loans be classified as reparation demands — demands that may have been forfeited with the Two-Plus-Four Treaty of 1990? Or is it a genuine loan that must be paid back? The expert commission analyzed contracts and agreements from the time of the occupation as well as receipts, remittance slips and bank statements.

They found that the forced loans do not fit into the category of classical war reparations. The commission calculated the outstanding German “debt” to the Greek central bank and came to a total sum of $12.8 billion as of December 2014, which would amount to about €11 billion.

As such, at issue between Germany and Greece is no longer just the question as to whether the 115 million deutsche marks paid to the Greek government from 1961 onwards for its peoples’ suffering during the occupation sufficed as legal compensation for the massacres like those in the villages of Distomo and Kalavrita. Now the key issue is whether the successor to the German Reich, the Federal Republic of Germany, is responsible for paying back loans extorted by the Nazi occupiers. There’s some evidence to indicate that this may be the case.

In terms of the amount of the loan debt, the Greek auditors have come to almost the same findings as those of the Nazis’ bookkeepers shortly before the end of the war. Hitler’s auditors estimated 26 days before the war’s end that the “outstanding debt” the Reich owed to Greece at 476 million Reichsmarks.

Auditors in Athens calculated an “open credit line” for the same period of time of around $213 million. They assumed a dollar exchange rate to the Reichsmark of 2:1 and applied an interest escalation clause accepted by the German occupiers that would result in a value of more than €11 billion today.

‘No Ifs or Buts’

This outstanding debt has to be paid back “with no ifs or buts,” says German historian Hagen Fleischer in Athens, who knows the relevant files better than anyone else. Even before the new report, he located numerous documents that prove without any doubt, he believes, the character of forced loans. Nazi officials noted on March 20, 1944, for example, that the “Reich’s debt” to Athens had totaled 1,068 billion drachmas as of December 31 of the previous year.

Forced loans as war debt pervade all the German files,says Fleischer, who is a professor of modern history at the University of Athens. He has lived in Athens since 1977 and has since obtained Greek citizenship. He says that files from postwar German authorities about questions of war debt “shocked” him far more than the war documents on atrocities and suffering.

In them, he says German diplomats use the vocabulary of the National Socialists to discuss reparations issues, speaking of a “final solution for so-called war crimes problems,” or stating that it was high time for a “liquidation of memory.” He says it was in this spirit that compensation payments were also constantly refused. Fleischer had long been accused of bias and he says he is now pleased to have support from Athens — particularly given that the present study has nothing to do with Prime Minister Alexis Tsipras’ Syriza government.

When work on the study first began in early 2012, the cabinet of independent Prime Minister Loukas Papademos still governed in Athens. A former vice president of the European Central Bank, Papademos formed a six-month transition government after Georgios Papandreou resigned. In April 2014, the successor government of conservative Prime Minister Antonis Samaras decided to continue work on the study and appointed Panagiotis Karakousis to lead the team of experts. The longtime general director of the Finance Ministry was considered to be politically unobjectionable.

50,000 Pages of Documents

Karakousis spent five months reading 50,000 pages of original documents from the central bank’s archives. It wasn’t easy reading. The study calculates right down to the gram the amount of gold plundered from private households, especially those of Greek Jews: 7,358.0014 kilograms of pure gold with an equivalent value today of around €235 million. It also notes also how German troops, as they pulled out, quickly took along “the entire cash reserves from branch offices and regional branches” of the central bank: Exactly 634,962,691,995,162 drachmas in notes and coins, which would total about €40 million today.

Above all, the study, with some reservations, provides clarity about the forced loans. “No reasonable person can now doubt that these loans existed and that the repayment remains open,” says Karakousis.

This history of the loans began in April 1941, after the German troops rushed to assist their Italian allies and occupied Greece. In order to provide their troops with provisions, the German occupiers demanded reimbursement for their expenses, the so-called occupation costs. It’s a cynical requirement, but one that became standard practice after the 1907 Hague Convention.

Out of the ordinary, though, was the Wehrmacht requirement that the Greeks finance the provision of its troops on other fronts — in the Balkans, in Russia or in North Africa — despite Hague Convention rules forbidding such a practice. Initially, the German occupiers demanded 25 million Reichsmarks per month from the government in Athens, around 1.5 billion drachmas. But the amount they actually took was considerably higher. The expert commission determined that payments made by the Greek central bank between August and December 1941 totaled 12 billion rather than 7 billion drachmas.

‘Unlimited Sums in the Form of Loans’

With their economy laid to waste, the Greeks soon began pushing for reductions. At a conference in Rome, the Germans and Italians decided on March 14, 1942 to halve their occupation costs to 750 million drachmas each. But the study claims that Hitler’s deputies demanded “unlimited sums in the form of loans.” Whatever the Germans collected over and above the 750 million would be “credited to the Greek government,” a German official noted in 1942.

The sums of the forced loans were up to 10 times as high as the occupation costs. During the first half of 1942, they totaled 43.4 billion drachmas, whereas only 4.5 billion for the provision of troops was due.

A number of installment payments, which Athens began pressing for in March 1943, serve to verify the nature of the loans. Historian Fleischer also found records relating to around two dozen payment installments. For example, the payment office of the Special Operations Southeast was instructed on October 6, 1944 to pay, inflation adjusted, an incredible sum of 300 billion drachma to the Greek government and to book it as “repayment.”

Debts Have to Be Paid Back’

In Fleischer’s opinion, the report makes unequivocally clear that the Greek demands do not relate to reparations for wartime injustices that could serve as a precedent for other countries. “One can negotiate reparations politically,” Fleischer says. “Debts have to be paid back — even between friends.”

Postwar Greek governments sought repayment early on. The German ambassador confirmed on October 15, 1966, for example, that the Greeks had already come knocking “over an alleged claim.”

On November 10, 1995, then Prime Minister Andreas Papandreou proposed the opening of talks aimed at a settlement of the “German debts to Greece.” He proposed that “every category of these claims would be examined separately.” Papandreous’ effort ultimately didn’t lead anywhere.

So what happens now? What should become of this new study, the contents of which had remained secret before now?

“I am not a politician,” says Karakousis, “I’ve just done my duty.”

But the question also remains whether the surviving relatives of the victims of Distomo will ever be provided with justice — and whether there are similar cases in other countries.

German lawyer Joachim Lau, whose law firm is based in Florence, Italy, represents the interests of village residents of Distomo even today. Lau, born in Stuttgart, a white-haired man of almost 70, is fighting for compensation in the name of the Greek and Italian victims of the Nazis. “I am disappointed by the manner in which Germany is dealing with this question,” he says. He says it’s not just an issue of financial compensation. More than anything, it is one of justice.

Careless Statements

In February, Lau warned German President Joachim Gauck in an open letter against propagating the “violation of international law” with careless statements about the reparations issue. In his view, the legal situation is clear: Greek and Italian citizens and their relatives affected by “shootings, massacres by the Wehrmacht, by deportations or forced labor illegal under international law” have the right to individual claims.

For the past decade, Lau has been pursuing the claims of the Distomo victims in Italy. The Court of Cassation in Rome affirmed in 2008 that the claims were legitimate and that he could pursue the case. Earlier, the lawyer had already succeeded in securing Villa Vigoni, a palatial estate on the shore of Lake Como owned by Germany — and used by a private German association focused on promoting German-Italian relations — as collateral for the suit. In 2009, Lau succeeded in having €51 million in claims made by Deutsche Bahn against Italian state railway Trenitalia seized. On Tuesday, the high court in Rome is expected to rule on the lifting of the enforcement order.

Following a ruling made by Italy’s Constitutional Court in October 2014, private suits in Italy against Germany have been possible again. One of the justices who issued the ruling is the current president of Italy, Sergio Mattarella.

It remains unclear whether this ruling will unleash “a wave of new proceedings” in Italy, says Lau, who currently represents 150 cases, including various class-action lawsuits.

Present and Past, Guilt and Anger

Everything connects in the mountain village of Distoma — the present and past, guilt and anger, the Greek demands on Germany today and past calls for reparations. Efrosyni Perganda sits in the well-heated living room of her home. The diminutive woman, 91 years of age, has alert eyes and wears a black dress. She survived the massacre perpetrated by the Germans at Distomo and she’s one of the few witnesses still alive in the village.

The bones of victims of the Nazi killings in Distomo are features as part of the village's memorial to the massacre. Zoom

Bernhard Riedmann / Der SPIEGEL

The bones of victims of the Nazi killings in Distomo are features as part of the village’s memorial to the massacre.

When the SS company undertook a so-called act of atonement in Distomo following a fight with Greek partisans, the soldiers also captured her husband. Efrosyni Perganda stood by with her baby as they took him. She never saw him again.

As the Germans began to rampage, she hid behind the bathroom door and later behind the living room door of the house in which she still lives today. She held her baby tightly against her chest. “I forgive my husband’s murderers,” she says.

Loukas Zisis, the deputy mayor, silently leaves the house as the woman finishes telling her story. He needs a break and heads over to the tavern, where he orders a glass of wine. “I admire Germany: Marx, Engels, Nietzsche,” he says. “The prosperity. The degree to which society is organized. But here in the village, we aren’t finding peace because the German state isn’t settling its debt.”

Zisis admires Germany, but the country remains incomprehensible to him. “We haven’t even heard a single apology so far,” he says once again. “That has to do with Germany’s position in Europe.” This is something that he just doesn’t understand, he says.