My assessment of the Greek Crisis

I will try to be objective.

It will not be difficult for me.

I have never been affiliated with any political party. So far, during the last forty
years I have voted for almost all Greek political parties!1

How it all started

To really figure out how it all started one might need to study History back to
the Middle Ages, go through the Ottoman rule and then through the formation,
in the early 19th century, of the modern Greek State.

Through this walk-through one would identify and understand many

characteristics of the Greek mentality and -very crucial- the attitude of the
Greeks towards "the Government": an attitude of deep mistrust.

Does one really have to go through such an exercise and study centuries of
History?

Well, it would help to a certain point but it is not really necessary.

In fact, one could "jump" directly to the year 1981 when Andreas Papandreou
and the Party he had founded (PASOK) won the elections.

Because, for all practical purposes it all started then.

Andreas Papandreou

Papandreou got elected using a powerful buzzword: "ALLAGI" (ΑΛΛΑΓΗ

meaning CHANGE).

However, during the over 20-year reign of PASOK (1981-2004 with a brief
intermission in 1989 when weak governments tried to rule in awkward ways)
the only "changes" were the elimination of any sense of discipline in the
Public Sector, the introduction and establishment of corruption in all levels of

1 I believe that one should vote in the elections judging every time what is best for the
country. We are of course entitled to judge not only who should rule for the next four years
but also who should not rule or, being angry with what is going on around us, even vote in a
“punishing” way. What we are not entitled –to my humble opinion- is to vote, without thinking
and judging, the same political party as we would vote for our football team, i.e. based on a
preference deeply rooted in our subconscious and inherited from our family, our childhood
memories and prejudices.

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public life2 and the abolishment of moral trust in society (notable example the
election of the President of the Republic Sartzetakis).

During Papandreou’s watch the unions became all-mighty, imposing their will
directly or indirectly and were indeed rewarded by PASOK by having their
leaders “promoted” into the main “political scene” as members of the
Parliament and ministers.

(One could also add the personal morals of Papandreou as, for example, the
revealing of the existence of an extra-marital daughter in Sweden or his
adultery with an Olympic Airways hostess. The morals of a leader definitely
influence the morals of the society he leads).

So, during Andrea Papandreou's rule the Greek society mutated into a selfish,
easy-going, least-effort society. A society that gladly accepted and digested
"double language" from politicians and consequently allowing politicians to
promise whatever came into their mind, both (society and politicians) being
happy not having to take unpleasant measures or make unpleasant decisions
about promises not fulfilled.

The last days of Papandreou, dying in a hospital while refusing to resign from
the premiership ("a Papandreou never resigns" were declaring his inner
circles) plunged the country into incertitude for several weeks.

Costas Simitis

Simitis, the second Prime Minister of PASOK was a pro-European politician

and during his watch Greece became member of the Euro-zone and Cyprus
became a member of the EU. Also during his watch Greece won the Olympics
of 2004.

Simitis has been criticized for allegedly having misrepresented Greece's

financial situation in order to enter the Euro-zone. The matter of the fact is, as
Wikipedia mentions:

"An error frequently made in press reports, is the confusion of the discussion
regarding Greece’s Eurozone entry with the controversy regarding usage of
derivatives’ deals with U.S. Banks by Greece and other Eurozone countries to
artificially reduce their reported budget deficits. A currency swap arranged
with Goldman Sachs allowed Greece to 'hide' 2.8 billion Euros of debt,
however, this affected deficit values after 2001 (when Greece had already
been admitted into the Eurozone) and is not related to Greece’s Eurozone
entry".

2 Andreas Papandreou himself was dragged to the Supreme Court for corruption
charges and was acquitted by one vote.

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This is an important fact to bear in mind when we will discuss the actual crisis,
because it eliminates the argument that the crisis is due partly to the fact that
Greece was unprepared to enter the Euro zone in the first place.

Simitis, supposedly endorsed the ambitious concept of "modernizing" the

Greek society, State and politics. Apparently he was too weak in realizing his
endeavor as he faced fierce opposition from his own Party and of course from
the all-mighty and fully corrupt unions.

Simitis did not embark in real austerity measures and having to organize the
Olympic Games of 2004 borrowed more funds. The very low interest of
borrowing in Euros obviously meant for the Government that loans were "free
money".

His big mistake was to abdicate end of 2003 foreseeing that he would lose the
2004 elections and his even bigger mistake (we will see later why) was to
deliver, upon his departure, PASOK to George Papandreou "son-of-Andreas".

Costas Karamanlis: The first real culprit for today’s crisis.

Karamanlis and his Party "Nea Dimocratia" won the elections of 2004.
Immediately after the Olympic Games in August 2004 the country was -from
the morale point of view- in the best condition ever.

Karamanlis ruled in an absolutely "relaxed" way and became the laugh-stock

of the Press with his lazy attitude and his allegedly meticulous observance of
working hours, watching TV and playing Nintendo (!) computer games.

If Karamanlis was a true visionary leader, now was the moment for him to
address the Greek people and explain the debt situation and promote not only
austerity measures but the promised "Re-founding" (ΕΠΑΝΙΔΡΥΣΗ) of the
State (in the same way Andreas Papandreou had promised ALLAGI).

Karmanlis did the exact opposite: During his watch the Deficit rose to
incredible heights exceeding 15% of the GDP (while the Maastricht limit for
the Euro zone countries was 3% of the GDP). The obvious consequence was
the rise of the (accumulated) Greek Sovereign Debt which exceeded by far
the Maastricht limit of 60% of the GDP.

George Papandreou

With the crisis appearing "ante portas" George Papandreou (leader of PASOK
following the “abdication” of Simitis) usurpated in 2009 the vote of the Greeks
unashamedly shouting to the electorate: "Money is here!" -apparently to be
distributed to the Greeks-("ΛΕΦΤΑ ΥΠΑΡΧΟΥΝ!").

As we all know the crisis started in the U.S. by the collapse of the sub-prime
real estate loans (of course the Enron-Arthur Andersen scandal should have
rung bells as from 2001 but the U.S. and the global "markets" choose to

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pretend nothing was wrong over there). It manifested itself by the collapse of
Lehman Brothers in September 2008.

Greek officials thought that we had nothing to fear, as Greek Banks were not
exposed to the "toxic" products of U.S. markets. What they either missed or
hid was that the Greek Banks, but also European Banks and Greek Social
Welfare Funds, were OVEREXPOSED to the toxic Greek Sovereign Bonds.

Thus the "markets" -scared by the Lehman Bros bankruptcy- started reacting
against the Greek Bonds by raising the interest to the prohibitive value of 6%
and 7% and above.

George Papandreou unable to grasp the message of the Lehman Brothers

collapse, unable to understand what the emerging crisis would mean for
Greece, started his rule committing two unforgivable mistakes:

1. He formed a government composed mostly of inexperienced

young people themselves unable (or not willing) to conceive the
required measures to protect Greece against the upcoming
crisis.
2. He proceeded with distributing salaries increases and handouts
instead of immediately adopting austerity policies that would
pass the message to the markets that Greece was a serious and
trustworthy player.

In a few weeks after he took office George Papandreou was forced to ask for
help from the IMF, EU and the ECB. These institutions provided Greece with
low-interest loans allowing the re-payment of bonds held by the Greek and
most important the European Banks and Funds. If Greece had not been
assisted in this way it would have defaulted with catastrophic results to the
holders of Greek Bonds (no Bank can write-off loans of two-figure Billion
Euros unpunished!).

To grant the new loans, these institutions, (better known since then as the
“Troika” as they acted jointly) asked for austerity and re-structuring programs
to be implemented [the Agreement imposing them better known as the
"Memorandum" MNIMONIO (ΜΝΗΜΟΝΙΟ)].

Unable to “adopt” the Mnimonio as a policy needed to be applied to the

corrupt and inefficient Greek reality Papandreou's government collapsed and
gave its place to a coalition Government led by a technocrat (ex Banker
Loucas Papadimos) who undertook to implement the Mnimonio provisions.

Papadimos' government however was not allowed by the supporting

politicians to continue the implementation of all the Mnimonio provisions.
Soon the Parliement's confidence was practically revoked and elections
proclaimed.

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Elections were won, albeit without ruling majority, by the right wing New
Democracy party led by Antonis Samaras. A three-party (New Democracy -
PASOK - DHMAR) coalition government was formed.

Antonis Samaras

During the George Papandreou rule, Samaras, as the major opposition leader
was a strong opponent of the austerity and restructuring program, i.e. the
Mnimonio.

In fact not only he voted against the approval of Mnimonio in Parliament but
he explicitly promised in his pre-election rally speeches to "tear the Mnimonio
page-by-page".

Our European counterparts conceived his attitude as contrary to the

philosophy of right wing conservative parties and as a further proof that
Greece should not be considered as a trustworthy partner.

Of course, Samaras inherited the assistance program but he, as George

Papandreou before him, also never really adopted it, most of the times trying
to pass the message to the people that he was dragged into its
implementation by the Troika.

Minor restructuring moves were effected (albeit with endless negotiations with
the unions) while no real anti-corruption and tax evasion measures were
taken. Suffice to mention the example of duties lost for the State due to
smuggling of petrol and diesel as well as cigarettes is over 2 Billion Euros
annually. Yet no specific actions were taken, people saying that nobody dares
attacking vested interests.

On the other hand, laws were passed in line with the agreed restructuring
measures but never implemented (!) thus creating a deep mistrust of the
Troika against the Greek government.

Of course some measures were taken as for instance the rationalisation of the
Health System that saved several billion Euros annually, but what really
Greece needed (and still doew need) is deep restructuring reforms.

Europarliament elections of May 2014 brought SYRIZA to the first place and
Samaras' party to the second. Samaras reshuffled his government bringing to
critical ministries politicians known for their populist mentality, politicians not
really esteemed by the center electorate but rather considered as funny
clowns of politics. Frequently invited to TV talk shows, their ministerial
behavior brought nothing to New Democracy.

Samaras declared, at the end of 2014 that Greece was ready and about to
leave the tri-lateral programs, while also delaying or creating obstacles to the
tri-lateral evaluations of the Program.

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This alienated the institutions (the Troika) who in their turn gradually "pulled
the carpet" under Samaras feet by denying any discussion on debt
sustainability and by denying disbursement of funds due to Greece on
summer 2014.

Samaras concluded his suicidal policy by proposing a right-wing politician as

candidate for the Presidential (parliamentary) election of end 2014 and upon
the rejection of his candidacy by the Parliament general elections were
proclaimed for the 25 January 2015.

Alexis Tsipras

Tsipras’ promise to the electorate was "end to austerity" (ΤΕΛΟΣ ΣΤΗ

ΛΙΤΟΤΗΤΑ). He also promised to end the tri-lateral supervision denouncing it
as "colonial".

Tsipras won the elections albeit with no ruling majority and therefore had to
co-operate with one more party. He immediately chose a right-wing nationalist
party, the so called "Independent Greeks" that also had in their agenda the
cancellation of the austerity/reforms Memorandum.

Tsipras appointed as Minister of Economy (ex-officio in charge with the Troika

negotiations) a professor of economics Giannis Varoufakis.

Varoufakis, an admittedly brilliant economist (with a career in Australian and

the Athens universities) but disposing of a selfish, arrogant and flamboyant
personality, tried to convince his European counterparts that Europe is wrong
about its adopted financial policies and kept on lecturing them at the
Eurogroup meetings instead of negotiating for the Greek case and reach a
conclusion.

Varoufakis continued this delaying tactics for more than four (4) months. He
dragged and dragged the so-called negotiations until the European partners
got fed-up and more or less discreetly asked for his replacement. A new
negotiating team was formed and apparently worked more diligently to reach
an agreement with the lenders.

On 25 June 2015 an agreement was almost reached, with one important

issue still pending: The EU proposal included the imposition of a 23% VAT on
hotel rates (catastrophic for the Greek tourist industry). On the night of 25 to
26 June, the EU accepted unofficially a smaller VAT (13%). However, the
Greek government, regretfully pretending not to know the latest (13%)
proposal, withdrew from the negotiations and proclaimed on 26 June 2015 a
referendum to take place on 06 July 2015.

30 June 2015 was the deadline for the EU program to expire (as of course
was well know by everybody).

The expiration of the program meant that:

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I. The remaining assistance funds (EU ECB) could not be disbursed any
more.
II. The existing program could not be extended but, if so decided by all
parties, a new program should be agreed upon following -obviously
lengthy- negotiations.
III. The Greek Banks faced a liquidity problem as considerable amounts
of deposits had left the Greek banks accounts either for accounts abroad
or to be kept at homes. Liquidity would not be taken for granted by the
ECB through the ELA mechanism.

Upon the expiration of the programme (30 June 2015) the SYRIZA
government was forced:

a. To close the Banks as already a mild Bank-run had been going on for
the last weeks [and the Banks remained closed for about three (3) weeks],

b. To close the Athens Stock Exchange (it opened with disastrous fall
~16% on Monday 03 August 2015) and

c. To impose a “capital-control” freezing in practice all Greek Bank

accounts (allowing withdrawals of 60€/day only) forbidding payments abroad,
freezing credit cards abroad etc.

Of course, these latest events are more or less well known as the closing of
the Greek banks, the Referendum and the subsequent full capitulation of
Tsipras during the dramatic negotiations of Brussels have monopolized the
international media.

Conclusion?

Based on the above I will attempt to draw a set of conclusions regarding the
present political situation in Greece.

A First and very general conclusion: It is rather clear that the Greek
electorate is being continuously "cheated" by the Greek politicians in the
sense that for the last 40 years governments neither essentially implemented
their pre-election promises and policies nor took any restructuring measures
but rather act "dragged" by the circumstances especially when they
implemented or tried to implement unpopular measures.

This means that:

On one hand Greeks vote to "punish" rather a Government that did not
"deliver" than to elect a Government that promises a certain policy (since
anyway it will not materialise its promises!).

On the other hand we have the paradox that Greeks, not trusting neither the
pre-election promises of political parties nor the political "framework" (the
political philosophy) of parties believe that at the end, all governments
implement only measures that are acceptable by the electorate.

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A Second again general conclusion is: The grave responsibility of the
political parties during the last forty (40) years does not lie only with the
accumulation of incredibly high amounts of sovereign debt. Their
responsibility mainly lies:

1. With the cultivation and flourishing of a philosophy

claiming that Greeks are somehow entitled to enjoy whatever benefits
were acquired through years of Euro-subsidies and yearly deficits.
2. With the gradual destruction of the main productive pillars
of Greek economy i.e. Agriculture (Greece imports perhaps 85% of
foodstuff), Industry (practically destroyed)3 by using in most counter-
productive way of European Union financial packages (Mediterranean
Programmes, “Delors4” programmes, Structural Funds etc etc).
3. With accepting that corruption is spread and
disseminated in all levels of the Public Admnistration, from Ministers to
coffee-boys, especially in the sector of Tax Authorities, City Planning
(building licenses etc), Public Health (you need to “tip” –generously-
doctors to receive a decent treatment in a foreseeable near future (!).
4. With allowing the Judicial system to delay the hearings of
cases for years, postponing cases almost indefinitely, delaying the
reaching and publication of verdicts for months or years. We are talking
here about “a denial of justice”!

The above lead us to another general conclusion: The present Greek crisis
is not merely a financial crisis but also, if not mainly, a crisis of social and
moral values.

Is there anything to be done? Can things get better?

To my opinion, there is not much that can be done any more.

Financial aspect

The imposed “Capital Control” continues to haunt Greek businesses (imports

of raw materials are practically impossible, incomes from any exports cannot
be freely used etc).

Also the Stock Market continues today, 05 August 2015 to plunge, and
dividends, if any, cannot be freely received by local investors (!).

Based on these two illustrative examples one could easily conclude that
Greeks will not trust the Banks at least for a near to medium term period (I
could risk to estimate 6 to 24 months! Hopefully not longer). I really do not

3 Only Tourism seems to work well nowadays showing an continuous annual

increase, but we must take into account of the political situation in neighbouring and
competitive countries such as Egypt, Turkey, Tunis that somehow make these countries less
attractive to tourists.
4 From the name of President of the European Commission Jacques Delors

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know what kind of Economy we will have (I mean the real, productive
economy) if the Greeks aim at keeping any money they have away from the
Banks and the Stock Market.

Re-structuring measures

So far, not only we have not noticed ANY re-structuring actions (such as fight
tax evasion, fight corruption, fight bureaucracy and so on) but on the contrary
we see a Government that already states (to-day’s speech of the Prime
Minister at the Ministry of Agriculture) that it is “dragged” into applying
measures that the Government itself does not believe into. How can you
convince the people to accept measures that you discredit yourself?

No real measures to fight corruption, no measures to expedite judicial

procedures (how can you fight corruption if a corruption case needs perhaps
three years to reach the courtroom?)5

I do hope that I will be proven to be a pessimist and that the situation in

Greece will improve.

5 The detention awaiting trial period in Greece is 18 months. There have been
several important cases (terrorism, drug dealing) that the detainees were to be set free for
having reached the 18 month period in detention. They obviously fled…

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 APPENDIX

The six months “negotiations” and

the Varoufakis plan “B”.

My own interpretation of what happened during the six months negotiations

with the tragic final Euro-Summit meeting of 12 July 2015:

Months before the elections of 25 January 2015, Varoufakis was campaigning

against the austerity measures adopted by the previous Governments. He
was campaigning in lectures and TV talk shows. Varoufakis belonged to the
inner circle of Tsipras and, together with other personalities of –let us say-
leftist orientation had formed an informal group/team called the “Aegina
group” (Aegina is the well known island near Athens). The name Aegina
group was due to the fact that they met at Varoufakis summer house there,
where, near the swimming pool drinking ouzo and tsipouro they exchanged
ideas on how to save Greece from the “austerity / Mnimonio parties”.

I believe that Varoufakis “seduced” Tsipras with his flamboyant character, his
sound knowledge of Economics and Game Theory.

One of the components of the solution was the exit from the Euro and the
adoption of the Drachma as national currency.

One of the applications in Game Theory is the so called “Chicken Game”

where two opponents are facing each other not yielding either until one yields
(“the chicken”) or are both destroyed6.

I believe that Tsipras indeed agreed that upon winning the elections:

a. Varoufakis would prepare a plan to exit the Eurozone.

b. Varoufakis would follow the “Chicken Game” rules during the
negotiations with the Troika.

So, Varoufakis becomes the Finance Minister and goes to Brussels to

negotiate. Instead of going prepared, with figures and scenarios, he starts
“lecturing” his other 18 colleagues about his visions of Europe and the
Eurozone.

Lectures continue for several weeks and months as if the other 18 ministers
had not “countries to run”, as if Greece (representing the 2% of Europe’s
potential) was in position to change the overall economic policy of Europe (if
not of the rest of the World!).

To realize the arrogance of Varoufakis, when asked by the Press, during the
early stages of the “negotiations”, about not being specific in the Eurogroup

6 https://en.wikipedia.org/wiki/Chicken_(game)

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session about how Greece conceived the future of its economic policy, he
said that he considered his position as a “creative vagueness” thus essentially
admitting (or better: confessing) that he dragged the discussions and had his
18 colleagues/ministers of Finance losing their precious time in meetings just
to listen to him and consequently alienating them.

So it is rather clear that Varoufakis was applying the “Chicken Game” rules
trying to consume the time (until the expiration of the existing programme on
30 June 2015) hoping that the Eurozone members, afraid of the
consequences of Greece leaving the Euro (the “Grexit”) would yield to
Greece’s new policy of leaving the austerity principles.

Nothing of the sort happened. The European Commission had long ago
prepared contingency plans for an eventual Grexit and that was made clear to
the Greek side.

Now let us go to the “Plan B” of Varoufakis about Greece re-adopting the

Drachma. Varoufakis has admitted in public:

[https://www.youtube.com/watch?v=nQrO8fCeZ3U&feature=youtu.be]

that he had formed a team (of about five people including an old friend of his
that in the meantime had been appointed as Secretary General of the Public
Revenues) to secretly work on it. They did produce a kind of plan mainly
consisting of the adoption of a “parallel electronic currency” that needed, in
order to be implemented throughout Greece, that each and every Greek is
assigned a new bank account and through this account to change from Euros
to Drachmas (1 Euro= 1 Drachma).

Tsipras was left with the impression that the Euro-Drachma switch would be
effected seamlessly and “by pressing one button”.

So, when the Referendum of 05 July 2015 resulted, as the Government had
campaigned, to an overwhelming “No” to the austerity (~62%) Tsipras was
prepared to proceed with the agreed Plan “B”.

But as he called Varoufakis for a meeting on the near future actions,

Varoufakis obviously informed him that the transition to the Drachma would
not be as seamless as anticipated, that he would need a team of 1.000
experts to materialize it, a period of several months (not just “pressing one
button”) and, of course, the electronic currency solution could not be applied
to the hundreds of thousands of Greeks living in remote villages and deprived
of internet, credit cards, ATMs etc etc.

Tsipras understood that Greece would “explode” (his expression).

Thus Tsipras made the well known dramatic U-turn, interpreted the 62% “No”
as a “Yes” (!!) and went to Euro Summit in Brussels for the final negotiation of
12 July 2015.

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