Sunday 28 October 2012

The Lagarde List and Justice in Greece

Media sources report that journalist Kostas Vaxevanis has been arrested for publishing the “Lagarde List”, a list of 2,059 names of Greek citizens with bank deposits at the HSBC Geneva branch.

This list was stolen by former bank employee Herve Falciani in 2007 and acquired by the French Finance Ministry. Similar deals have been done by Germany, notably with undeclared German deposits in Switzerland.

This “Lagarde list” was given by the then-Finance Minister of France, Christine Lagarde, to the Greek Minister of Finance George Papaconstantinou (PASOK) in October 2010. According to Papaconstantinou’s testimony in the Greek Parliament, he ordered a preliminary investigation by SDOE, the tax police, into 50 of the names on the list. Upon leaving his position some 8 months later, however, he claimed that the list was turned over to SDOE for full investigation, but that he himself no longer had the original list.

There were no further investigations by the next Minister of Finance, Evangelos Venizelos (PASOK), who declared that he could not be sure that the list was genuine. This declaration is remarkable, as it reveals that either he did not trust the previous Minister (also a PASOK member), or he did not trust SDOE, which in fact was re-constituted by PASOK when it took power in October 2009.

The net result is that for 2 years, from October 2010 to October 2012, neither SDOE nor the Ministry of Finance have proceeded with a proper investigation of the list.

It is therefore outrageous that this week a journalist published part of that list and was arrested in record time for this “crime”.

This event illustrates the structural problems affecting the Greek political system and Greek society today. Assuming the Lagarde list is genuine, the people on it represent a cross-section of the Greek elite. They include top politicians from nearly all political parties, journalists, businessmen, civil servants, and a wide range of other professions. Both PASOK and New Democracy members are widely represented on it.

However much this elite seeks to safeguard its privileges, it is clear that the patience of Greek society is over. The list was apparently leaked by a worker in the Ministry of Finance to, and from there has been widely replicated across the blogosphere. Apart from taking legal action against one journalist, there is no way to block its publication any further. All the elite can do, of course, is to block a real legal investigation, which has happened in a number of occasions in the past, and will no doubt happen again.

And with this in mind, one has to ask several questions:

a.     Why should European taxpayers continue to bail out a political system which has revealed itself to be entirely corrupt and hopelessly incompetent time and time again?

b.     Does the Troika “elite” not realise that to the average Greek and European citizen, it (the Troika) is fully complicit in backing the interests of this elite against the interests of the vast majority of the middle and working class? Including the unions and civil service workers?

c.     Why are there no Troika demands for a full investigation and forensic accounting into corruption scandals and public procurement? So far, there have been blanket demands for “cracking down on tax evasion.” What about demands for very specific issues, such as the Lagarde list?

d.     Why should Greek taxpayers and voters continue to support this system? At what point will the patience of society snap? At what point will guillotines be set up in Syntagma Square?

e.     Can anyone truly say that a reaction by the extremes is not a better solution to the system we see today? Would a “benevolent” military dictatorship or a return to the monarchy not be a better option that what we see today? Would a SYRIZA government not be a better option?

f.      How can anyone blame Angela Merkel for the Greek crisis when it is abundantly clear that the decisions which have led to this situation have been engineered solely in Greece, by a Greek elite comprising nearly all political parties, and which has been in place for at least the last 30-40 years?

This disgusting incident, coming as it does on the eve of the October 28th anniversary and the new austerity measures which will be voted in Parliament, is yet another indication of the fundamental corruption and instability which define the Greek system today.

In the light of this instability, the only refuge of the political class is two-fold, and we see it reflected in the remarks made by President Karolos Papoulias and other politicians at the Thessaloniki military parade:

·       Blame an external enemy for Greece’s domestic problems (“Europe must recognise Greece’s sacrifices in WWII” / “We will not allow Angela Merkel to make Greece into a protectorate”)

·       Use fear tactics (a Eurozone exit, bankruptcy) to scare voters into supporting one of the two “established” parties (ND), which is what happened in the last elections.

Yet with each passing day, a “peaceful” or rule-of-law-based solution to this situation appears impossible. The question therefore is: What comes next?

© Philip Ammerman, 2012

Tuesday 16 October 2012

“Island of Dreams” or “Island of Nightmares”: Finding Ozymandius in Eretria

The "Island of Dreams": Pezonisi, as seen from Eretria Harbour

Readers of Greek press will recall that every so often the Municipality of Eretria announces with fanfare the privatisation of the so-called “Island of Dreams”. This is a forested island connected to Eretria town by a short causeway and bridge. The project was originally developed in the 1980s, and since then has gone to ruin.

The project was developed by a Municipal Company called the Δημοτική Επιχείρηση του Νησιού των Ονείρων (ΔΕΝΟ). DENO built a total of 46 bungalows and 52 hotel units, together with a restaurant and reception centre, on a 66,000 square meter island just off Eretria harbor. The work was extremely basic and almost no attempt was made to develop quality architecture or design.

The project has not aged well: there is practically nothing you can do with this accommodation standard today

The “resort” functioned for a number of years, most recently hosting children from Russia. DENO collapsed, with over EUR 2 million in debts, and is undergoing liquidation. For the past few years, the site has been abandoned and is literally crumbling to ruin.

Bungalow bathroom view

I visited Eretria in late August and took the opportunity to visit the site, slipping into the abandoned resort through a hole in the fence and spending an hour walking through garbage and abandoned buildings. This reminded me of nothing so much as some factory tours in the former Soviet Union in the 1990s.

Bungalow bedroom view

The present situation is unacceptable in too many ways, and this site may in fact illustrate exactly why Greece must to privatise some of its under-utilised assets, and why it can do this without any danger of “bloodsucking capitalists stripping the wealth of the people.”

a.     The facilities have simply been abandoned. Equipment such as refrigerators, kitchens, air conditioners, and furnishings are simply rotting away, having fallen to the ground or floor. There has not even been an attempt to loot the place: it’s simply crumbling to pieces. I don’t understand why the Municipality which is responsible for the site, has not closed the units properly.

b.     The entire site has been poorly designed. Incredibly, not a single one of the 46 “bungalows” actually has a proper sea view, despite the fact that the island offers panoramic sea views on three of four sides. The bungalow entries face inwards, not outwards, and are not built near the edge of the island, but along a central avenue. Simply design elements, such as verandas and large windows overlooking the sea, are missing.

Garbage lies uncollected since the hotel last operated. 

c.     The accommodation standard is unacceptable by today’s standards. I can imagine this place being built as a student hostel in the 1980s in some grand PASOK project for its “young pioneer” youth organisation, but today it is imply impossible to house paying guests in such rooms.

At one point, the littoral was used a garbage dump. 

d.     The coastal littoral surrounding the island is an unmitigated disaster. At one time, it was used as a garbage dump. It has also been bulldozed and landfilled, and resembles a vast, barren dirt parking lot. It is difficult to understand how this will be rehabilitated, but a massive effort is needed.

The Municipal Council of Eretria is simply in no condition to develop and manage a hotel resort. The Greek government should exit any type of attempt to do so, and to its credit, is trying to privatise the “Xenia” hotel chains which were set up by the Greek National Tourism Organisations in the 1970s and 1980s, most of which have collapsed into dust in the same way the “Island of Dreams” has.

The Municipality has just launched an international tender for leasing the island to 2045. My company, Navigator, has published a short analysis of this development opportunity, together with some more photos from my visit.

Island of Dreams: The Abandoned Restaurant

Besides being reminded of some factory tours in the wreckage of Communism, the other inevitable reminder was of Ozymandius. I’m wondering if any of Greece’s recent prime ministers have read the same poem.


I met a traveler from an antique land 
Who said: "Two vast and trunkless legs of stone 
Stand in the desert...
Near them, on the sand, 
Half sunk a shattered visage lies, whose frown, 
And wrinkled lip, and sneer of cold command, 
Tell that its sculptor well those passions read 
Which yet survive, stamped on these lifeless things, 
The hand that mocked them and the heart that fed; 
And on the pedestal these words appear: 
"My name is Ozymandius, King of Kings, 
Look on my works, ye Mighty, and despair!"
Nothing beside remains. 
Round the decay 
Of that colossal wreck, boundless and bare 
The lone and level sands stretch far away.

Percy Bysshe Shelley

© Philip Ammerman, 2012 

Monday 15 October 2012

Your Tax is in the Mail (and at the Pump)

This week starts with the unwelcome news that long-announced new taxes are being implemented in Greece. This is seen in the heating oil distribution “season” which started today, and in the mailing of the 2010 property tax.

Heating Oil Distribution

The reality of tax increases on heating oil for housing hits this week, as distribution has officially started. Tax increases announced since last year have the effect of raising the price from about EUR 0.95 cents per litre at the beginning of 2012 to EUR 1.40 cents per litre now. Obviously, everyone is up in arms. Greece has benefitted from very warm weather so far this month, with daily temperatures running at 25 degrees. This will end as winter sets in.

This is one of the more regressive measures, despite the theoretical mechanism put into place to support lower-income families by giving them (yet another) subsidy. Rather than liberalising the sector, for instance by promoting competition at the refining, importing and distribution, and allowing year-round distribution, the Greek government is piling bureaucracy upon bureaucracy and tax upon tax upon what should be a simple task, and punishing the poor and middle class in order to collect higher taxes.

Even competition will not result in a significant change in fuel prices: of the EUR 1.40 charged for 1 litre of fuel, only about 20 cents are refiner, distributor and retailer margins. The rest is tax.  

2010 Property Tax Mailed Today

Today also marks the date when the 2010 property tax is mailed to property owners. This astounding story of delay dates back to the Karamanlis and Papandreou administrations. To make a long story short, the current government is finally implementing this measure, with their customary excellent timing (in the middle of a depression).

We should remember that this year, property is already being taxed via a special contribution on electricity bills (which has been split into 5 instalments). So this property tax is in fact the second such tax to be paid this year, and is entirely separate from additional municipal or broadcaster taxes levied on the electricity bill, and also separate from the “solidarity” tax on incomes levied on the income tax statement. There is also a third property tax, for high value properties. And there is also value-added tax on property transactions, which adds a fourth layer of taxation.

This plethora of taxes on immovable property is indicative of just how badly planned the tax system is, particularly when one considered that there is no independent valuation of a property involved, but it is based on district zoning coefficients, “objective values” and other purely theoretical means of valuation.

The direct impact of these taxes are clear: new construction and housing sales have plummeted; there are thousands of builders out of work; hundreds of construction firms have closed; and the burden of taxation remains disproportionately on the poor and middle classes.

Hundreds of thousands of households have not been able to pay the previous property taxes. The Greek Public Power Company reports that over 500,000 household electricity bills remain unpaid (this number may in fact be higher).

So the government is doubling down, by increasing the number of taxes that people are unable to pay. In the meantime, the “Lagarde disk” of some 2,000 names of account holders at HSBC Geneva together with several other lists of suspicious transactions make their merry way through the media, while the transactions holders presumably make their way further offshore.

PASOK's well-nourished head, Evangelos Venizelos, who was apparently responsible for the "disappearance" of the Lagarde list, continues to speak of social justice. 

It should come as absolutely no surprise that in the latest Public Issue poll carried out for Skai (October 2012), SYRIZA is polling at 43% in voter intentions, versus 33% for New Democracy. 

"The most difficult choice a politician must ever make is whether to be a hypocrite or a liar."

© Philip Ammerman, 2012

Philip is Managing Partner of Navigator Consulting Group and European Consulting Network.