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France to Sell Frigates to Greece in Controversial Deal

10/17/2011

Germans Question Contract

France to Sell Frigates to Greece in Controversial Deal

Berlin is unhappy about a weapons deal in which France plans to supply warships to highly indebted Greece free of charge for the first five years, and at a big discount when payment comes due. Firms and politicians in Germany say taxpayers may end up paying for part of the deal, and they want Chancellor Angela Merkel to intervene.

A huge arms deal is threatening to put French-German relations under strain. According to information obtained by SPIEGEL, France wants to deliver two to four new frigates to the Greek navy and to allow the highly indebted nation to postpone payment of the €300 million ($412 million) purchase price per ship for the next five years.

Under the deal, Greece will have the option of paying up after five years, with a significant discount of €100 million, or returning them to the French navy. The “stealth” frigates are designed to avoid detection by enemy radar and are built by state-owned French defense company DCNS.

The deal is being criticized by German rivals that have been competing for the contract for years.

In a letter to the German government, an executive from the ThyssenKrupp group complained that the vessel purchase will in effect be co-financed by German taxpayers because Greece, reliant on aid from the European Union and International Monetary Fund, may have to restructure its debts.

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A Greek debt haircut is looking increasingly likely. If this happens and Greece is rescued again with funds from the European bailout mechanisms, Thyssen’s scenario would come true. German taxpayers would shoulder part of Greece’s government spending and thereby be forced to pay for a portion of the frigate purchase.

http://www.spiegel.de/international/europe/0,1518,792189,00.html

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