Apparently, it has been impossible to sell Greece any weapons at all, not even a water pistol, without bribing officials at the Defense Ministry. Corruption is so pandemic thatTransparency International awarded Greece once again the dubious honor of being the most corrupt country in the EU. For 2013, Greece ended up in 80th place of the 177 countries in the survey, same as China. But it takes two to tango.
And in holier-than-thou Germany, where exporting at any price is a state religion (with chart)regardless of who runs the show, the defense industry was allegedly eager to dance with Greece – supplying tanks, submarines, and other equipment that broke Greece didn’t need and couldn’t afford.
The balance between QE and Treasury supply will begin to shift in July. The underlying bid it has provided for stocks and Treasuries will begin to fade.
This report tells why, and what to look for in the data and the markets. GO TO THE POST
Now there’s a confession. After four days of grilling, investigating magistrates in Athens extracted it from Antonios Kantas, General Secretary for Procurement at the Defense Ministry between 1996 and 2002. He’d been arrested in mid-December after authorities found nearly €14 million in various accounts. In his 30-page testimony, elements of whichhave been leaked, he admitted having pocketed €15 million in bribes since 1989 – just this one guy!
But it was a community effort that stretched across party lines. He named names, euros, and dollars, implicating 17 Greek politicians and businessmen. They include former head of procurement Yiannis Sbokos, former Defense Minister Akis Tsochatzopoulos – who, along with Sbokos, has already been condemned to years in the hoosegow for laundering the kickbacks he’d received in various arms deals – and his worthy successor, former Defense Minister Yiannos Papantoniou. And Kantas named the coddled weapons manufacturers in Germany.
There was the multi-billion euro deal for 170 “Leopard 2” tanks, manufactured by Krauss-Maffei Wegmann (KMW), as the Süddeutsche Zeitung “learned.” The tanks have all been delivered and paid for except for a few tens of millions of euros. For his diligent work, Kantas received €1.7 million in several payments, including €600,000 that a middleman “forgot” in Kantas’ office as payment for not raising objections to the purchase.
KMW denied everything when the Süddeutsche started prying. It had never paid, or authorized others to pay bribes, neither to Kantas nor to anyone else, the company said. Further, it required all employees and business partners to observe the laws. The order from Greece, dated March 2003, had been carefully monitored. Kantas didn’t represent Greece, etc., etc.
KMW has built over 5,000 Leopard tanks, much of it for export to savory and unsavory countries since domestic purchases after the collapse of the Soviet Union shriveled to nearly nothing. Selling tanks is already a hot-button issue in Germany. It was triggered once again when Chancellor Angela Merkel went to Indonesia last July, accompanied by plane loads of executives. The Indonesian government wanted to make a deal for 100 used “Leopard 2” tanks from the German military – though Merkel’s spokesman had denied it a few days earlier, claiming that it was “not on the agenda.”
It must have ended up on the agenda anyway. Embarrassingly, Indonesian President Susilo Bambang Yudhoyono confirmed after his talk with Merkel, albeit indirectly, that his government had requested the tanks. He had to modernize the army, he said. “Everything that we cannot produce ourselves we have to buy from friendly states,” he said, “and now Germany.”
The controversy erupted in Germany because Indonesia is an island nation. Why would it need tanks to defend itself? From whom, exactly? From tanks and infantry rolling in waves across the ocean? Or did the government, which has been accused of human rights violations and crimes in repressing internal conflicts, want the tanks to use against its own people?
Apparently. The tanks Indonesia was interested in buying would be modified versionsdesigned to fight terrorists and revolts, according to industry insiders. German defense contractor Rheinmetall, which is doing the modification work, and the German government remained assiduously silent on the topic. But the Indonesian government has been talking about it, with Yudhoyono explaining to an incredulous world that “we have never used tanks and helicopters or other weapons against our population.”
Indonesia also asked the Netherlands to sell them their old Leopards, but the Dutch parliament nixed the deal. In Germany, the Bundestag doesn’t get involved in arms deals. It’s up to the government. And Merkel wants those exports, rumored to be worth €3.3 billion. Exports at any price.
Then Greece bought German submarines, a process that was a cesspool of corruption. They were built by Howaldtswerke-Deutsche Werft (HDW) in Kiel, a subsidiary of conglomerate ThyssenKrupp. The submarines were equipped by Rheinmetall-Defence-Electronics and Atlas Elektronik, a German maker of naval electronics, integrated sonar systems for submarines, and torpedoes, now controlled by Thyssen-Krupp. Ferrostaal GmbH, a German industrial company, marketed the submarines to politicians. Kantas claimed to have been paid between €500,000 and €600,000 by a representative of Atlas Elektronik to get that deal done.
This summer, the Prosecutor’s Office in Bremen started investigating Atlas and Rheinmetall for tax fraud and bribery in connection with the sale. They’re alleged to have paid €9 million in bribes. So Kantas only got a small fraction. In August, authorities raided the offices of the two companies. Turns out, they’d made the payments to a British mailbox company owned by a Greek company, but the payments stopped in 2007. Greek authorities raided Rheinmetall’s office in Athens – and that’s how they found out about Kantas’ involvement in all these deals.
As always, Rheinmetall rejected the accusation, claiming that it was “baseless,” that it had made “no direct or indirect payments to Greek officials,” and that any improper paymentswere “not known to us.”
However, the Prosecutor’s Office in Munich, after investigating Ferrostaal’s role in the deal, prevailed in 2011 in court. The judge condemned two employees of Ferrostaal to, well, probation (to the sound wrists being gently slapped) and Ferrostaal to a €149 million fine.
Then there was the sale to Greece of “Asrad,” a vehicle-mounted short-range anti-aircraft system, designed by Rheinmetall and Swedish arms supplier, Saab Bofors Dynamics. Kantas claimed he’d received €1.5 million for the deal. He also pocketed €750,000 for KMW’s artillery system.
But non-German arms suppliers contributed to his hard-earned wealth as well. He received $3 million for the purchase of Russian anti-tank missiles, including $700,000 in cash, of which $500,000 were handed to two bankers to deposit overseas; $1.7 million for a Russian anti-aircraft missile system; €250,000 for equipment from Brazilian company Embraer; €240,000 for radar systems from Saab; €800,000 for Mirage fighter jets made by French arms maker Dassault; $1 million for a deal to update US-made M48 tanks; and €400,000 for the purchase of anti-ship missile Exocet made by MBDA, which is owned jointly by BAE systems, EADS (Airbus), and Finmeccanica of Italy. The latter is entangled in the helicopters-for-India corruption scandal that saw the CEO get arrested Italy. And so on.
Who knows how long the list actually is! For example, in September, a Greek magistrate brought charges of bribery and money laundering against Kantas for having accepted a bribe of €500,000 paid to a Swiss bank account in his name, for a deal that awardedGerman industrial conglomerate Siemens a contract to modernize the military’s telecom system.
It’s convenient to blame the culture of corruption in Greece for the putrefaction seeping from every pore of the economy. The scourge has infected Greek institutions to their roots and is in part responsible for the current economic fiasco. But bribery requires a willing partner. In white-glove Germany, the state religion of exports at any price, come hell or high water, has encouraged authorities to close their eyes when companies spend a little extra to get deals done.
Greece didn’t need the weapons, couldn’t afford them, and had to pile on debt to buy them… debt that has become subject to high and tight haircuts and massive bailouts, funded largely by grumbling German taxpayers. And therein lies a twisted, ironic injustice: German taxpayers have to transfer once again their wealth indirectly and unwittingly to the coddled German export sector.
When Jens Weidmann, President of the emasculated Bundesbank, speaks, central bankers and money printers worldwide stuff wax into their ears. “Caution,” he started out, “the euro crisis is far from over.” Then he committed central-bank heresy. Read…. This Ends In A “Planned Economy” – Bundesbank President