Arms Sales, Debt and Corruption

Irish Left Review, Andy Storey, 19 April 2013. Jorgo Chatzimarkakis, a German MEP with the Free Democrats party has announced that he is resigning from German politics because he is “fed up with German hypocrisy”.

Chatzimarkakis was born in Germany to Greek migrants and has dual nationality so his actions and comments are particularly directed towards German-Greek relations. The issue of corruption is the one where he sees hypocrisy as most glaring:

“The Germans in their hearts believe it is OK to bribe if it leads to more profit. They have a totally different attitude to corruption as the donor [party]. Many regard themselves as not guilty if they give… The guilty ones are those who take … this is the sort of hypocrisy that I am personally fed up with.”

A recent report entitled Guns, Debt and Corruption: Military Spending and the EU Crisis, authored by Frank Slijper, hones in on one sector where such corruption is endemic. Greece has long had the highest levels of military spending in the EU and Germany has been one of its leading suppliers of military equipment. In 2011, two former managers of the German firm Ferrostaal were convicted in Germany of paying €62 million in bribes in connection with the export of submarines to Portugal and Greece, and Ferrostaal itself was fined €140 million. The former Greek Defence Minister, Akis Tsochzopoulos, along with several others, faces trial in Greece for taking kickbacks on defence contracts, including an alleged €8 million from Ferrostaal.

In another case, German company KMW denies having paid bribes to facilitate the sale of €1.7 billion worth of tanks to Greece, but the truth is impossible to get at because the money trail was routed through the Virgin Islands – which refuses to cooperate with investigators. Siemens represents a more clear-cut case – it agreed an out-of-court settlement of €273 million when charged by Greece with bribery offences in relation to military contracts.

But the Siemens case is unusual in that Greece got some money back. Whatever the circumstances under which military debts were incurred by Greece, the governments of the countries where the exporters are based are demanding that all money outstanding be repaid in full. As Slijper puts it:

“the governments of countries of lending countries – like Germany and France – are emphatic on the priority of settling outstanding bills with arms suppliers…, while at the same time insisting on swingeing cuts in public spending and other austerity measures”.

Indeed, part of the first tranche of the Greek ‘bail out’ was specifically earmarked to pay for arms contracts. And the contracts have not dried up, which, it is alleged, is also not unrelated to the ‘bail out’ – an aide to former Greek premier Papandreou told the Reuters news agency “No one is saying ‘buy our warships or we won’t bail you out’, but the clear implication is that they will be more supportive if we do”.

One way to address this issue would be to carry out an independent audit of the Greek debt to determine how much of it was accrued through nefarious (military and other) transactions, as has been called for by Greek civil society groups and by many others across Europe. But that demand will of course be resisted because it opens up the dreaded (for core country elites) vista of co-responsibility for debt i.e., that reckless or corrupt creditors (French banks, German arms exporters and others) would be obliged to bear at least some of the cost of their actions.

Co-responsibility does not feature prominently in European elite circles. Beyond the issue of corrupt military sales, take the example of Goldman Sachs and Greece: Goldman Sachs knowingly helped Greece hide the scale of its budget shortfalls to make it appear the country was not in breach of the EU Maastricht Treaty deficit rules. And yet it is Greece that is lambasted for its alleged fecklessness, while Goldman Sachs luminaries – like Monti and Draghi – are headhunted to oversee austerity for ordinary European citizens. As with corruption surrounding weapons procurement, Jorgo Chatzimarkakis’ charge of hypocrisy against German (and other European) decision-makers is very well founded.