The submarine deal that bankrupted Greece.
As Greece slashes spending to avoid default, it hasn't moved to skimp on one area: defense.
The deeply indebted Mediterranean nation, whose financial crisis roiled the global financial system this year, is spending more than a billion euros on two submarines from Germany.
It's also looking to spend big on six frigates and 15 search-and-rescue helicopters from France. In recent years, Greece has bought more than two dozen F16 fighter jets from the U.S. at a cost of more than 1.5 billion.
Much of the equipment comes from Germany, the country that has had to shoulder most of the burden of bailing out Greece and has been loudest in condemning Athens for living beyond its means. German Chancellor Angela Merkel has admonished the Greek government "to do its homework" on debt reduction.
The military deals illustrate how Germany and other creditors have in some ways benefited from Greece's profligacy, and how that is coming back to haunt them.
Greece, with a population of just 11 million, is the largest importer of conventional weapons in Europeand ranks fifth in the world behind China, India, the United Arab Emirates and South Korea. Its military spending is the highest in the European Union as a percentage of gross domestic product. That spending was one of the factors behind
Greece's stratospheric national debt.
The German submarine deal in particular, announced in March as the country lurched toward bankruptcy, has cast a spotlight on the Greek military budget and on the foreign vendors supplying the hardware. The deal includes a total of six subs in a complicated transaction that began a decade ago with German firms.
The arms sales are drawing heat from Turkey, Greece's neighbor an arch-rival. "Even those countries trying to help Greece at this time of difficulty are offering to sell them new military equipment," said Egemen Bagis, Turkey's top European Union negotiator, shortly after the sub deal was announced. "Greece doesn't need new tanks or missiles or submarines or fighter planes, neither does Turkey."
Greece's deputy prime minister, Theodore Pangalos, said during an Athens visit in May by Turkish Prime Minister Recep Tayyip Erdogan that he felt "forced to buy weapons we do not need," and that the deals made him feel "national shame."
Other European officials have charged France and Germany with making their military dealings with Greece a condition of their participation in the country's huge financial rescue. French and German officials deny the accusations.
A spokesman for German Chancellor Merkel says the submarine transaction was the culmination of an old contract signed long before Greece's debt crisis. In May, France's defense ministry said Greek authorities have confirmed their willingness to pursue talks on several arm-procurement deals.
In May, Greece's economic crimes unit began investigating all weapons deals of the past decadetotaling about 16 billionto determine if Greece overpaid or bought unnecessary hardware.
German prosecutors are investigating whether millions of euros in bribes were paid to Greek officials in connection with the sub deal. In May, the chief executive of one of the German companies helping to build the submarines, called Ferrostaal AG, resigned amid the probe.
For some prominent Greeks, the latest submarine deal was the last straw. In late April, Stelios Fenekos, a 52-year-old vice admiral of the 22,000-person strong Greek Navy, resigned his position, bringing a three-decade Navy career to an end. He says he did so to protest the Greek defense minister's decision to purchase the subs, as well as other decisions taken in recent months that Mr. Fenekos considers "politically motivated."
"How can you say to people we are buying more subs at the same time we want you to cut your salaries and pensions?" says Adm. Fenekos, in his first interview with a reporter. He was referring to the government's 5% cut in most pensions and even deeper slashes to public-sector wages enacted in response to the crisis. The Greek Navy, he says, cannot afford to maintain the additional submarines. It currently has eight subs.
A spokesman for the Greek Ministry of Defense said Mr. Fenekos' resignation was accepted. In stepping down, "Mr. Fenekos did not refer to the submarine deal," he said.
From the Wall Street Journal
The Submarine Deals That Helped Sink Greece - WSJ.com
I hardly think that India will spend 1% of its GDP on a single deal like this one. But some times they are unpredictable.
