The Untold Story – Arms imports and the Greek debt crisis

Last week I went to a talk by Czech Prime Minister Petr Nečas at LSE in which he made the usual grim diagnosis about the debt crisis in Greece. The country was in dire need of structural reforms, he said, both to its economy and society. Leaders across the continent have been making similar criticisms, with Sarkozy and Merkel warning the Greek government last month that it wouldn’t receive new bailout funds unless it fully implemented austerity measures. And despite the significant debt swap agreed on today, any EU bail-out remains conditional on the country implementing a further round of budget cuts. Yet one area of the Greek budget doesn’t seem to have received such scrutiny, its huge military spending. The reason is simple, France and Germany still account for the vast majority of arms sales to Greece.

Admittedly, Greek military spending has been reduced massively over the last few years, although not nearly as much as government expenditure on healthcare, pensions or social welfare. However it still spends the most in the EU as a percentage of GDP, and remains one of the biggest weapons importers in the world. Moreover, in 2010 when the first bail-out package was being negotiated, the Greeks spent €7.1bn on its military, compared with €6.24bn in 2007. £1 billion was spent on French and German weapons, plunging it even further into debt. Many suspect that this is no co-incidence, and that the rescue package was explicitly tied to burgeoning arms deals. In particular, there is evidence of pressure from France to buy six frigates, whilst Germany was content to sell off some faulty submarines.

The fact that Greece, a relatively small and democratic country with not much in the way of global ambitions, should spend so much on its military is fairly perplexing. In 2006, as the financial crisis was looming, Greece was the third biggest arms importer after China and India. It has a standing army of 156,000 men, more than the UK which has 6 times its population, and still has a compulsory military service of 9 months. Over the last 10 years its military budget has stood at 4% of GDP, over $1500 per person. If Greece is in need of structural reform, then its oversized military would seem the most logical place to start. In fact, if it had only spent 1.7% like a typical EU country over the last 20 years, it would have saved 52% of its GDP – meaning instead of being completely bankrupt it would be one of fairly average countries struggling with the recession.

Of course, the supposed threat from Turkey is always used as a justification by Greece for its profligate arms spending. However, this argument just doesn’t hold up on several grounds. Firstly, both countries are part of NATO and share a number of mutual allies, not least the US, and so all-out war between the two is highly unlikely to occur. Secondly, Turkey has proposed on several occasions a mutual reduction in arms spending, something Greece has repeatedly refused to do. Finally, despite all this relations between the two countries have markedly improved in recent years, making such a massive military build up seem even more unnecessary. All Greece’s military spending seems to achieve is antagonise the situation and goad Turkey into an arms race.  So why has Greece continued to spend such huge amounts on its army? It’s not altogether clear, although it may well be due to populist pressure on the previous right-wing government not to appear soft in the ongoing tensions with Turkey over Cyprus.

What is certain is that the French and German arms industries have gained a lot from Greece’s extravagant spending. In the five years up to 2010, Greece purchased more of Germany’s arms exports than any other country, buying 15 per cent of its weapons. Over the same period, Greece was the third-largest customer for France’s military exports, and its top buyer in Europe, with 12 per cent. The Netherlands also has been a significant exporter. However, the US is perhaps the biggest beneficiary, accounting on average for 40% for Greek imports, and has been known to intervene in military spending decisions. In addition, with each new new fighter plane or battleship sold creating yet more sales to regional rival Turkey, it is easy to see why Greece has made such a lucrative market.

In the current context, it is easy to blame all Greece’s troubles on its problems with corruption, tax evasion and its oversized state sector. These are all undeniable issues which no doubt require significant ‘structural reforms.’ Yet, arms imports aside, is Greece really that different from Spain or Portugal, countries also in dire straits but not standing on the brink of collapse? I cannot help but speculate that if Greece’s military spending had been reined in sooner, at the expense of the French and German arms industries, we might not be facing the crisis we are now. And the Greek people, instead of facing austerity measures which have reduced living standards by 30%, might have been able to take a more moderate and sustainable route to reform.

Edited version published in The Guardian, 21st March 2012

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10 thoughts on “The Untold Story – Arms imports and the Greek debt crisis

  1. Eventually someone opens this conversation!! France and Germany have sold billions of army equipment in Greece, in the same time they ask Greece to make cuts. Thank you for your article.
    I just want to make clear that Turkey is not an enemy for Greeks, and this is not the reason for the existence of such a big army. The reason is that Greece has also the role of securing EU’s eastern borders. Not to keep EU safe from Turks, but to keep illegal imigrants out of EU. EU does nothing to help but just demands to keep them out. No pressure on Turkey, no support in troops. The result is that Greece is forced to keep lots of military forces close to the borders to do this job. And the cost is not only in weapons, but also the supplies needed for all theese islands and the mountains at the borders. Just the oil needed for all those frigates that patrol the Aegean everynight is a huge cost. Thank you again for the great article.

  2. Dear Paul,
    Congratulations for this very good paper.
    I am the editor in chief of NewropMag a transeuropean political news plateform on internet running with volunteers and trying to spread some real information about what is happening in Europe and around. NewropMag is a non profit, non commercial organisation.
    We are be very interested to publish your article on NewropMag and if you agree to publish more articles from time to time depending on our different issues.
    Best thanks, and hope to stay in contact with you
    Marianne Ranke-Cormier
    http://www.newropmag.eu

      • Paul

        Just want to agree with the earlier comments, this article is absolutely superb and incredibly timely. Congratulations on getting it in the Guardian.

        This issue is a scandal and it needs to be discussed more widely. I’m going to re-post your piece on our blog tomorrow and add a link to your site.

      • Also just to note I think you need to do more to get your blog more widely read. The Mambo hasn’t been running much longer than yours and we have about 20 times the number of hits you’ve had.
        And yours is a lot better.
        You have some really good articles on here and they deserve a wider audience.

  3. Pingback: Bloggingportal.eu/blog » Blog Archive » The Week in Bloggingportal: Eurobloggers are a bunch of self-referential, submissive twits

  4. Pingback: Voices of the 7 Billion - The Untold Story – Arms imports and the Greek debt crisis

  5. A beautiful example of the practice: “don’t let the facts ruin a good story”.
    Since the first news appeared about how Greece spent a £1bn on French and Gerrman weapons, it has been proven that this is not the case. The original “reporter” didn’t bother to actuall read the initial report but saw a table and copied that. French and German firms asked permission (as they are required) to make proposals for arms and these totalle £1bn. At that same year (2010), Greece actual spent 70 million Euros for parts and spares ONLY. But no “journalist” or blogger bothered to correct his/her writings because, as already said the idea “don’t let the facts ruin a good story” rules. This is “journalism” at the age of the internet and blogs….

  6. And a second comment on this: “Of course, the supposed threat from Turkey is always used as a justification…. Turkey over Cyprus”. It really makes you wonder if the blogger has ever bothered to read anything on this matter… Turkey has an official “casus belli” statement open against Greece. It has threatened to act militarily if Greece extends its territorial waters to 12NM, as Greece is allowed to do by international sea law. Perhaps an all-out war will not occur, but Turkish officials have repeateadly disputed Greek rights over various Aegean islands. And perhaps the blogger hasn’t spent any holiday time in one of the Aegean islands to have a personal experience, but there are continuous overflights of these Greek islands by Turkish AF jets. Three years ago, Greek AF and Turkish AF jets collided over a Greek island, whose air space was violated by the latter. The number of flying accidents (or “accidents”) in the Aegean Sea is a true testimony of the actual situation in the area despite any improvement in the diplomatic field. Turkey has not proposed ANY specific arms reduction, has only expressed its will to discuss the issue. At the same time Turkey has went forward with many arms programmes, the most important of which is the acquisition of the F-35 – one of the first countries to get it. Not to mention new tanks, helicopters, new frigates, submarines etc etc. And only ten days ago, the Turkish Navy leadership expressed its vision for a Turkish Navy aircraft carrier. A simple google search could provide a wealth of information on the actual current programmes of the two countries. But again, who need facts and truth when he writes so well….

    • Hi Phantomas, the stats about Greece’s arms imports in 2010 come from an official document from the European Council (try page 118 of this document http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2011:382:0001:0470:EN:PDF). They were released on 31st December 2011, good timing for a document you don’t want people to look at!
      What is your source for the 70 million euros?

      I accept I’m no expert on Greco-Turkish relations, and perhaps I should have written/read more about Turkey’s role in perpetuating ongoing tensions. Ultimately though you accept that ‘all out war is unlikely to occur,’ which is my central point refuting the claim that Greece needs high military spending to offset Turkish agression.

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