Bloomberg News

NATO Ties Bind as Greece Fights for Solutions to Remain in Euro

June 18, 2012

Greece's New Democracy Party Leader Antonis Samaras

Greece risks running out of money by July unless election winner Antonis Samaras quickly assembles a coalition that can secure the next aid disbursement. Photographer: Chris Ratcliffe/Bloomberg

While Greece struggles to stay in the euro, its membership in NATO is another story altogether.

“It’s a major part of their identity, and they would do what they have to do to maintain being a NATO member of good standing,” Charles Ries, U.S. ambassador to Greece from 2004 to 2007, said in a telephone interview before yesterday’s voting in Greece.

Even Alexis Tsipras, who finished second on promises to renege on the terms of a European Union-led bailout, made a campaign appearance at the Defense Ministry May 29, criticizing pay cuts for soldiers and declaring Greek territory “non- negotiable.”

The country risks running out of money by July unless election winner Antonis Samaras quickly assembles a coalition that can secure the next aid disbursement. The question of Greece leaving the euro, once taboo, is openly discussed in European capitals. A Greek exit from the euro would be unlikely to undermine its role in NATO because security is one of the few issues that most Greeks agree on.

“Leaving the euro is not the same as leaving NATO,” said Paul Sullivan, a specialist on security issues at Georgetown University in Washington. “NATO was there well before the botched up euro zone.”

That’s not to say strategic planners are indifferent to Greece’s plight as years of recession may deepen if it exits the currency shared by 17 nations.

“It may cause such political instability and lead to such chaos that Greece would either in effect or formally move away from the West, by which I mean the EU and NATO,” said Thomas Wright, a fellow at the Brookings Institution in Washington. “There would be stress on their relationship with both.”

Joining NATO

Greece joined the North Atlantic Treaty Organization in 1952, 29 years before it joined the European Economic Community, which developed into the European Union. Greece adopted the euro in 2001.

In the past decade, Greece has been the EU’s biggest military spender as a share of the economy.

“The Greek military has been so oversized in the past that even if spending were cut in half, it would still rank in the upper half of NATO members,” said Karl-Heinz Kamp, director of the research division of the NATO Defense College in Rome.

Greece’s military budget in 2011 was 5.86 billion euros ($7.3 billion), up from 5.4 billion in 2010 but down from 7.6 billion in 2009. In early 2010, the Greek army cut conscription to nine from 12 months.

Military Spending

As a percentage of the economy, spending fell to 2.3 percent in 2010 from 3 percent in 2009. German military spending, by comparison, is 1.4 percent of gross domestic product while Italy’s is 1.7 percent.

Greek governments have justified the high spending because of tensions with Turkey, a border with former Warsaw Pact states, and the challenges of controlling thousands of islands.

Some of those justifications are now obsolete. Relations with Turkey have improved. Turkish Premier Recep Tayyip Erdogan, during a visit to Athens last month, said they should work to cut military spending. Bulgaria and Albania are now NATO members, and only a naming dispute is holding up Macedonian membership in the alliance.

Greece’s euro-zone partners, which are now its biggest creditors, never complained about Greece’s spending, much of which went for equipment made in Germany and France.

‘Unworldly’ Level

“Why weren’t we harder on the Greeks? Because they were buying much of their kit from the Germans, Americans, French and British,” Francois Heisbourg, head of the Foundation for Strategic Research, said at a March 13 conference in Washington. “We have managed to maintain Greek military spending at an unworldly high level for much too long.”

From 2000 to 2011, Germany accounted for $2.5 billion, or 23 percent of Greece’s $11.1 billion of arms imports, second to the U.S., and ahead of France which was third at $1.3 billion or 12 percent, according to the Stockholm International Peace Research Institute.

Greece has about 900 Leopard battle tanks, built by Germany’s Krauss-Maffei Wegmann GmbH, and 50 Mirage 2000 fighter jets, built by France’s Dassault Aviation SA (AM), according to Defense Suppliers Directory, a U.K. database for the arms trade.

Dusseldorf-based steelmaker and shipbuilder ThyssenKrupp AG (TKA) is supplying submarines for the Greek navy under a contract worth more than $3.2 billion. Greece fell behind on payments to the company last year.

Arms Imports

Between 2003 and 2007, Greece, with a population of just 11 million, was the fourth-largest arms importer, behind China, India and the United Arab Emirates. Greece was the top client for German arms exports in that same period, taking 11 percent. Turkey was next with 9.8 percent.

Germany, France, Britain, Italy Spain, and the Netherlands are all among the world’s top 10 arms exporters.

The Greek military has 136,000 personnel, with 90,000 in the army alone. In spite of that spending, Greece hasn’t played a major role in NATO missions. It has just 122 troops in Afghanistan now.

“If the Greek government has trouble paying its bills come July, it would pro-rate the pay of all its public workers,” said Ries, the former ambassador, who is now Washington-based vice president at the Rand Corporation. “I can’t imagine that the military would see its pay cut more than the others. Quite the opposite, I think they would make it a priority.”

‘Wild Exaggerations’

Talk of Greece becoming a failed state “are wild exaggerations,” Ries said. The military, which overthrew an elected government in 1967 and held power for seven years, has been apolitical for decades, he said.

Air bases in Crete were used during NATO’s air war over Libya last year, and NATO ships use deepwater bases in Corfu, near Athens, and Souda Bay in Crete. While NATO countries don’t charge each other rent for ships that stop at bases, providing fuel, food, and supplies is a major part of the local economy, Ries said, recalling that crew from a U.S. aircraft carrier once spent $8 million ashore during a weekend stop in Corfu.

“They are not going to want to give that up,” he said.

To contact the reporter on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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