After Goldman Sachs, the Value of Greece, Isle by Isle


The Greek island known variously as Holy Ghost, The Island of the Father and the Son and the Holy Ghost, Holy Trinity, or just plain Trinity, owes its greatest renown, despite its lavish New Testamentish nomenclature, to the cameo role it played in the pagan classical age. This 12-acre slip of an atoll was a staging ground for the Persian armies laying siege to Thermopylae, the famed last stand of those hot, well-oiled Spartan souls hymned by our own latter-day Thucydides, Frank Miller. Now, however, Greek government officials are straining to find a way to convert Holy Ghost, and the nation’s 6000 or so other island outcroppings into liquid assets, so as to begin paying down the country’s colossal €400 billion debt flowing from the European Union’s bailout of the basket case known as the Greek economy.

But as A. Craig Copetas reports in Business Week, preparing these vast holdings for sale to foreign investors-and the buyers pretty much have to be foreign, if Greece is to get any viable capital out of the deals-is no mean feat. There is, first of all, the question of ownership; most of the properties are in private hands, and not the government’s to sell. There will be plenty of government perks, of course, via the tax revenues, tourist, levies, construction jobs that a battalion of foreign-funded resorts would likely generate-to say nothing of the untaxed stream of bribes and kickbacks that would also accrue to Greece’s legendarily corrupt and bureaucratic state.

But with conflicting ownership claims going back several centuries, if not in fact to the dawn of Western civilization, the provenance of any given land title makes for a hermeneutic nightmare even without the 2500-odd forms and official clearances that Greece requires in order to process a significant land sale to a foreign bidder. “The labyrinthine federal, state, local, military, and religious regulations, decrees, laws, proclamations, and edicts,” Copetas writes, “have made it nearly impossible for anyone to sell anything, because no one can agree on who owns what.”

Holy Ghost island, as Copetas notes, is a perfect case in point. It sits some 50 miles from Athens, via road and boat. Its outsized dalliance with history continued down into the modern age, when the Beatles sought to purchase it after spending a mod Mediterranean getaway there in the 1960s. They petitioned its then-owner, Sophocles Papanikolaou, chancellor to the Greek Royal Court, to unload, but three years of negotiation proved fruitless. (In another footnote to Holy Ghost’s protean way with renown, Papanikolaou’s cousin Georgios is the doctor who invented the pap smear.)

The Greek Orthodox Church, meanwhile, is convinced that it is the island’s true owner, and as Copetas writes, Church fathers will gladly part with the property, so long as the eager-beaver resort developer coming into it will also spring for a chapel, a baptismal font, and numerous other trappings of Orthodox piety. I suppose for the right sort of savvy island entrepreneur, this could be an opportunity all its own-the basis for a luxury getaway package combining a week of resort-and-casino debauchery with a Sunday of spa-quality repentance. Perhaps in an ecumenical nod to the Fab Four, the estate of the Maharishi Mahesh Yogi could be brought in on the act.

And for all the genuine government excess sure to attend a prospective sale, Holy Ghost would be a bargain on the tax books. While real-estate brokers value it at around €20 million, it commands a paltry €1.5 million valuation from the Greek tax office-meaning that the 9 percent sales tax would apply to the far lower sum rather than the €20 million that the seller (in this case, the Papanikolaou clan) would collect. “Cheap, yes?” a lawyer for the Papanikolaous tells Copetas after patiently laying the whole confusing scheme out.

Well, after a fashion-provided a buyer can ever emerge from the dense thicket of federal paperwork involved in any island transaction. Even though Prime Minister George Papendreou endorsed a plan to sell off prized national assets such as the islands at the World Economic Forum earlier this year, the volume of official review involved in an island sale is mind-boggling. A standard sale of such property requires eight different national ministries, from the Defense administration (since an island can’t be sold to any buyer deemed potentially complicit in plans for a future Turkish invasion) to the Culture division, an island realtor named Katerina Samaropoulou explains. Then, “once you have the eight ministries signed on, and depending on where the island is and its legal status, you go back to the Finance Ministry to see if they want to buy it at the tax-office price,” she notes-something that the Greek government would definitely be wise to do, given the lowball assessments granted to spots such as Holy Ghost.

Though on the other hand, the selfsame administrative leviathan hasn’t yet assembled a comprehensive registry of lands in its possession, with the government now contesting its potential ownership of some 675,000 acres of land now under title to individuals; the Orthodox Church is embroiled in ownership disputes over another 325,000 acres, bringing the overall total up to a cool million. At the bottom of such controversies, says former Secretary-General of the Economic Ministry Stratis Stratigis is a sad, simple truth: “Greek governments never learned how to count.”

However, before the genuine, howling irrationality involved in putting a Greek island on the global auction block provokes another neoliberal sermonette on the backward, baleful character of state economic oversight in our age, it bears recalling the unique public-private partnership that allowed the Greek debt crisis to spiral out of control in the first place.

Under the Maastricht treaty that grants economic membership to the European Union, a national economy must operate with a deficit ceiling of 3 percent of overall GDP. Since its admission to the Maastricht club, Greece has never actually hit that magic number-at times omitting to count big-ticket items like military operations and health-care debt in its makeshift deficit inventories. But the real creative accounting began when the global derivatives market-and a plucky little investment bank named Goldman Sachs-threw sultry come-hither looks at Greek financial officialdom. Via a complex battery of cross-currency trades, Goldman tethered Greece’s currency to an entirely fictional rate of exchange in order to mask its true scale of debt-and all the while, Greece just continued to run up the tab. The rigged exchange setup “enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen” involved in the Goldman deal, according to Der Speigel. “In that way, Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.” Since Maastricht rules don’t require disclosure of financial derivatives-and indeed, don’t even count currency trades as debt in the first place-no one was the wiser, until of course, it was far too late, and Greece, like so many chastened former Goldman clients, had to settle up its toxic accounts with government scrip, and pray that they can liquidate enough of the nation’s assets to keep up with the €4 billion monthly payments that start coming due in 2012.

The grim joke, of course, is that surrendering the government’s stake in the archipelago-hospitality complex would be a onetime firesale of real assets, palliating Greece’s short-term debtholders at the EU in exchange for a mess of pottage. (Copetas reminds readers that a similar feeding frenzy occurred in the “shock therapy” heyday of the former Soviet Union, when the Yeltsin government sold off former state-run enterprises at an estimated 10 percent of their actual market value, in a desperate bid to raise ready cash. )

There is, in a way, a neat symmetry to the arrangement: Contracting heaps of unsustainable debt conjured from a derivatives market in pretend money has left Greek policymakers desperately trying to sell off the actual material basis of their country. Those same leaders, so long obsessed with the geopolitical specter of a Turkish invasion, probably never reckoned, back when they settled on their clever Goldman-backed scheme in 2002, that national sovereignty could be just another flimsy derivative-based security. Then again, you might expect them, of all people, to recall another long-ago international hustler, named Circe, who used similar numinous concoctions to transform erstwhile or spurned partners into objects of cosmic ridicule. Oh, and her Greek island was called Aeaea. I wonder what it’ll go for now.

Chris Lehmann’s book, Rich People Things, is available now for pre-order! “Social criticism at its scorching-hot best,” says Barbara Ehrenreich!