How the Greek Shipping Industry Schemed to Win Big in the Debt Crisis (1/2)

James S. Henry is a leading economist, attorney and investigative journalist who has written extensively about global issues. James served as Chief Economist at the international consultancy firm McKinsey & Co and as an investigative journalist his work has appeared in numerous publications like Forbes, The Nation, and the The New York Times. He was the lead researcher of the recently released report titled 'The Price of Offshore Revisited.'

Transcript

JESSICA DESVARIEUX, PRODUCER, TRNN: Welcome to the Real News Network. I'm Jessica Desvarieux in Baltimore.


Early on Thursday the Greek parliament approved a series of austerity measures in order to start receiving their 86 billion-euro bailout. The deal has caused tensions in the Syriza party, as many feel betrayed by Prime Minister Tsipras who was elected on a platform of rejecting austerity. While many are blaming domestic mismanagement as the cause for the potential Greek exit, what role did the Swiss banks play in inciting this crisis?

Here to discuss all of this is James Henry. James is a leading economist, attorney, and investigative journalist who has written extensively about global issues. Thanks for joining us, James.

JAMES HENRY: You're quite welcome.

DESVARIEUX: So James, let's get right into it. How are Swiss banks connected to the Greek debt crisis?

HENRY: As of the third quarter of 2009, shortly before the first bailout, it turns out that Swiss private banks accounted for about 39 percent of all bank loans to Greece. And that's a story that really hasn't been explored very systematically by the media. We've heard a lot about French and German banks getting bailed out by the ECB and the IMF.

But the question is, what were the Swiss banks doing lending all this money to Greece? And I think it's an interesting entree to another whole aspect of this, which is the role of the Greek elite, their offshore accounts, their offshore shipping industries, and other industries that are mainly held offshore, not paying their fair share of taxes in Greece.

So this whole crisis sheds light on this kind of global offshore industry, as well.

DESVARIEUX: Okay, let's get into that a little bit more. As I mentioned in the introduction, there's a new set of austerity measures that were passed on Thursday. But there's also a focus on reform, and reforming Greece's second-largest industry--excuse me, world's second-largest industry, the international shipping industry. And I want to get a sense of what is the relationship between that industry and the Swiss banks, and connecting it to Greece a little bit more specifically. And what will these reforms actually do?

HENRY: Well, one of the provisions in the reform package that was passed in addition to clamping down on home foreclosure, the rights of people to defend against home foreclosures, which I find really [brutalitarian], is the idea of raising the tonnage fees paid by the Greek shipping industry.

The shipping industry is--well, it's not the second-largest industry. That would be banking, or defense. But certainly shipping is one of the most important industries in the world. And this crisis really highlights the fact that it's basically an offshore industry. It's a lot of--first of all, a lot of the individual ships are registered in places like Panama, Liberia, the Marshall Islands, with relatively low regulations of labor rights, of safety inspections, insurance requirements, as well as registration fees.

Secondly, the owners of the industry basically inhabit, for the most part in the case of Greece, they're not living in Greece. They're living--transnational citizens of nowhere for tax purposes, in places like Geneva and London and New York. And these are very prominent, very wealthy families. So the issue arises, are they paying their fair share of taxes in Greece? And the answer I think, at a general level, is definitively no.

And third, we have this odd case of sophisticated Swiss banks lending heavily to Greece right up to the very end of 2009, 78 billion euros of bank loans to Greece. I've got to believe that a lot of that represents what's called back to back loans, basically where you have private banking assets accumulated by wealthy individuals. You're feeling secure about lending to Greece because those loans are backed up in the first instance by the deposits and the assets under management that these individuals have accumulated offshore. And secondly, you're likely to get bailed out by the Troika when it comes along. And I think that's indeed what we see in 2010, the Swiss exposure to Greece drops from 39 percent to about 3 percent, only about 3 billion euros.

So suddenly those, those bank loans get bailed out.

DESVARIEUX: All right. Let's be a little bit more specific, James, here. Which families are involved in the shipping industry?

HENRY: Well, I'm hesitating to name names here. I think what we, those families that are well known as Greek shipping owners are--Americans probably remember Onassis, who accumulated a lot of ships from the U.S. military in the late '40s and then turned them into a very successful tanker business internationally. Then Niarchos was another well known name. Latsas, Landras, Potsas, Charos. There's a tiny--relatively tiny handful of relatively well known very wealthy families that have dominated this Greek industry.

What the new Greek government in January pledged to do was to try to get the cooperation of havens like Swtizerland and Cypress, indeed London can be considered a haven from the standpoint of international taxation. Get their cooperation in recovering taxation from some of the offshore wealth parked in these places, by these elite families. And they've absolutely gotten no assistance whatsoever. The Swiss have basically stonewalled them. There's an estimated 200 billion euros at least of private financial offshore money from Greece sitting there being not taxed.

So not only is the world shipping industry largely offshore, but you also have the owners of the industry arrange their affairs so they're not contributing to this crisis.

DESVARIEUX: All right. James, let's pause the conversation here because I want to talk a little bit more about what you mentioned, considering recovering taxes and whether or not this Greek government can do this in the existing structure.

So James, thank you so much for joining us.

HENRY: Quite welcome.

DESVARIEUX: And thank you for joining us on the Real News Network.

End

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