Greek Tragedy Act 3: The rescue package

The fleet of ambulances have arrived in Athens with a rescue package but it remains to be seen if the patient can be revived. A combination of the EU and the IMF has agreed to provide a $146b bailout package to the new sick man of Europe. The EU will give Greece $106b and the IMF will give the rest. Finance ministers from the 16 countries of the euro zone endorsed the plan yesterday after the Greek government announced budget cuts and tax increases. The enormous package is Greece’s last chance saloon and may not stave of a default of its staggering sovereign debt. According to Greek Prime Minister George Papandreou the choice was "between collapse and salvation". (photo: AP)

In a joint statement, EU Economic and Monetary Affairs Commissioner Olli Rehn and IMF Managing Director Dominique Strauss-Kahn said they recognised the sacrifices that will have to be made by the Greek people, but they were necessary to rebuild the country’s shattered economy. “We believe that the program is the right thing to do to put the economy back on track. Importantly, the authorities have also designed their program with fairness in mind," they said. “The support from European countries, the European Commission and the European Central Bank, and the IMF demonstrates a very high level of external commitment.”

But that commitment is not totally in place yet. For the European countries, the package was as much self-serving as it was about helping a neighbour. The German Government was particularly reluctant to pitch in. As Europe’s largest economy, Germany is expected to provide the largest share of the bailout funding despite strong opposition. Germans are angry at Greece for manipulating its financial figures to join the euro zone in 2001 and living beyond its means ever since. The German Cabinet meets later today to discuss the aid and despite grumblings, officials expect parliamentary approval by the end of the week.

The euro had plunged as Greece's financial problems increased last week with Standard & Poor downgrading its bond debt to junk status. But in the wake of the rescue package the European Central Bank said today it would accept the country’s bonds as collateral for loans regardless of how they are rated by credit agencies. The ECB Governing Council has changed its tune since January and now says it will exempt Greece from the minimum-rating requirement until further notice. “The Governing Council has assessed the program and considers it to be appropriate,” the ECB said. “This positive assessment and the strong commitment of the Greek government to fully implement the program are the basis, also from a risk management perspective, for the suspension.”

The Greek austerity measures include a rise in Value Added Tax of 2 percent to 23 per cent, a 10 per cent jump in fuel and alcohol taxes and a further reduction in public sector salaries and pensions. George Papaconstantinou, the Greek finance minister said the cuts would save $40b over three years with the aim of cutting the deficit from 13 percent to less than 3 percent of output by 2014. Annual holiday bonuses have been capped and axed for higher earners and public sector salaries have been frozen until 2014. With the combined cuts amounting to a 10 percent pay cut for many Greek workers, the mood is angry on the streets of Athens and Thessaloniki with a third general strike in as many months due on Wednesday.

Many observers believe the rescue package will not be enough to save Greece. Some analysts have warned Greece had not yet solved its fundamental problems and the Socialist PASOK government may not have the political stomach to carry out the reforms. The sovereign debt crisis also looms over Spain and Portugal and market speculators are watching carefully what happens next. Some economists say debt restructuring should not be ruled out to reduce the overall debt burden on Greece’s economy, but the downside is it would also create the heavy risk of denying Greece access to credit markets. The New York Times quoted Barcelona based economist and Fistful of Euros blogger Edward Hugh who was pessimistic about the outcome. “The immediate impact may be soothing, but the inflammation will soon show up again,” said Hugh. “My feeling is the rot has now gone too far.

Public service workers strike in Greece as austerity measures kick in

Greek public service workers have launched a nationwide strike in protest at government measures to tackle the country's crippling budget deficit. The strike has affected airports, schools, hospitals and government offices across the country as workers fight government attempts to freeze pay, impose taxes and reform pensions. It is the latest headache for beleaguered new socialist Prime Minister George Papandreou who had had to deal with a three-week protest by farmers demanding higher government subsidies. This week he has raised the average retirement age, frozen public sector salaries and increased taxes on petrol.

Greece's deficit currently stands at 12.7 percent which is four times higher than eurozone rules allow. Its debt is soaring towards half a trillion dollars with markets sceptical the country will be able to bail itself out. There is a strong possibility that Greece, Spain or Portugal will default on its debts and require them to either abandon the euro or get an EU bailout. European governments have agreed in principle to support Greece and are considering various options, including bilateral aid. German self-interest to keep the euro zone strong is likely to lead to an aid package from Berlin. It is also arguable Germany has a duty of care. Greece's troubles originated when low interest rates that were inappropriate for Greece were maintained to rescue Germany from an economic slump.

If the eurozone does not come to the rescue, a more desperate option would be to turn to the International Monetary Fund. The IMF has helped other eastern European countries like Latvia and Hungary in 2009 but it hasn't had to intervene in the eurozone. This would be a blow to the euro’s prestige and significantly the only support from the idea is coming from non-euro countries such as the UK and Sweden. Former Bank of England policy maker Charles Goodhart said that while such a move would be a precedent, the amount of money required to rescue the Greek fiscal position is relatively minor. “I would ask the IMF to come in,” he said. “From the European point of view, it’s the least bad option.”

There are also untested legal issues to deal with as there is no clear procedure for bailing out a euro zone economy. Article 122 of the EU treaty says the EU Council can decide "upon the measures appropriate to the economic situation", but should be used only if severe difficulties arise in the supply of certain products, notably energy. The treaty also states Council may grant, under conditions, financial assistance to a member state, if that state "is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control".

The problem is that it was the difficulties were not beyond Greece’s control. The Greek deficit got out of control due to a mixture of incompetence and deceit. Successive Greek governments had managed to pull the wool over the eyes of Brussels’ bureaucrats until the new Pasok Government doubled the projected GDP deficit from 6 to 12 percent late last year. Greece needs to raise almost $100 billion this year to refinance existing debt and keep paying salaries and pensions. Because most of that is front-loaded into the first six months, the government plans to raise 40 percent of it by April whatever the cost. To bankers this smacks of desperation and ratings agencies reacting by downgrading Greece’s credit rating thus making their loans even more expensive.

What the issue is bringing to the table are inherent problems within the eurozone. The currency cannot be devalued because the same currency is used by 16 countries with economies in wildly differing states of health. That means that while Greece’s ability to repay is being crippled by austerity measures, there is no way to lower the cost of the debt. Cuts inflicted on the eurozone's weaker economies highlight a fundamental weakness: the lack of a centralised budgetary mechanism, such as exists in the US, to move resources as needed around the EU. Gerard Lyons, chief economist at Standard Chartered said if monetary union is to survive, it has to become a political union. “If it doesn't there is likely to be some sort of implosion and a move towards a two-speed Europe,” he said.

New Papandreou defeats New Democracy in Greek election

George Papandreou has been sworn in as Greece’s new Prime Minister after his Panhellenic Socialist Movement (PASOK) won an absolute majority in this weekend’s general election. His victory ended five years of rule by the centre-right New Democracy party. PASOK were favourites to win but no-one expected the eventual margin: they have taken 160 seats in the 300-member parliament to 92 for ND. The socialist party took 43.8 per cent of the vote to 33.9 per cent for their opponents, its worst ever result. Outgoing PM Costas Karamanlis resigned from the ND party leadership immediately after conceding defeat while defending his unpopular economic policies as "the only realistic way of overcoming the crisis". (photo of Greek parliament by Derek Barry)

According to London’s Financial Times, Greece is slipping into recession later than most European countries with negative growth forecast for 2009 and 2010. While its service-based economy could face a long period of stagnation, Karamanlis’s prescription of two-year wage freezes, tax increases and economic liberalisation did not go down well with voters. But with the party hit by a series of corruption scandals, voters instead went with the 57-year-old Papandreou. He promised to streamline government with an emphasis on *green growth*, social and educational reforms and measures to bring more young people into the workforce.

After being sworn in Papandreou immediately announced a 3b euro economic stimulus package. This package stands in contrast to the country’s overdue 2010 budget plan that will need to tackle a budget deficit already twice the EU limit. Part of the package will pay for a campaign promise of above-inflation increases in wages and benefits for public-sector workers. Papandreou says he will fund the increase by cracking down on tax evaders and increasing the tax burden on the rich. But unless he can improve the economy soon he could well face the same social unrest that blighted the latter part of Karamanlis’ term in office.

Papandreou was born in the US and educated in Sweden, England and Canada and is a Harvard University fellow. He is the scion of an illustrious political dynasty and his father and grandfather have both served as Prime Minister. His grandfather George Papandreou was Prime Minister three times between 1943-1945, a short period in 1963 and again from later that year to 1965. According to Greek scholar Nicholas Rizopoulos, George Senior was a mercurial rabble-rouser whose liberal-republican credentials didn’t stop him from cutting deals with the right when it suited his career.

George Junior’s father Andreas Papandreou founded PASOK in 1974 as a descendant of an underground group that opposed the seven-year military dictatorship which ended that year. PASOK gradually shed its radical roots and became more moderate as it moved closer to power. The party ruled Greece for 20 of 23 years between 1981 and 2004 and Papa Papandreou was Prime Minister for most of the 1980s and early 90s. His son was a latecomer to politics but once inducted had a meteoric rise to foreign minister in 1999.

In this role Papandreou’s most notable success was patching up Greek relations with Turkey particularly over its role in Cyprus. He was instrumental in helping pave the way for Cyprus EU membership in 2004. By then Papandreou was out of office. Karamanlis’s ND had a sweeping victory in that year’s election winning 165 of the 300 seats. ND was re-elected in 2007 but with a greatly reduced majority. Financial scandals bedevilled Karamanlis’s second term. These ranged from a state land-swap deal in which high-value state property was traded for cheaper land owned by a monastery for 100 million euros, to a minister’s illegally-built villa which employed migrant workers without paying their social security taxes. Other social issues included the slow response to bushfires and the riots in Athens and Thessaloniki last year.

Karamanlis had two years left in this term but called the election early to prevent what he called PASOK blackmail. PASOK had threatened to force a new election after March 2010, when a new president was to be chosen. This would have meant a drawn-out election campaign which would have halted developments in social and economic policy, something Greece can hardly afford in the current economic climate. But Karamanlis’s snap election plan backfired. The 2004 result was almost completely overturned this weekend.

Chaos, Chios and Cesme

I was never supposed to be in Chios or Cesme. The idea was to get the nine hour ferry from Pireaus to Lesbos and then sail into Turkey via Ayvalik. But somehow I was convinced the ferry made good time from the mainland or that I had researched it wrong and it was only a seven hour voyage. In any case I blissfully disembarked the ferry from Pireaus and sought out the nearest hotel as the last light faded behind the hills of the port.

It was not until I entered the lobby of the hotel that I noticed something was amiss. The wording on the scenic picture that greeted me was Chios not Lesbos. I did not want to ask the lady at the desk where I was (which seemed too silly for words). Then I remembered some people on board the ship who did not seem in a hurry to disembark. Putting that together with the 2 hours gained, I realised there and then that my ferry made two stops and I had accidentally got off at the first port of call. At that moment the ferryboat hooted loudly and I could see it leaving port by the window. For better or worse I was staying in Chios.

Immediately I smiled at my mistake for I knew this was actually a good outcome. Researching ways into Turkey via the Greek islands, several Internet sites said Lesvos was the most expensive port of departure and Chios and others were a lot cheaper. Plus it meant I would land in Cesme which was loaded in history. All that remained was to find out more about Chios itself.

It was a large island by Aegean standards. Lesbos was Greece's third largest island and Chios wasn't far behind in fifth. The large island was itself another reason why it never twigged I was headed for the wrong place.

The fame of this island is based upon its mastic gum. Mastic is a small tree almost unique to Chios. In a small area on the south of the island, mastic trees produce a distinctively flavoured resin, also known as mastic. Mastic has been used as a spice for over 2,000 years as a gum, medicine or to spice up cakes, pastries and liqueurs. When Chios was incorporated into the Ottoman Empire, the spice and the area it grew in became crucial to defend.

I took a leisurely local bus to the town of Mesta barely 35km from the town of Chios but one hour away on narrow winding roads. Here in the southwest of the island is the heart of mastic production. This village, like many around it, was built in defensive formation with the houses tightly packed around the church making it difficult for enemies to penetrate. These mastic villages have controlled the gum production since Roman times.

The pretty town of Chios itself faces off the Turkish port of Cesme visible less than 10km away. The waters between the towns were the scene of a crucial 18th century naval battle that was instrumental in the growing reputation of the Ottomans as the sick man of Europe. Here in 1770 was fought the battle of Chesma in the Russo-Turkish war. Aided by British naval officer Rear Admiral John Elphinstone, Russian forces under the command of Grigory Potemkin defeated the Turkish navy which sought refuge in Cesme. Potemkin was a particular favourite of the German born Tsarina Catherine the Great who called him endearingly "my dear pigeon".

Dear pigeon's victory established Russian control of the Aegean and Catherine erected Cesme Palace in his honour. The palace is still extant but it is the Cesme castle that is the major drawcard. The castle was built by the Genoese rulers of the 14th century and passed into Ottoman hands around 1400. Bristling with towers that slide down the hill to the port, the castle presents a fearsome barrier to control of the mainland. Outside lies a statue that attempts to turn this dark page of Ottoman history into a victory.

This is the monument of Gazi Hasan Pasha next to his lion. Kaptan Pasha was a former slave who rose through the Ottoman naval ranks. He avoided worse disaster in the battle of Chesme by withdrawing part of the Turkish fleet to port. Despite personally bringing the bad news of defeat to the Sublime Porte in Constantinople, he was eventually promoted Grand Vizier. Cesme still proudly honours the Pasha, an attitude probably for the best when dealing with someone with such a potentially nasty pet.

Athenian Agora phobia

Welcome to thriving and prosperous Athens. The world financial meltdown seems to have passed Greece by. Either that or Prime Minister Karamanlis has ordered a food led recovery. Cafes, bars and restaurants are numerous and packed. A gemutlich hum competes for attention with the ceaseless traffic. Gnomes from Zurich number banks are here to understand why the country seems immune to crisis. Either that or they are Swiss football fans here for the World Cup match v Greece tonight at Piraeus. Perhaps the slight grim look on the Swiss faces is more to do with that country's embarassing World Cup loss to Luxembourg rather than the impact of the battered bourses of the world.

October is a good time to come to Greece. The weather is warm but the crowds are thinning out. There are no peak season prices either. Hotels are cheap, clean and competitive. I flew into Thessaloniki on Friday on a quiet British Airways flight from Gatwick. The capital of Macedonia is Greece's second city hugging the Thermaic Gulf some 500km north of Athens and contains a considerable charm of its own. The city is named for the sister of Alexander the Great who married the founder of the city, King Cassander of Macedon. The city subsequently passed through a series of rulers, Romans, Byzantians and Ottomans who all left their mark on the architecture. The Turks captured Thessaloniki in 1430 and turned the city into a religious-coded patchwork of Islamic, Greek and Jewish areas. This uneasy multiculturalism survived until three 20th century tragedies forever changed the town. A great fire destroyed half the city in 1917, and five years later the Turks were expelled creating a refugee crisis across both countries. Finally Hitler's conquest in 1941 doomed the Jewish population. By the end of that war, Thessaloniki was a purely Greek city.

Today, Thessaloniki proudly wears it patchwork past and even more proudly proclaims itself capital of Macedonia (FYROMers need not apply). The former Ottoman prison guarding the eastern entrance to the town is now the White Tower museum and lookout and is the preeminent symbol of the city. Underneath the tower the seafront stretches on for miles in either direction while the remains of the Ottoman walls guard the hills over the old city. Other museums detail the Alexandrine, Roman and Byzantine epochs while the subsequent 400 year Turkish occupation is casually ignored.

They may not like the Turks, but the Thessalonikans do like their food. Cafes and bars radiate out from Aghia Sophia square and hog every available space in the numerous alleys and lanes. This glorification of food was repeated in Volos some 2.5 hours south of Thessaloniki, on a railway branch line out from Larissa. Volos is on the Pagasetic Gulf which, when not sounding like some nasty infection, resembles a lake being surrounded on three sides by high mountains some of which are skiable in the short winter. Though a relatively new city founded in the 19th century, it is one of Greece's most charming towns with many neoclassical buildings peering out on the promenade. Behind the town, Mount Pelion commands the landscape imperiously. The seafront exudes relaxation and demands the consumption of a beer, ouzo or Metaxa, or better still all three.

Although Volos is only 300km north of Athens, it took seven hours to get there by train including a one hour wait in Larissa. There are some serious mountains to contend with in Central Greece but annoyingly the railway line grimly clings on to the side of the mountains while the motorway cuts a swathe through the plain. Why couldn't they have built the railway there too? Eventually the "fast" train rolls lazily into Athen's Larissa station in late afternoon.

There is just enough time to visit the Agora before it closes at 6pm. Situated between the Plaka and the foot of the Acropolis, the agora dates back to the 6th c BC. Here was where ancient Athenians met to discuss public matters. If some international financial crisis was afoot, the leading men (ancient democracy was not asexual) of the era would gather in one of the buildings of the agora to discuss what impact it would have on Athens. There under the cool marble stone, religious gatherings took place, merchants sold their wares and artists displayed their handiwork. Much of the spirit of the agora is retained in the Plaka where a steady stream of hawkers gather around the outdoor diners selling knickknacks of dubious provenance.

Behind the Plaka and the newly built metro lies the glory of Athens: the Acropolis. Greek for "high city", the Acropolis is the Sacred Rock and officially Europe's most pre-eminent cultural site. Rising 150m above sea level, the earliest buildings on the site date from Mycenean times. The Parthenon was built to commemorate the Battle of Marathon in 490 BC but was destroyed ten years later by marauding Persians. During Athens' Golden Age 20 years later, Pericles began an ambitious building program on the sacred rock. He build temples which honoured many of the Greek Gods including Athena herself in the form of Nike ("victory"). The Parthenon was rebuilt as a treasury, also honouring Athena. The building has since served as a Byzantine church and an Ottoman mosque. The Venetians badly damaged the site during their invasion in 1687. The British Earl of Elgin stole many of the Parthenon artefacts in 1801 leading to a squabble over the marbles between Greece and Britain that remains a touchy subject to this date.

There have been several restoration projects since the Greeks regained control of Athens in 1832. The earliest efforts were clumsy and made matters worse. Greece established a Committee for the Conservation of the Acropolis Monuments in 1983. Every item on the rock was meticulously catalogued and the restoration began with the delicate task of repairing the bad re-work. The difficult task has been exacerbated by the pollution which has plagued Athens since the 1960s. Acid rain and car pollutants have eaten into the marble threatening to undermine the whole restoration project. News that the Italians have returned some stolen booty is only partially good news. Some day, the Acropolis museum may be the only place to see the wonders of Pericles' greatest creations.

Downer swaps Canberra for Cyprus

With the support of the Labor Government, former Liberal foreign minister Alexander Downer is now likely to become the UN Special Envoy for Cyprus. Although not yet officially announced by the UN itself, Downer made the announcement himself from London where he is involved in private discussions about his future. The 56 year old South Australian said Australia has a humanitarian interest in a resolution to the Cyprus dispute because of its own large community of Greek and Turkish Cypriots. "I will be working toward helping the Cyprus saga,” he said. "I will be working toward helping the Cyprus saga, working as an envoy to try and resolve that long standing issue." “Working as an envoy to try and resolve that long standing issue."

The news came as Downer officially announced his retirement from federal politics today. The news brings an end to speculation of what role he might play in a future Liberal leadership contest. His last day in Canberra will be 14 July and there will follow a by-election in the Liberal blue ribbon seat of Mayo. Apart from the Cyprus role, Downer plans to work in an Adelaide consulting firm and also take up a part-time position in a South Australian university. Downer was Australia’s longest-serving foreign minister, lasting 11 years in the job throughout the entire period of the Howard Government.

Bernard Keane in Crikey was scathing about Downer’s legacy. Keane called him Australia’s “worst foreign minister of recent decades” who was the White House’s lapdog for most of his 11 year stint in the job (coinciding with seven years of the Bush administration). Keane castigates Downer’s role in the decision to go to war with Iraq, his intellectual dishonesty in the AWB scandal, and the damage he caused to the relationship with Papua New Guinea.

But Downer is not without his supporters. Writing today in the Wall Street Journal (the cross-benefits of Murdoch’s ownership becoming increasingly apparent), Australian right-wing journalist Janet Albrechtsen described Downer as a “stalwart and articulate defender of the legitimate right of Australians to determine their national sovereignty”. She claims that Downer’s determination to stay the course in Iraq has won Australia influence in Washington which will benefit Kevin Rudd while he (Downer) heads off to become Ban Ki Moon’s “fix-it man in the Mediterranean”.

Downer will have a difficult act to follow in current Cyprus special envoy, the Ethiopian-born Taye-Brook Zerihoun. Zerihoun is an experienced diplomat who formerly served as a UN envoy in Sudan. He spent his last few days in office in the island nation talking to both the Cypriot Greek leader Dimitris Christofias, and his Turkish Cypriot counterpart, Mehmet Ali Talat. He told a Medal Parade of the UN peacekeeping mission that there's been marked progress in the peace process in the last few months, a development which he adds, has engendered much optimism and goodwill in Cyprus and around the world.

One of Zerihoun’s last acts was to bring Christofias and Ali Talat together again on Tuesday for further talks on reunification. The leaders agreed in principle on the issues of single sovereignty and citizenship. Citizenship has been a key concern for Greek Cypriots particularly as they try to halt the growing number of naturalised mainland Turks who have moved to the island since Turkey’s 1974 invasion. The Turkish Cypriots, meanwhile, want the federation of the two communities foreseen in the UN-brokered peace talks to be an entirely new creation. This is opposed by the Greeks who want their government (recognised across the world except by Ankara) to continue to be recognised.

While these basic issues will take some time to resolve, Zerihoun has brokered other initiatives in recent months in an attempt to make life easier for both sides. They include educational programmes on cultural heritage; steps on road safety; easing the movement of ambulances between the two sides; the establishment of a Cyprus Joint Committee on Health; cooperation for an island-wide assessment of all major waste streams; and agreement on environmental education. Zerihoun has been backed up by the UN Peacekeeping Force in Cyprus (UNFICYP) which has been on the island since 1964 charged with preventing communal violence.

It was Downer himself who announced Australia’s last envoy for Cyprus. He appointed John Spender to the role in 1998. Back then, Downer was worried by the continuing deadlock over efforts to bring the Greek and Turkish communities together. “Thirty-five years since the outbreak of intercommunal fighting and 24 years since the Turkish invasion of 1974, the problem of Cyprus remains unresolved, “ he said “A settlement is long overdue.” Now Downer will have a direct opportunity to make that happen.

Cyprus talks resume between Greek and Turkish communities

The leaders of Cyprus’s divided communities met yesterday for the first time in over 12 months in the UN buffer zone in the capital Nicosia. Tassos Papadopoulos, Greek Cypriot president, and Mehmet Ali Talat, Turkish Cypriot leader, held a three-hour meeting facilitated by a UN resident representative, Michael Moeller. Ahead of a Greek Cypriot election, the talks did not make great strides. However Moeller said the two leaders "agreed on the need for the earliest start for the process" and "discussed other issues leading to a comprehensive settlement." Negotiations have been stalled since Papadopoulos rejected a UN power-sharing plan in 2004 which the Turkish Cypriots accepted.

The latest talks were welcomed by British foreign minister David Miliband who currently visiting Turkey. He pledged London’s support for a lasting settlement that would eventually lead to Turkey’s accession to the EU. “We very much hope that those talks will be entered into with real openness and determination on both sides,” he said.

At the heart of Cyprus’s problem is the mistrust and political rivalry between the island’s two ethnic communities. 80 percent of Cypriots are Greek Orthodox while the remainder are Turkish Muslims. Both sides claims to the island are rooted in history. Cyprus has been part of the Hellenic world since about 1000 BC and part of the Ottoman Empire since 1571. Ironically the Ottomans restored the Greek Orthodox religion which had been suppressed by the previous rulers, the Venetians.

In 1878, the Ottomans reached a secret agreement with Britain called the “Cyprus Convention” to transfer power of the island to the British. In exchange the British agreed to pay an annual lease and supported the Ottomans during the Congress of Berlin which redistributed Bulgarian territories back to the Turks. In the face of public opposition, the British reneged on the tribute and the money was diverted to pay off Crimean war loans instead.

After Turkey’s defeat in World War I, Cyprus became a crown colony. Britain formally annexed the island in 1925. Rebels began a campaign to end British control. However unlike Ireland and India, the Cypriots did not by themselves constitute a nation seeking independence. Instead, they saw themselves as an unfree part of a nation which possessed its own state. Consequently, for the Greek Cypriots freedom was synonymous with the goal of “enosis” - union with Greece.

It was gradually recognised, however, that enosis was politically unfeasible due to the presence and increasing assertiveness of the island’s Turkish community (about 18 per cent of the overall population). Instead, Britain signed the Zurich-London Treaty which declared the independent Republic of Cyprus in 1960. After pressure from the Turkish minority, the 1960 constitution went to great length to grant both groups cultural autonomy and institutional power sharing within a common state. At the time of independence Greeks and Turks intermixed in towns and villages across the island; there was no territorial base to divide the country into Greek and Turkish zones.

The Turks had a guaranteed 15 out of the 50 seats in parliament, three out of ten ministers and extensive powers of veto. In 1963 a frustrated Greek Cypriot President Makarios proposed amendments to the constitution to change guarantees on the number of Turks in the military and the civil service and remove the Turkish veto power. The changes were strongly resisted by Turkish Cypriots became the catalyst for a decade long conflict between Greek and Turkish elements separated by a UN peacekeeping force.

In 1974 the rightwing Greek junta arranged for the overthrow of Makarios and replaced him with a hardline Greek Cypriot government led by Nicos Sampson. Turkey feared this was a precursor to a Greek takeover and unilaterally announced a “peace keeping operation” to restore the constitutional order. They invaded the island and established control over the north. The invasion caused Greeks to flee south and Turks in the south to flee north fearing retribution. This ethnic cleansing resulted in a new entity called the Turkish Republic of Northern Cyprus (TRNC) which occupied 40 per cent of the island.

The international community condemned the invasion but the Turks were allowed to keep control. The TRNC has not been recognised by any country except Turkey which resettled peasants from Anatolia on the island to shore up its hold. The UN came in to police an 180km long middle ground known as the “Green Line” as positions hardened on both sides. The Green Line was up to 20kms wide and divided the capital, Nicosia, in two.

The (southern) republic of Cyprus joined the EU in 2004 after a 12 year waiting period. At the time, the European Council confirmed its strong preference for EU accession by a united Cyprus and insisted Greek and Turkish Cypriots to continue to negotiate with the objective of concluding a comprehensive settlement. However Cyprus was accepted into the union even though this clause was never realised. Talks in 2004 and again in 2006 failed to achieve the breakthrough.

Turkey also wants to join the EU by 2012 but Greece and Cyprus both insist it solve the Cypriot question before their application will be granted. However Turkey may turn this position to their benefit by agreeing to forego the TRNC in order to overcome Western apprehension of an Islamic country in the European alliance. In July 2005, Turkey included Cyprus in an expanded customs union with new EU countries offering preferential trading terms.

Issues to be resolved include the property rights of those made refugees by the 1974 invasion and the rights of minorities. The last time the two sides met was in July 2006, the two sides agreed to set up working parties to tackle issues affecting all Cypriots. They agreed on a twin-track process of technical and political talks. But none of the proposed groups has ever met.

The EU hope to implement a three part plan: Turkey to open its ports to Greek Cypriot shipping; Famagusta to be handed over from TRNC to the EU; and Varosha, the resort area of Famagusta, a no man's land since the invasion, would be handed over to the UN to allow Greeks to return. While these goals remain elusive, at least the sides are talking again. Tim Potier, assistant professor on international law and human rights at Cyprus's Intercollege, said the consequences of failure will only impact on the two communities and the island. "It's better for expectations to be lowered and the front door left open for further discussions," he said.

Greeks refuse Macedonia's help on wildfires

Despite wildfires which devastated the countryside and caused over sixty deaths, Greece has turned down an offer of help from its neighbour Macedonia. Macedonia offered 3 vehicles, 26 firefighters and a back-up crew of 60 at their southern border with Greece. However despite a fire death toll which has now risen to over sixty people as of 27 August, the Macedonian request to enter the country was ignored by the Greek Civil Protection Directorate and the firefighters went home. The incident is the latest salvo in a long and sordid battle over naming rights to both the region and the former Yugoslav republic.

The dispute between Greece and the Republic of Macedonia is based on the Greek contention that the Macedonians have plagiarised an important part of Greek history as a first step towards claiming part of Greek territory. The modern Slav Macedonia is unrelated to the ancient Macedon of Philip II and his son Alexander the Great. The modern term did not emerge until the end of the 19th century when a group in Thessaloniki formed a secret society dedicated to Macedonian independence from the Ottoman Empire. The Balkan wars of 1912-13 destroyed Ottoman power in Europe and led to lasting partition of Macedonia between Greece and Serbia.

After World War I, Woodrow Wilson’s 14 point plan proposed an independent Macedonia but Serbia supported by France prevented it from happening. The Serbs also re-badged the province as Southern Serbia in their new Kingdom of Serbs, Croats and Slovenes (which became Yugoslavia in 1929). They were opposed by an insurgent group called the Internal Macedonian Revolutionary Organisation (IMRO). IMRO operated out of Bulgaria and sought an independent Macedonian state until they were outlawed in 1934.

Before World War II Macedonia was known as “Vardarska Banovina” (Province of the Vardar river). Yugoslavia fell to the Nazis in 1941 and their harsh rule led to the rise of the Yugoslav Communist Party. When the Nazis were finally kicked out in 1944, newly installed Communist leader Marshal Tito named Yugoslavia's southernmost republic as the "Socialist Republic of Macedonia". Greece contends that Tito used the name Macedonia deliberately in order both to lay claim to the northern province of Greece of the same name, and more particularly, the city of Thessaloniki with its Aegean port. But Tito did not act out that threat. Instead he turned his back on Greece and closed the border causing great dislocation among Macedonian families.

Tito’s death in 1980 eventually led to the ethnic divisions and fractious break-up of Yugoslavia at the end of the decade. In 1991 Macedonia was the only former Yugoslav republic to gain its independence without bloodshed. Greece immediately objected to many aspects of independent Macedonia's state symbols and laws including its constitution and its contentious 16-ray Vergina Sun flag. Macedonia acceded to all these demands after a damaging Greek trade embargo which ended in 1995. The only remaining unresolved issue is the name.

Due to sustained Greek objections, Macedonia took its seat in the UN in 1993 under the provisional name of FYROM – Former Yugoslav Republic of Macedonia. The UN stressed this was a temporary measure “pending settlement of the difference that has arisen over the name of the State”.

The two parties are no closer to that settlement 14 years later. In July Greece ruled out any move that the country could join NATO as the “Republic of Macedonia.” The need for a solution is supported by the European Union, while at a meeting in Washington with US Secretary of State Condoleezza Rice, FYROM Foreign Minister Antonio Milososki was urged to assist efforts to resolve the name issue. Greece had earlier agreed it might be known with its capital city Macedonia-Skopje (similar to Congo-Brazzaville) but Macedonia has rejected this.

The most recent development on the issue came on 31 July when Greek PM Costas Karamanlis sent a message to the Macedonian authorities that Athens is waiting for an adequate response on "the concession it made". Karamanlis addressed the issue of differences over the name of Macedonia during talks with French President Sarkozy, focusing on the European perspective of the Western Balkan's countries.

According to the International Crisis Group, (ICG) the best prospects for agreement lie in a triangular solution with the following three elements coming into effect simultaneously:
- a bilateral treaty between Skopje and Athens involving Macedonian concessions to Greek concerns, including allowing Greece to have its own name for Macedonia
- acknowledging Macedonia’s name as ‘Republika Makedonija’ (in Macedonian language only)
- adoption and use for working purposes by the United Nations and other intergovernmental organisations of the Macedonian-language name ‘Republika Makedonija’.

However that may be wishful thinking on the ICG's part as well as Greece's. For simplicity, everyone else in the world without a dog in this fight will call the country "Macedonia".

Greek riots relive the terror of the Generals

At least 10 people were injured in Athens on Friday as police and protesters clashed during a rally marking the anniversary of a 1973 student uprising. There were two flashpoint locations; the Prime Minister’s official residence and the US embassy. Rioters threw flares and rocks at police who responded with tear gas. Some 15,000 demonstrators participated in a march marshalled by 7,500 police. The match was timed for the 33rd anniversary of the student uprising against then-ruling military junta. Many were killed in those riots which eventually led to the overthrowing of the government a year later. In recent years the march has been organised by anarchist groups and police were ordered to take a tougher line. There was also trouble in Greece’s second city Thessaloniki where protesters damaged a sports museum by throwing stones and smoke bombs.

The course of Greece’s modern political history dates back to the Second World War. Greece was occupied by Nazi Germany after it successfully resisted an Italian advance in 1940. The Germans were eventually forced to withdraw in 1944 and the country descended into civil war between communist-led Democratic Army and Hellenic Army. This war lasted until 1949, when the communists were defeated in the battle of Grammos-Vitsi. The Greek national army was well-equipped with US and British weaponry and ammunition and surrounded the exhausted Communist forces at Mt Grammos. To avoid total defeat the Communists fled into neighbouring Albania and the civil war was over. Greece joined NATO in 1952 and the country experienced a gradual and consistent economic growth, aided by significant grants from the Marshall Plan.

The peace lasted until the mid sixties. In 1963 Greece elected a liberal Prime Minister George Papandreou. The King openly opposed Papandreou's government and there were frequent ultra-rightist plots in the Army which destabilised the government. Eventually the army, supported by NATO worried about Greece’s new leftist leanings, launched a coup d’etat against the elected government in the early hours of April 21, 1967. The colonels were able to quickly seize power by using surprise and confusion. All the leading politicians were arrested. The Regime of the Colonels would last for the next seven years. Although supported by the US, the regime was deeply unpopular within Greece after it abolished civil rights, dissolved political parties and arrested and exiled most politicians.

The focus for opposition was the universities. The junta had banned student elections and drafted leftist students for the armed forces. In February 1973 law students went on strike and barricaded themselves inside the university of Athens demanding the cancelling of the law that imposed forceful drafting of "subversive youths". The strike was brutally broken up by police. In November students at the Athens Polytechnic commenced their own protest, built a barricade and launched a radio station. In the early hours of 17 November, the junta leader George Papadopoulos sent the army in to crush the demonstration. With the city in total darkness, a tank crashed through the gates and crushed the barricade. Though no-one inside were killed, at least 24 people died in fighting in the streets outside the campus.

A junta hardliner Taxiarkhos Ioannides used the uprising as a pretext to re-establish public order and staged a counter-coup that overthrew Papadopoulos one week later. He reinstated strict military law. Ioannides ruled precariously until June 1974 when he botched a coup attempt on Cypriot leader Archbishop Makarios. Turkey used this excuse to invade Northern Cyprus and the Greek regime imploded under the political pressure. The Greek public feared all out war with Turkey and emptied supermarkets in the panic and indecision that followed. Ioannides was booted out and a government of national unity was established. Constantine Karamanlis (Greek leader from 1955-1963) was recalled from exile in Paris to lead the government. Upon news of his impending arrival Athenian crowds took to the street cheering and chanting his name. Karamanlis quickly defused the tension with Turkey and presiding over the move to democracy. He legalised the KKE (the Greek Communist Party) and freed all political prisoners. He called elections for November 1974.

Karamanlis won a massive majority for his new conservative party New Democracy in the election. The monarchy was abolished and replaced by a presidency and a new constitution was agreed in 1975. Karamanlis won another election in 1977 and ruled for another three years. The socialist PASOK party under George Papandreou’s son Andreas finally won power in 1981. It was the first socialist government in Greece’s history. That same year, the move to democracy was firmly entrenched when Greece was accepted as the 10th member of the European Community (now Union). Ever since, Greece has experienced remarkable and sustained economic growth based on tourism and shipping. The highlight was the return of the Olympic Games to its spiritual home for the 100th anniversary of the modern games in 2004. The wheels of politics turned again and Kostas Karamanlis (nephew of Constantine) won back power for New Democracy a few months prior to the Olympics marking his party's first electoral victory in nearly 11 years.

However, the anarchist movement remains relatively strong in Greece, especially in Athens and Thessaloniki. The movement developed in the 1970s strongly influenced by German and Italian groups such as Baader-Meinhof and the Red Brigade. The movement was shaped by the 1973 insurrection against the colonels. And 17 November every year is the movement's finest hour as it attempts to relive the glory days of fighting against tanks and repressive governments. Unfortunately for them, democratic Greece has moved on a long way since the 1970s and the movement's support remains confined to poverty-stricken ghettos and the last vestige of radical students.