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16 Feb, 2010 17:33

Greek PM on Russian cash-finding mission

Greek Prime Minister George Papandreou met with Russian leadership on Tuesday. Cooperation on major gas and oil pipeline projects dominated talks.

Greece has so far failed in its bid for help from the EU, with finance ministers simply telling it to prepare for tougher spending cuts and new taxes.

Now George Papandreou is courting Russia with a number of attractive concessions. Among them, a promise to promote the South Stream gas pipeline project to other EU members.

Energy cooperation

Following talks with his Greek counterpart, Vladimir Putin called for intensifying mutual efforts to develop the South Stream project.

"We need to boost this project, so we have agreed on what must be done and how," he said. “This large project, South Stream, is bound to become an instrument of economic recovery and post-crisis development. South Stream is not a Russian-Greek venture. This is a large international project based on market terms."

According to the Greek Prime Minister, the country’s financial difficulties will not affect the construction of the South Stream pipeline.

"Greece will emerge from the crisis stronger, which will ultimately help construction of the pipeline," George Papandreou said after his meeting with Vladimir Putin.

The Russian premier, in turn, expressed assurance that Greece will overcome the current economic difficulties it is facing.

"As for the current economic difficulties Greece is going through – we know about them. There is nothing good about it, of course, but we think they can be dealt with," Putin said.

Papandreou said that Greece is ready to sign a contract with Russia for the construction of its section the South Stream pipeline. "We are ready to sign the contract to set up a joint [Greek-Russian] company," he said.

According to Papandreou, the sides have also agreed to continue efforts on the Burgas-Alexandroupolis oil pipeline project.

"We have agreed to continue efforts on Burgas-Alexandroupolis in the near future. This is a mutual desire," he said. "I do not see anything preventing us from progressing with the project more dynamically, and naturally in cooperation with Bulgaria."

Greece’s economic situation

As for Greece’s current economic difficulties, following the meeting with Papandreou, President Medvedev said Greece should seek financial help elsewhere.

“I’ve just had a meeting with the Greek prime minister and advised him to turn to the IMF and the World Bank to overcome the difficulties facing Greece,” Medvedev said.

Meanwhile, Greece's debt is reaching a critical level and has already made Europe’s currency plunge against the dollar.

The EU has promised to help, but instead of bailing the country out, European finance ministers have told Athens to prepare for even tougher spending cuts and new taxes.

Greece's current money troubles have been aggravated by recent revelations that it has been masking its vast debts.

Just after adopting the euro in 2001, Athens secretly borrowed billions from Goldman Sachs, but without declaring it as a loan.

Former EU MP Giulietto Chiesa explained how the scheme worked:

“The debt has been transformed into currency exchanges, which permitted the Greek government to maintain this money outside of the budget. This trick was very similar to mortgage debt operations on Wall Street.”

Economist and author William Engdahl also believes such tricks were inspired by Wall Street, which is seeking to boost its influence around the globe.

“The problem is Goldman Sachs …is literally able to affect the affairs of state in the Euro land,” he said. “They are doing political tricks, they are doing manipulations to prop up the stock market and make it appear that there’s a recovery.”

One of the first people to pick up on the story was US blogger Megan Carpenter and she says hiding national debt is nothing new and even Greece's example will not bring an end to the practice.

“The question is whether or not the countries will continue to be engaged in this behavior to show that they are not in debt,” said Carpenter. “People know their government is in debt, so the government gets engaged in certain accounting things on a regular basis to show that they are not as [much] debt as they are, and the US is doing this right now.”

It will be difficult for Russia to get any concessions from Greece. As an EU member, Greece cannot decide anything – like visa facilitations for Russians – for itself without Brussels, observed Ekaterina Kuznetsova from the Center for Post-Industrial Studies.

“There is talk that Greece may default, but the problem is that we will only understand this in the middle of March when Greece will have to refinance €16 billion of its debt,” she said.