US embassy cable - 05ATHENS2161

UNCLAS SECTION 01 OF 04 ATHENS 002161 
 
SIPDIS 
 
SENSITIVE 
 
H FOR CODEL HYDE FROM AMBASSADOR CHARLIE RIES 
 
E.O. 12958: N/A 
TAGS: PGOV, GR, OREP, PREL, VISIT 
SUBJECT: SCENESETTER FOR CODEL HYDE (ATHENS, AUGUST 25-28) 
 
REF: STATE 145349 
 
ENTIRE TEXT IS SENSITIVE BUT UNCLASSIFIED -- PLEASE TREAT 
ACCORDINGLY. 
 
1.  (SBU)  Embassy Athens warmly welcomes the August 25-28 
vist by CODEL Hyde to Greece.  You will arrive just as the 
summer holidays are winding down, and your visit will provide 
an excellent opportunity, not only to showcase U.S.-Greece 
relations, but to kick off the fall quarter with high-level 
discussions of our top foreign policy priorities.  We have 
arranged a meeting with Foreign Minister Molyviatis, and I 
will host the delegation at lunch with senior Greek 
decisionmakers. 
 
2.  (U) Looking back, the last three years have been 
momentous for Greece.  In 2002, Greece arrested the key 
leaders of the domestic terrorist group "17 November" which 
had terrorized Greece for 25 years, and had made Athens a 
"critical threat" post for the USG.  In 2003, Greece held the 
EU Presidency at the onset of Operation Iraqi Freedom, and 
kept the U.S.-EU relationship intact despite deep splits 
within Europe on relations with the U.S.  In 2004, Greece 
hosted the Summer Olympics, a major terrorist target, without 
incident.  Also in 2004, Turkey's EU membership aspirations 
were advanced, a Greek strategic objective.  In 2005, Greece 
joined the UNSC as a non-permanent member for the first time 
since 1952. 
 
3.  (SBU) Your visit comes almost a year to the day after the 
Closing Ceremonies of the Athens 2004 Olympics.  Today, 
however, Greece is facing a burgeoning budget deficit in the 
aftermath of those highly successful, but very expensive 
Olympic Games, and Prime Minister Costas Karamanlis has had 
little time to bask in the afterglow. 
 
GREECE AND THE GLOBAL WAR ON TERRORISM 
 
4.  (SBU) In Prime Minister Karamanlis's May 20 meeting with 
the President in Washington, the two leaders affirmed their 
strategic partnership, and discussed a variety of issues, 
including democratization in the broader Middle East region, 
Iraq and Afghanistan. 
 
-- On Iraq, the PM pledged during his campaign not to send 
troops, however Greece is providing funding for the NATO 
training mission in Iraq and providing equipment transport. 
 
-- On August 15, a Greek-led multinational medical unit began 
operations in Kabul, augmenting a Greek contingent of 
soldiers serving in the International Security Assistance 
Force in Afghanistan. 
 
-- Greece has offered to host a ministerial meeting on 
democratization in the Middle East under the auspices of the 
G-8s Broader Middle East and North Africa initiative. 
 
-- Greece has been helpful on the issue of terrorism 
financing, but its ability to detect terrorist money, or 
money laundering in general, is limited.  In particular, some 
smaller banks outside of Athens are still not computerized, 
making the tracking of money flows difficult. 
 
GREECE-TURKEY-CYPRUS 
 
5.  (SBU) Although there are unresolved issues between Greece 
and Turkey -- both still differ on Aegean air/seaspace 
demarcation and Greece often complains of alleged Turkish air 
incursions in the Aegean -- Greek-Turkish rapprochement 
remains the bedrock in their relations.  As a result, Greece 
has been one of Turkey's strongest supporters in the EU 
because it relates Turkey's EU accession to its own strategic 
interests.  The August 2 statement by French PM de Villepin 
that Turkey must recognize the Republic of Cyprus before 
beginning accession negotiations with the EU has put Greece 
in a difficult position. 
 
6.  (SBU) As is the case in many EU member states, public 
opinion in Greece has not yet embraced Turkey in the EU.  The 
government expects that a Turkish-EU dialogue on accession 
will contribute positively to stability in the region, while 
Greek public opinion shows that many Greeks, like their EU 
counterparts, have concerns about adding a large Muslim 
country to the EU family. 
 
7.  (SBU) The Cyprus issue has been stymied since the Greek 
Cypriots rejected UNSYG Annan's plan to reunify the island in 
the April 2004 referendum (Turkish-Cypriots accepted the Plan 
in the same referendum).  While Athens quietly backed the 
Annan Plan, the Greek Government also felt it should stand by 
the Government of Cyprus and the vote of the Greek Cypriots. 
At present, UNSYG Annan does not feel there is sufficient 
grounds for restarting the negotiating process.  On the 
island, the Turkish Cypriot community has been concerned to 
break out of its isolation, while the Greek Cypriot 
government has been quick to oppose direct trade or 
transportation links which could imply recognition. 
 
BALKANS 
 
8.  (SBU) Southeast Europe is a tough neighborhood, with the 
countries of the ex-Yugoslavia struggling to move beyond the 
wars that wracked the Balkans in the 90s.  As the only 
country in the region that is a member of both NATO and the 
EU, Greece sees itself as a natural leader to assist the 
region's Euro-Atlantic integration.  We strongly support this 
endeavor and would like to see Greece play an even more 
active role, including re-energizing its 550 million-euro 
Balkan assistance program. 
 
9.  (SBU) One issue that Foreign Minister Molyviatis will be 
sure to raise is the Macedonia name issue.  Following the 
breakup of Yugoslavia, Greece and Macedonia in 1995 agreed on 
"Former Yugoslav Republic of Macedonia" as an interim name 
until the two countries could decide on a mutually acceptable 
solution.  Last year's USG decision to recognize the Republic 
of Macedonia by its constitutional name touched off a storm 
of controversy in Greece.  Many Greeks saw our decision as a 
deliberate snub and the explanation that we took this action 
to help defeat a referendum in Macedonia that could have 
split the country and de-stabilized the Balkans did not 
convince many here.  In the aftermath, FM Molyviatis has 
asked the USG to publicly support the UN negotiations and 
accept whatever solution Athens and Skopje agree upon.  We 
have done so and continue to strongly support the UN-led 
negotiations.  On the surface, the issue seems to be wholly 
semantical, but to both sides it strikes deep chords of 
nationalism and historical destiny.  Macedonia strives to 
join NATO and the EU, and to do so, must come to terms on the 
name of the country that will enter.  Greece needs an 
acceptable compromise from the Macedonians; otherwise, the 
decision on Macedonia's NATO/EU entry would be unlikely to 
clear Parliament and may end up in a referendum. 
 
DOMESTIC TERRORISM 
 
10.  (SBU) The USG assisted in all aspects of Olympics 
security, and this close cooperation with the Greek 
Government has paid dividends in other security fields, such 
as the Container Security Initiative (CSI).  Along with our 
allies and friends, we heartily congratulated Greece for 
presiding over a safe and secure Games and funding the 
necessary security commitments. 
 
11.  (SBU) We continue to be concerned about domestic 
terrorism in Greece.  Greece made big strides by convicting 
key members of the infamous 17 November terrorist group, 
responsible for killing many Greeks and six Embassy employees 
(5 Americans and 1 Greek) over the course of its bloody, 
25-year history.  The same is true regarding prosecution of 
members of another domestic terrorist group, Peoples' 
Revolutionary Struggle (ELA), which, in past years, had 
bombed nightclubs frequented by U.S. servicemen. 
 
12.  (SBU) We are concerned that the December 2004 brutal 
assassination of a Greek police officer guarding the 
residence of the British army attache may represent the 
emergence of a follow-on terrorist group.  We have also been 
concerned by the release of two convicted members of 17N and 
ELA (on medical grounds), believing this sends the wrong 
signal about Greece's commitment to the war on terrorism. 
Finally, more needs to be done to crack down on anarchists 
who use homemade bombs to attack targets like Citibank ATMs 
and political party offices.  We have an excellent dialogue 
with the GoG on these matters. 
 
BILATERAL ISSUES: TIP, FMS, VWP 
 
13.  (SBU) Our bilateral relationship runs the gamut from 
commercial to military matters, and is enriched by the large 
Greek-American community in the U.S. and the estimated 
100,000 Americans, many of them dual citizens, living in 
Greece. 
 
-- TRAFFICKING IN PERSONS: The congressionally-mandated TIP 
report, with its different tiers of countries (Greece is 
currently on the Tier 2 Watchlist, a designation for problem 
countries), has been the key tool in getting Greek government 
attention.  Greece had made some progress in recent years, 
but can do more in some major areas, including treating 
trafficked women as victims (not criminals), more vigorously 
prosecuting traffickers and keeping statistics on TIP-related 
convictions. 
 
-- FOREIGN MILITARY SALES: On July 20 Greece announced it 
would purchase thirty F-16s via the Foreign Military Sales 
program, with an option to purchase 10 more.  This purchase 
has raised a loud, continuing debate in Greece about the 
merits of the F-16 vs. the Eurofighter.  The Greek decision 
was the Air Force's choice, mainly because F-16s are less 
expensive and easier to integrate with existing planes.  We 
also welcome the vote of confidence in the defense 
relationship with the U.S.. 
 
-- VISA WAIVER PROGRAM: In June 1998 the Department of State 
notified the Department of Justice of its intention to 
nominate Greece for membership in the Visa Waiver Program 
(VWP).  The Attorney General approved Greece for inclusion in 
the VWP in May 1999 subject to three criteria: (1) full 
membership in the Schengen border security regime; (2) 
resolution of reciprocal 90-day duration of stay in Greece 
for U.S. citizens; and (3) improvements in passport issuance 
procedures and control of blank passports.  Greece has met 
the first two and is working on the third requirement. 
Greece has announced it will begin issuance of its new 
biometric passport in March/April 2006. 
 
ECONOMICS 
 
14.  (U) Greece leads the EU in excessive debt (116% of GDP) 
and deficit(6.7% of GDP), and Karamanlis faces tough choices 
in order to bring them under control.  GDP growth will be 
less this year, due in part to the end of construction 
projects related to last year's Olympic Games, which means 
the GoG must increase revenues or cut expenditures to meet 
EC-imposed deficit targets.  For years, Greece has had trade 
and current account deficits, compounded by declining 
competitiveness.  At mid-year, tax increases have not met 
revenue goals, raising the specter of cutting social 
expenditures; a task sure to prove unpopular.  The government 
must also confront the task of making Greece's economy more 
competitive by privatizing inefficient state industries and 
attracting foreign investment, while minimizing structural 
dislocation. 
 
15.  (SBU) None of these reforms will be easy, given that 
inflationary pressure from rising health care and pension 
costs are expected to exceed those of any other EU member and 
 a strong euro continues to weaken already lackluster Greek 
exports.  GDP growth in 2004 was 4.2 percent, buoyed by both 
construction and consumption during the Olympic period, but 
is forecast from 2.7 to 3.4 percent in 2005-06.  Unemployment 
averaged 10.5 percent in 2004, although it hit a first 
quarter peak of 11.3 percent.  Consumer price inflation rose 
by 3 percent in 2004, well above the 2.1 percent European 
average.  2005 forecasts set inflation at 3.6 percent. 
 
PUBLIC OPINION 
 
16.  (SBU) A word on Greek public opinion and the media.  You 
may have heard about strong anti-American feeling in Greece. 
It does exist in a general sense, directed at official 
American policies, but almost never translates into harsh 
treatment of Americans on a personal level.  It reflects 
grievances over our perceived historical favoritism toward 
Turkey, American support for the former Greek military junta, 
the situation in Cyprus, our actions in Iraq, and, most 
recently, our policy to recognize Macedonia by its 
constitutional name, which, as noted earlier, many Greeks saw 
as a challenge to their national identity.  Polls bear this 
out: some 93 percent of Greeks opposed the war in Iraq and a 
large majority (80 percent) believe the U.S. plays a negative 
role in the global war on terrorism.  Some media outlets hype 
this sort of feeling, broadcasting violent images from Iraq 
and playing up any perceived slight against Greek interests 
by the United States. 
 
17.  (SBU) At the same time, there are signs of change.  Per 
capita, Greeks make up the largest percentage of foreign 
students in the U.S. of any EU country.  Many Greek elites 
have a nuanced and balanced view gained from years in the 
U.S. or from working closely with Americans in business or 
multilateral institutions. Your visit is part of the normal 
high-level exchange between our two countries. 
 
18.  (U) Again, I look forward to your visit and a productive 
and pleasant stay in Athens. 
RIES