US embassy cable - 05ATHENS3113

UNCLAS SECTION 01 OF 02 ATHENS 003113 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG, EAGR, GR, OIL 
SUBJECT: DISSENSION IN THE RANKS: PUBLIC POWER 
CORPORATION'S PALEOKRASSAS RESIGNS FROM GREEK GOVERNMENT 
 
 
1. (U) Summary. On December 1st, Public Power Corporation's 
(PPC) President, Ioannis Paleokrassas resigned from his 
politically appointed post after his latest misstep within 
the ranks of the ruling New Democracy (ND) party.  A former 
Minister of Finance in the previous Mitsotakis 
administration, Paleokrassas often clashed with Development 
Minister Dimitris Sioufas, PPC board members,and other  ND 
party officials during his tenure at the PPC in his attempts 
to expose corruption and consolidate real rather than 
ceremonial power.  His departure raises further questions 
about the effectiveness and the sincerity of the GoG to 
increase transparency and liberalize the domestic energy 
market.  End Summary. 
 
Background-An Insider on the Outside 
------------------------------------ 
 
2. (U) Ioannis Paleokrassas began his political career in 
1977 as a Deputy Minister and moved in and out of government 
several times during the next 28 years, serving as Minister 
of Finance, European Communities Commissioner and as a Member 
of Parliament.  Current PM Kostas Karamanlis nominated him to 
serve as chairman of the PPC in 2004, shortly after ND took 
power. 
 
3. (U) In spite of his prominent position with senior ND 
ranks, Paleokrassas' has often clashed with those around him. 
 In 1978, he likened the Greek economy to the Soviet Union 
and said that the reason for a stagnant Greek economy was 
"statism and the French left-wing culture of all political 
sides."  In 1989, he grew even more bold, declaring that "No 
market operates in Greece.  Oligopolies, the expression of 
immorality in the economy, hold sway...Greece is a vast 
graveyard of competition, where Greek graverobbers of 
protectionism wander with the blessings of the country's 
political and intellectual leadership." 
 
4. (U) Upon taking offic in early 2004, Paleokrassas began to 
clash with Sioufas regarding senior PPC evecutives Stegios 
Nezis and Avraam Mizan, who were retianed from the previous 
PASOK government.  As the battle continued over his actual 
power, Paleokrassas sent documentation on 7 different current 
and former PPC officials, Nezis ans Mizan included, and their 
involvement in corruption schemes to the public prosecutor's 
office.  When challenged on his actions by Sioufas, 
Paleokrassas contacted PM Karamanlis to obtain support, which 
he received. 
 
The Proverbial Straw 
-------------------- 
 
5. (U) Rumors surrounding tensions between Paleokrassas and 
GoG officials and the PPC board exploded into the open as a 
result of an interview given to Greek daily Kathimerini on 27 
November.Likening the media and other members of parliament 
to instruments, he touched political nerves by his statement 
that there were "Senior Political Ministry officials (who) 
act as conductors, completing the orchestra."  One 
international journalis told Econoff that he was shocked by 
Paleokrassas'comments, not because they were untrue, but 
because of the very public way in which he was putting into 
question the ND government's stated dedication to confronting 
corruption. 
 
6. (U) Three days of political and media fallout followed the 
publication of the Kathimerini interview and led to a 
December 1 meeting with Minister of Development Sioufas in 
which Paleokrassas was asked to provide evidence on his 
allegations by 6 pm that day or resign. Paleokrassas also 
requested to meet with PM Karamanlis on 1 December as well, 
but the PM refused the meeting.  Paleokrassas offered his 
formal resignation letter to the PM the next day. 
 
The Exit Interview 
------------------ 
 
7. (U) In a press conference December 5, Paleokrassas 
clarified that his allegations of corruption were directed 
against former PASOK members of PPC, but focused on Sioufas 
as complicit in protecting two of the individuals he referred 
to the public prosecutors office (Stegios Nezis and Avraam 
Mizan).  Sioufas issued a detailed response to Paleokrassas' 
allegations that explained his support of the two individuals 
in question was in the interest of continuity as the country 
moved toward the critical time surrounding the 2004 Olympic 
Games. 
 
Comment 
------- 
 
8. (U) Paleokrassas' resignation has inevitably raised 
questions amongst the Greek public about the Karamanlis 
government's anti-corruption drive.  We believe his 
motivations, however, are more consistent with his past 
attempts to consolidate power in the chairman's office and 
rid the PPC senior leadership of anyone not loyal to his 
cause.  It appears that his latest series of allegations were 
simply too much for the GoG to bear, leading to the call for 
his resignation. 
 
9. (U) Paleokrassas' resignation has nonetheless focused 
tremendous public and media attention on the GoG's policies 
vis-a-vis market reforms in general and the PPC specifically. 
 This fallout will inevitably cause the GoG to tread 
especially carefully in coming months as it works to move 
ahead with reform while not completely abandoning 
consideration of its politcal debts. 
RIES