DISSENSION IN THE RANKS: PUBLIC POWER

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