Less healthcare, but Greece is still buying guns

Greeks furious at 'intact' arms spending as eurozone leaders insist on cuts to their public services

As Greece is forced by European leaders to abandon a referendum to allow the people the chance to vote on its latest bailout conditions, the country is preparing for yet another dose of austerity.

The conditions of the next €130bn rescue package will be severe, yet there is an elephant in the room: the extent to which the German but also the French military industries rely on Greece.

The small, crisis-hit nation, whose prime minister, George Papandreou, narrowly survived a vote of confidence on Friday, buys more German weapons than any other country. Some Greeks want to know why it is that France and Germany are demanding cuts in pensions, salaries and public services, but the buying of arms is allowed to continue unabated.

Yanis Varoufakis, professor of economics at Athens University, says: "When Greek hospitals are running out of bandages, the only bit of the budget not being attacked by the EU and IMF is military expenditure."

Greece is the highest military spender, in terms of percentage of GDP, in the EU. Professor Varoufakis adds: "Greece is a disproportionately crucial customer for the arma-ments industry. In comparison to Greece's size, it's preposterous."

Despite its dire financial straits, the country's military expenditure has risen during the global financial crisis. It spent €7.1bn in 2010, compared with €6.24bn in 2007.

Some 58 per cent of Greece's military expenditure in 2010 went to Germany, according to the Stockholm International Peace Research Institute (Sipri).

The US is the major beneficiary of Greek military expenditure, with the Americans supplying 42 per cent of its arms. In second and third place are Germany, with 22.7 per cent, and then France, with 12.5 per cent.

Professor Varoufakis believes: "The EU and IMF keep giving loans to Greece to stop it going bankrupt, but countries such as Germany need to justify this to voters, hence the demand for spending cuts. But with Greece being such a crucial arms customer, it only takes a phone call to the German government from an armaments manufacturer to ensure that Greece's military budget stays intact."

Greece's defence budget is historically high due to the perceived threat from neighbouring Turkey. Arms companies have benefited by playing the two sides off against each other. Professor Varoufakis says: "Typically, one side buys, say, a frigate, and then the other buys the same frigate – with the only difference being the colour of the paint."

However, critics in Greece argue that, as an EU member, Greece should be guaranteed protection from Turkey by its more powerful allies. Although the EU is not a military alliance, common sense suggests that Greece could reasonably expect support if it was attacked by Turkey.

Kostas Panagopoulos, co-head of the Greek polling agency Alco, says: "We have had a huge military spend for the 40 years since the junta, due to our issues with Turkey. But people are saying we must change our priorities. I believe Germany and France are pressuring Greece to keep spending. It is not clear if it is part of the bailout deal – it is a hidden issue."

Greece's importance for the military exports of both countries is clear from a closer look at data from Sipri. During the five years up to the end of 2010, Greece purchased more of Germany's arms exports than any other country, buying 15 per cent of its weapons. Over the same period, Greece was the third-largest customer for France's military exports, and its top buyer in Europe, with 12 per cent. In that time, only 1 per cent of UK arms sales went to Greece, all of which were in 2010.

As their government kept snapping up guns and ammo, ordinary Greeks suffered through the cuts. Yiorgos Droggitis, 30, has not been paid for almost two months. An administrator for one of Greece's debt-laden local authorities, Haidari, in north-east Athens, Droggitis says his finances are increasingly stretched: "One day, over the summer, I did not even have 80 cents to buy bread."

To top it all, Droggitis is only now able to open the windows of his apartment after several weeks during which the street where he lives was strewn with stinking rubbish due to refuse collectors being on strike.

He is among those angry that the EU is demanding cuts in Greece at that same time as selling the country billions of euros-worth of weapons. He says: "Germany and France are telling us to take these cuts to our health and education systems, but we keep buying their weapons."

Pavlos Spanakis, 67, a retired civil engineer in Athens, has seen his state pension cut a second time, bringing it to 80 per cent of what it was two years ago. He sighs: "The austerity measures have gone too far and we cannot afford more cuts. We must improve in other ways – and one would be for the EU to protect us from Turkey so our defence budget can be smaller."