“So many coincidences for the untrammelled fulfilment of a death so clearly foretold.”
Gabriel Garcia Marques, Chronicle of a Death Foretold
The tall, ghostly tower is a familiar sight at the waterfront industrial zone of Patras, Greece. Visible from the 6 lane motorway upon entering the city from the west, the Peiraiki-Patraiki tower is standing amidst a sprawling complex of abandoned warehouses and empty workshops. Its melancholy sight brings back memories of past grandeur to the locals, and stirs the curiosity of visitors : how could the pride of Patras, a massive company employing 7000 workers and operating 9 factories in Greece and abroad, meet with such a catastrophic end?
The Roaring Twenties
This is the place where industrial history was made a century ago. The small, family owned yarn and sock making workshop became the city’s first Public Limited Company. And soon after, strange looking contraptions begin to arrive from Germany.. There’s magic in the air, as a curious crowd gathers at the city’s busy port to admire the new diesel powered spinning and weaving machines. Modernisation is followed by rapid expansion. The upcoming company is in the market for a hundred different hires : spinners, doffers, balers, reelers, dyers, fettlers – so many other job titles since erased by the onset of more modern technology.. The call is answered by suburban lads, local farmhands, and experienced machinists moving sideways from the ageing, steam powered factories of Patraiki’s ailing competitors. In the aftermath of Greece’s disastrous loss of territory in Asia Minor, the factory will employ many from the refugee wave of Mikrasiates, the destitute émigrés fleeing the catastrophe. By the end of the decade, the tiny workshop has matured into a prospering textile factory, and is a well regarded employer.
Depression and War
Soon, Patraiki completes the takeover of its main competitor, Peiraiki. The joined up company (PP) is bigger than ever, boasting three factories and hundreds of employees, but also assumes the substantial debt that came with the merger. Then the Great Depression hits : in America, banks fold, businesses fail, and bread queues appear. Greece, already stifled by the expenditures of war and its seemingly chronic budget deficits, opts for easing : the gold standard is abandoned, more money is printed, business debts are restructured, and interest payments temporarily postponed. Trade protectionism and a weaker drachma would restrict imports, and this is all great news for the Greek industry, which experiences a period of stimulated growth in the late 30’s. And PP is not a small regional workshop anymore : it’s become a textile conglomerate with national reach, and an important employer of many workers in both Patras and Pireaus. Its success story now captures popular imagination, pleases politicians – and also dazzles underwriters at a very alarming rate..
The outbreak of war finds PP in considerable debt. Soon, its factories gear towards weaving blankets and other textiles for the Greek army : as desperate, epic battles are fought in the cold Albanian mountains, the industry is struggling to keep up normal operations. Then comes the collapse, the retreat, the capitulation… The factory is allowed to switch back to civilian output, but is forced to distribute all its profits to the collaborationist government. During the occupation, the Nazis “borrow” the equivalent of 14 billion dollars from Greece’s main lender, the National Bank, in the form of 0% interest “loan” (whose allegedly outstanding repayment remains a contentious issue to this day). Greece emerges from the conflict pillaged, and beset by shortages in even the most basic goods. When the Nazis retreat, political tensions boil over into a bitter civil war. By that time, PP’s pre-war debt is just another component in the National Bank’s humongous deficit.
The Vultures and the Cats
The civil war finally wanes in 1949, while in the U.S. President Truman signs off the Marshall Plan. It’s an unprecedented aid package designed to speed up the recovery of the war torn economies of Europe. For the next 2 years, the Greek government is set to receive $376 million in loans, grants, and materiel. In this accelerated microcosm of Greece’s emerging post-war economy, a new generation of local entrepreneurs appear. Nikos Nikolaou (2008), a veteran financial journalist, describes them as hawkish, shady, high-stakes gamblers with plenty to win – and virtually nothing to lose. Their relative wealth, status, and network somehow survived (or in certain cases.. emerged during) the war, and now enables them to claim a sizeable slice of the “American Pie”. According to Georgios Mirkos (2010), a former governor at the National Bank of Greece, over $80 million of aid was distributed to a small cabal of 10-15 industrialists, with another $35 million distributed to 150 smaller players. All in all, about a third of the Marshall Plan is entrusted to an “in-crowd” of wealthy, celebrity investors. A certain few among these appear to have borrowed up to a staggering 20 times the value of their own capital. Throwing any notion of risk analysis into the infinite Aegean blue, they will proceed to run their “paper companies” with expediency – and as still evidenced decades later, without any serious plan for repayment. Post-war Greek industries are now plowing ahead in a minefield, burning through their precious nine lives like proverbial cats.
Paul Porter (1947), U.S. Ambassador and head of the American Economic Mission to Greece, was confronted by the country’s various deficiencies during his tenure. He painted an unflattering picture of post-war Greece in his top secret reports : “There is really no State here, in the Western concept. Rather we have a loose hierarchy of individualistic politicians, some worse than others, who are so preoccupied with their own struggle for power that they have no time, even assuming capacity, to develop economic policy.” He goes on to describe what he saw as the mindset of ordinary citizens : “there appears to be a sense of helplessness on their part; a feeling that because they suffered during the War they should now be cared for by their richer allies; a belief that the external factors in their problem are so large that their individual efforts are futile.” Indeed, the Greek people and their economy are lacking confidence, and this will require more than a jolt. And an effort to prop up the troubled post-war state in the longer term, would come at the expense of development capital : most of the remaining aid will go part toward primary and consumer good imports, and part toward servicing the country’s frightful deficit. By 1950, Greece’s military expenditure represents a staggering 40% of its GDP. This was the bill of victory for the government forces, who had successfully expelled the armed bands of Communist guerrillas behind the Iron Curtain a few years earlier. At the same time, Greece was seemed bent on retaining, what was understood to be the second largest (and ostensibly the most entitled) public sector in Europe. Greek Civil Service jobs were (and still are) for life, becoming constitutionally permanent in 1911, and were nonchalantly burning a large hole in the country’s already strained budget. Porter describes the “..failure on the part of the Government to withstand demands for wage increases by Government employees and others.”
But Porter further reported on the selfish mindset of the new generation of Greek investors: “Such little liquid capital as there is in private hands has sought outlet in gold or foreign exchange rather than in development … Discussions with Ministers and industrialists always end up on the political note. They claim it is futile to adopt any policies or to undertake any permanent reconstruction until international and domestic security is achieved … People are not investing in productive enterprise in this atmosphere, and the responsibility rests primarily with the State which has taken no effective steps to create a climate of confidence or to prohibit capital from hedging its risk outside the national economy.” Today, we know that many of them would spend the next two decades inflating capital costs – such as the value of premises or machinery imports – making a quick, profitable return on their small investment. These questionable profits are then privately tucked away in Swiss bank accounts, while more and more debt accumulates on their corporate balance sheets.
Α Golden Age of Corruption
The discovery of a pathetic post-war situation in Greece will pose both a challenge and an opportunity for U.S. foreign policy, translating to a 25 year period of intense political meddling in Greek affairs. As Cold War paranoia intensified, Greece’s perceived inability to resist corruption and external influence was seen as a potential backdoor for Soviet infiltration, especially on account of its recent civil war adventure. So the Americans decide to throw more financial aid to the problem, and that enables them to enjoy a profound influence to the making – breaking – of Greece’s post war governments. From 1949 to 1956, Greece is chiefly led by U.S. sponsored retired Field Marshals (such as Nikolaos Plastiras, who found himself in office 3 times during that period). Between 1957 and 1967, the country experiences an intense disruption of the democratic processes by a bipartisan, military deep state : One side was linked to CIA’s stay-behind European Operation Gladio : it was a home grown, special forces cadre code-named Red Sheepskin. The other side was made up of officers with more progressive socialist leanings, code-named ASPIDA. Both sides wrestle for power : although pure communist parties had been outlawed since 1946, centrists and socialists are on the rise during that period, eventually managing to win the 1963 election. Alarmed by this result, and by the omnipresent spectre of Soviet infringement, the Red Sheepskin and their Western sponsors will resort to a circle of violence and intimidation against any suspected Leftist proxy parties. Open persecution, trials, imprisonment, and political assassinations become widespread. In the end, this period of worsening instability will lead to a right-wing coup d’etat in 1967, where the armed forces assume control of the state. This Regime of the Colonels is better known as the Junta. Danielle Ganser (2004) relates the account of William P. Talbot, then U.S. ambassador in Athens condemning the coup as “a rape of Democracy”, to which Jack Maury, then chief of the CIA station in Athens responded “how can you rape a whore?“
While the nation is suffering this politically turbulent period, hawkish industrialists profit further. They are ideally positioned to capitalise from the constant fear of communist insurrection, and the resulting rivers of U.S. aid pouring into the country to secure it. They are also peddling the happiness and stability afforded to the working class in their factories, and readily participate in this theatrical show of a solid, competent economy. And they capitalise from their deep connections within banks, their dependencies with politicians, the favour of foreign actors : they hardly bother to service their business loans anymore, unless the conditions suit them. In fact, they decide to simply stop paying back anything at all.
Despite the treasonous activity of the largest portion of Greece’s post-war cowboy capitalists, there’s also been a handful of good industry leaders, all of which demonstrated a common trait : they have invested a larger part of their own fortune to their companies, many of which remain healthy, performing organisations to the present day. But such examples seem to be the exceptions, like islands in a dark ocean of corruption. The manner in which the smart guys siphoned foreign aid and got fast tracked at the bank counter for decades is shocking. This kind of opportunism led to the scandalous “frozen credits”, a byword for the pile of unserviceable, unclaimable, and widely overlooked industrial debt accumulating at an alarming rate at the nations’ banks at the time. The callousness of the crooked few also stifled the capacity of hundreds of smaller, more principled investors to borrow from Greek banks. Georgios Kartalis, the Greek minister of Finance who handled the financial aftermath of the Marshall Plan in the 50’s, spoke of the government’s inability to collect from these powerful barons as the greatest challenge faced by his office. His account of the situation has proven prophetic. According to Nikos Nikolaou (2008), PP did partake in this process, enjoying “frozen” credit interest, or making ad-hoc repayments at the owners discretion – especially when low inflation rates or successive devaluations of the drachma created favourable conditions. But in the end, PP never paid back those fast track loans – its debt still a part of Greece’s national deficit, a $6.5 million arrears at the time it finally folded in 1992. Yes – that’s Greece the country’s deficit now, not just the National Bank of Greece’s. And the story of how that actually ended up happening, will have you gasping in astonishment.
Socialism and its discotheques
So back to Peiraiki-Patraiki after the war, going from strength to strength. They build Greece’s first post-war factory in Megalo Pefko, and by the 60’s, the company has become one of Greece’s leading employers, gaining their place in the limelight of a December ’62 TIME Magazine piece titled Greece: Counting on Cotton. The article is posing well founded questions about the Greek industrial sector’s ability to hold their own against more advanced European competition, shortly after the country’s ascension as an associate European Community member in 1961. Christopher Stratos, the young scion and managing director of Peiraiki Patraiki sees no problem. He speaks of “..using things Greece has plenty of – cotton and cheap labor..” as a recipe of enduring success for what he considers a “model” Greek company – although there’s no mention of the protectionist tariffs, the borrowing on tap, or the frozen repayments that make this model “thrive”.
In 1966, PP enters the pantheon of popular culture in Alekos Sakellarios’ “My daughter, the socialist” – a pastel coloured romcom from the affectionately called “Golden Age of Greek Cinema”. It was a home-grown, massively popular genre portraying the carefree, frivolous, and sometimes downright silly character of life in Greece, seasoned with dramatic and comical generation gap situations. Watching those Golden Age films today, one can only lament the accidental overdose of reality they contain about the country’s post-war oblivion. People seem to have no idea they’re on Titanic, heading into an iceberg – the band just keeps on playing.
The movie is typically shot with the vibrancy of a great acid trip, and is about the daughter of an industrialist, returning from her business studies in London to assume management of the family business. She’s full of alien, progressive ideas (socialist, anyone?), and a modernising agenda that brings her in conflict with her archetypal father – who represents the traditionalist establishment of the time. She is also met with the factory’s restless, picketing workforce : they clash with the management, demanding improved payment terms and benefits. After a period of initial mistrust, she joins them on strike, which gets her in trouble with both her father and the authorities – but ends up falling in love with the dashing ringleader, naturally a poor but honest working class boy, with a surplus of bravado and a lovely singing voice, and… well I could go on forever about cheesy Golden Greek cinema types, but instead, here’s a clip from the movie, showing dancing and prancing around Peiraiki-Patraiki’s Megalo Pefko factory :
Less than a year after the film screened, the Junta moved in to eradicate any notion of “sleeping with the socialist enemy” from society. Greece entered one the darkest periods of governance in it’s history, and the orgy of mismanagement intensified. When the Hellenic Industrial Development Bank decided to establish a rudimentary set of loan conditions, requiring investors to meet a min of 50% capitalisation, Junta appointed governors intervened, instantly removing the unpleasant barrier. And when the Numismatic Commitee, Greece’s premier financial think tank pushed for lending control legislation for less than 30% capitalisation, the Junta itself intervened : Nikolaos Makarezos, smart guy, Brigadier of Artillery, holder of 3 degrees in Economics, and self appointed Minister of Finance. The state of affairs surprised even Junta’s own (self appointed, naturally) Minister of Interior, Brigadier Stylianos Pattakos, who proclaimed his shock about the state of industrial borrowing (in his typically pompous Junta-speak) “.. the situation is unacceptably unacceptable. A situation impossible to justify in a virtuous society. I proclaim that such incapable, untrustworthy businessmen should get a record as persons of ill repute, and be afforded no further value forthwith, monetary, ethical, or otherwise” . Needless to say that by that time, the golden boys of Greek industry had become virtually untouchable, even by the powerful dictators of the country they’ve bleeding dry.
The Junta finally fell in 1974, on the back of the abominable Turkish invasion of Cyprus. Beginning with the Communist Party of Greece that becomes again legal in the same year, the veil before the seductive mysteries of Socialism is finally lifted. The Greek Socialists, returning from self imposed exile in France, Germany and elsewhere, will come to power by a landslide in 1981. They were led by Andreas Papandreou, the charismatic, yet divisive politician who is now poised to make his vision of a new era for Greece a reality. One of the first priorities of the Socialists is to consolidate their political capital by inserting their own people in every ministry, every organisation, every office, every level of government and the public sector . And thus a new, upcoming middle class emerges in the 80’s : a class of generously payed, well heeled, highly connected, amply protected Prasinofrouroi, literally the “Green Guards” : they’re named after the rising green sun, symbolising the party they brought to power with their votes, the Panhellenic Socialist Movement (PASOK).
Would there finally be hope for this poor country, ravaged by greedy capitalists and corrupted by totalitarian governments? Well – I wish I could tell you there would.. Yes, PASOK did get elected on a socialist platform of anti-corruption, social equality, jobs for everyone, taking it from the rich – redistributing it to the poor. But you would be wrong to expect them to do it by, for example, rolling up their sleeves and cleaning up the muck they inherited from over 3 decades of the Greek Right. Instead, they did something that finally pushed the last of the standing Greek industries over the cliff. They called it “Socialisation”, which was PASOK-speak for privatisation.
PASOK wanted to give people great jobs, even better working conditions than ever before. In fact, life would now finally become rosy, like the movies of the Golden Age, happy and carefree. Papandreou knew that this was the kind of progress people needed to push back the still fresh memories from the dark days of dictatorship, and boy, did he spin that yarn. So once PASOK filled every possible position in the public sector with their voters, they set about enlarging it, arranging for even more roles for their Green Guards, existing or prospective, and sometimes also for their extended families, or dependants. The Greek industrial sector was exhausted after years of mismanagement and abuse, and lacked competitiveness. Industries struggled on the back of a global recession caused by the two OPEC petrol crises of the 70’s. Privatising these ailing corporations was a stroke of genius for Papandreou, killing two birds with one stone : not only he’d emerge as the undisputed champion of the Greek working class, but would also be in position to deliver the bright, socialist future he promised. Everyone would soon get an opportunity to apply for a constitutionally guaranteed job in the public sector, and thus join PASOK’s social revolution.
This was an amazing, and almost unexpected end game for the Greek hawks : there would be no more lurking in the dark, no regrets, no future accountability… all of it was about to be taken from them by the Socialists, and redistributed to the people of Greece. Many of the barons now use their connections to lobby this new, too-good-to-be-true government to privatise their company as soon as possible. The failing corporations would now be characterised “problematic” , which is socialist-speak for insolvent, and they would become part of the roster in the government’s newfangled Organisation for Corporate Reconstruction, now tasked with taking the Greek industry to its final journey called remediation, the attempt to set the companies’ finances straight, making them viable again. Peiraiki-Patraiki is set to become one of those businesses : in its final spending spree, it embarks on an inexplicable expansion program, despite a global recession and the crushing landslide of debt that’s about to wipe it out. PP opens no less than 2 new factories in Greece and the Sudan, and purchases another location in Germany in 1981, the same year PASOK begins its reign. Faidon Stratos, the last owner of Peiraiki Patraiki will later hint at the politically driven nature of this final expansion attempt, stating “.. PASOK’s strategy was about controlling the industry. They applied this to all industrial activity in Greece. In our case, the government applied a compulsory increase in the share capital, effectively becoming the majority stockholder”. This entire avalanche of debt is now assumed by the new owner, the Greek state. The private debt becomes part of the state’s budget deficit, and rolls down the mountainside, gathering momentum (and interest). The factories become repositories of trusted voters, where higher salaries and better benefits can always be bested, and exceeded. They become Utopian, socialist state-run corporations, operating in defiance of any applicable market laws, often beyond the boundaries of common sense : they become the allegorical Ships of Fools discussed at length in Plato’ s Republic.
Peiraiki Patraiki finally collapses in 1992, amidst strikes, protests and petitions by the thousands of workers that were promised (no, guaranteed) this unusual, and very Greek, socialist utopia. PP’s massive debt was assumed by the Greek taxpayer. As the collapse of the USSR reverberates across the former Eastern Bloc, a new European order is emerging – new economies push forward with sound reforms, free from state protectionism, trade tariffs and planned economics of state socialism, while at the same time, Greece is heading the opposite way. Once the Conservatives get a whiff of the electoral opportunities afforded by the now industrial-scale public sector appointments pioneered by PASOK, they begin doing the same. In 2001, and despite its record of chronic inefficiency and rampant expenditure, Greece miraculously joins the first wave of countries to join the Euro. When another global crisis hits in 2008, the Greek economy finally collapses like a badly built sandcastle, having absorbed years and years of non serviceable debts, frozen credits, automatic pay and pension rises for everyone, and borrowing even more to keep the dream alive. As for the rest – well most of you probably know how that went
I recently had the chance to spend several hours inside Peiraiki – Patraiki’s majestic factory across the port of Patras. The gargantuan hangars and warehouses have become an informal home to the small, unfortunate tribes of Afghani refugees that find their way to Patras, seeking passage to mainland Europe. The installations are covering an area of about 25 football pitches, and remain a stark reminder of the failures of State, Socialism, Capitalism, Syndicalism, Trade Unionism, and a bunch of other mutants forms of -isms endemic to, and (make no mistake) still popular in Greece.
But I am glad to see that the facilities are in relatively good condition, thanks to the regenerative efforts of the Patras Port Authority, who manages the property directly. They are providing security, and even re-utilising parts of the complex as a business park for local companies. They have also sponsored alternative uses of the facilities, including an art installation – which explains the strange looking Razzle-Dazzle camouflage on PP’s Vulture and Cat tower. Despite the sad end of Peiraiki-Patraiki, I am hoping that its facilities will be preserved to become a beacon of learning, and integral part of Patras’ important industrial heritage.
Special Thanks : To Mr Stavros Antypas, Director of Holding & Development at the Patras Port Authority and his staff, for enabling me to visit and document the factory over several days in October 2019.
- Stories : The Marshall Plan, frozen credit, and “problematic” corporations , Nikos Nikolaou (2008), first appearing in Kathimerini newspaper, 29 Mar 2008 (in Greek)
- State, Bank, Industry by Georgios Mirkos (2010), Livanis Editions (in Greek)
- The Marshall Plan : Financial Aid and political subjugation by Giorgos Romaios (in Greek)
- This article for the movie connection (in Greek)
- This article for portions of Peiraiki-Patraiki’s history (in Greek)
- The Chief of the American Economic Mission to Greece (Porter) to the Under Secretary of State for Economic Affairs (Clayton) ,(1947) FOREIGN RELATIONS OF THE UNITED STATES, 1947, THE NEAR EAST AND AFRICA, VOLUME V, Doc. No. 868.50/2–1747
All photos are mine, except where otherwise stated. The designer of PASOK’s 1981 election posters is unknown to me – please contact me so I can add your credit.
Disclaimer : This is an article about the history of Peiraiki Patraiki, and modern Greek history in general. Although there are references to well documented topics, the article does not intend to pass judgement or portray the entirety of the owners, staff and/or other personalities associated with Peiraiki Patraiki, or various Greek banks, corporations, or governments in a particular light.
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