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Greeks Bearing Lawsuits
by James Dunnigan
July 7, 2014

Greek financial crises exposed a lot of corruption in Greece. A lot of the dirty dealing had to do with the military budget and one of the ugliest bits of skullduggery had to do with the four German Type 214 subs the Greek Navy bought, but was unable to pay for. Currently Greece owes the shipbuilders nearly $800 million and Greece, finding that pleading poverty really just delays the inevitable loss of the four subs, has decided on a bold if desperate strategy; it is suing the German builder and the Greek shipyard the Germans partnered with for $10 billion. Greece now claims that the Germans failed to deliver the subs in working order. It’s going to be difficult for the Greeks to win this one in an international court because the Greek government and the Greek shipyard that, at Greek insistence, built three of the four subs, have consistently failed to deliver. But in 2010 an Arab investor (Abu Dhabi Mar) bought the broke Greek shipyard. The Germans thought that new management and access to Arab oil money would get the Greek shipyard in shape to get their work on the subs completed. That is what happened and before the lawsuit was recently filed the Greeks said the subs were ready for sea trials, but apparently someone in the government redid the numbers and concluded that with rich Arabs now owning the Greek shipyard there might be a chance, even if remote, of making some money out of this disaster by suing the Germans and the Arabs for errors, corruption and incompetence that was all coming from the Greek side of this mess.

The Germans had hoped that this muddle would be cleared up in 2010. At that point The Greeks owed the German manufacturer and the Greek shipyard nearly $800 million. The Greek government insisted that the cash was not available and was not likely to be for some time. So the Germans decided that the four Type 214 class subs would be auctioned off to the highest bidder. Seeing that the exasperated Germans were serious the Greeks talked their way out of the auction solution. That just delayed the inevitable and now the Greeks are making a desperation move via a lawsuit. Once that fails, the subs will be several years older and even less valuable at auction.

Late payment was not the only problem with these subs. Between 2006 and 2010 Greece and German submarine builder ThyssenKrupp argued over the quality of German work on the Type 214 boats. Then in early 2010 the Greeks finally agreed to the original deal and declared the quality issues resolved. It was about time. Back in 2006 the first Type 214 arrived from Germany and the Greeks quickly declared that the boat suffered from 400 defects. Meanwhile, the other three 214s were being built in Greece and the first one of those was about ready for launch.

When the Germans first heard of the complaints they thought it was politics. A new Greek government had just been installed and it was common for new officials to try and make the previous gang look bad. The Germans also expected that the Greeks were using this defect list to renegotiate the contract and pay less than they had agreed to.

The Germans eventually concluded that nearly all the 400 defects were bogus (false or exaggerated) and sued for breach of contract. The Greeks responded by refusing to accept the sub, which remained tied up in Germany. Then the Germans threatened to withdraw technical help for the Greek shipyard that was building the other three boats, and go to court to prevent the Greeks from using any of the German technology. Meanwhile, the three boats constructed in the Greek shipyard were largely finished, but not complete. In 2008 the Greeks offered to settle the dispute but they didn't have the cash to make the required payments.

The 2010 deal had the Greeks accepting the first sub and then selling it. The Greeks still wouldn't admit that their defect list was a fraud. The Germans agreed to resume assisting the Greek shipyard and withdraw its lawsuits. Greece promised to make required payments but this was not done. It's believed that Greece's 2008 financial problems (spending more than they promised the European Union that they would) was a major factor in this settlement. This debt problem forced the government to cut way back on spending. That, plus the German threat to, in effect, shut down the Greek shipyard, and throw 1,400 people out of work, forced the government to back down on the crises it had created. But the cash was simply not there to pay for the subs, so the went back and forth as the Greeks tried to talk their way out of the threatened auction.

Meanwhile, Greece has eight German Type 209 subs. These 1,100 ton boats entered service in the 1970s and are being kept in service via regular upgrades and refurbishment. The 214s (ultimately eight of them) were to replace the 209s. Since that deal has finally died, the Greek submarine force will just fade away by the end of the 2020s.  Archrival Turkey has ordered six Type 214s in 2009, with the first arriving in 2015. All are being built in a Turkish shipyard with German assistance and some German components. There have been no problems with quality or payments.

 


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