Karamanlis over Troubled Waters after Vatopedi Scandal & Financial Crisis

Athens.- Special for the Greek News
The Athens Exchange (ATHEX) plummeted nearly 10 percent on Friday, with the Greek banks leading the “dive”. Senior bank sources have attributed the selling pressure to panic conditions on the market and broader risk aversion by institutional investors. And while market analysts recognize that Greece simply gets hit by the effects of the global financial tsunami and not because of the economic policies of the government, they fear that the recent crisis over the Vatopedi Monastery scandal will further weaken the ruling party and will hurt the investorsʼ confidence in the governmentʼs ability to apply the necessary measures.

The Vatopedi scandal claimed its first victim on Thursday, even before Parliament begins its investigation into the affair, as State Minister and government spokes-man Theodoros Roussopoulos resigned from his posts, saying that he wanted to be free to fight the allegations of corruption.

Last month, the Greek merchant marine minister quit after accusations that his wife had acted as the notary public for several land-swap deals between Vatopedion and the state.

Alternate government spokesman Evangelos Antonaros will take over as the main press representative, while Interior Minister Prokopis Pavlopoulos will look after the Press and Information Ministry.

The political news overshadowed the bad financial news. Greek media split their attention between the dive of ASE, the resignation of Roussopoulos and the monks of Vatopedi.

“We are moving to a stage where emerging market exposure is very bad. If you look at where defaults on sovereign debt is going to be, it is going to be in the emerging markets somewhere,” said Jim Wood-Smith, head of research at Williams de Broe, according to Reuters.

In recent years, Greek banks have been increasing their exposure in emerging markets such as Bulgaria and Turkey to offset a slowdown in lending growth in the domestic market. National Bank of Greece was hit the most (-16%) over suspicions that their investments in Turkey are unsafe.

Greeceʼs economic growth, which has been one of the eurozoneʼs outperformers in recent years, is also heavily dependent on neighboring emerging markets.

N.Y.TIMES
The events also heart Greeceʼs international image, that had improved significantly after the Olympics. In an article published on Saturday under the title “Land Scandal Threatens Greek Leader”, New York Times points out that “A scandal over more than 250 questionable land swaps is threatening to bring down the Greek government and tarnishing a storied Greek monastic society. Two government officials have already resigned over the dealings, in which a wealthy Orthodox monastery traded cheap tracts of lakeside property for prime public real estate, including a housing venue for the 2004 Athens Olympics. An initial judicial inquiry put the loss to the state at $136 million.

The monastery, Vatopedion, is one of 20 on the northern peninsula of Mount Athos, home to a 1,000-year-old monastic community in which all females are entirely barred.

The scandal embroils its abbot, Ephraim; at least three senior aides to the prime minister, Kostas Karamanlis; judicial officials linked to Orthodox faith groups; and the wife of a former minister who acted as notary public for the land swaps. And many Greeks are asking whether Mr. Karamanlis, who canceled the deals after their scope emerged this month, knew of the arrangements all along.

According to publisher George Kirtsos, “This is the biggest scandal to hit Greece in recent decades. Its effects are bound to be far-reaching because of the wide range of interests that are implicated.”

The NYT article says, “Revelations by the news media of the deal details and grainy pictures showing government officials hobnobbing with Abbot Ephraim