Sept. 7 (Bloomberg) -- At Amherst College’s Pratt Hall in 1970 and 1971, a handful of students from Greece spent countless hours decrying the military junta ruling their country.
George Papandreou, a bluejean-clad freshman whose father as prime minister had founded the country’s Socialist Party, would agree with Antonis Samaras, a sophomore living upstairs who favored blue blazers, that the regime had to go. Friends since high school in Athens, they were of one mind as they talked in the dormitory and over pizza in nearby South Hadley.
“Had there not been a junta, it’s possible George and Antonis wouldn’t have forged the friendship that they did,” said Philip Tsiaras, who lived in the dorm room next to Papandreou’s and is now an international artist. “They would have their political lines already drawn for them depending on who was in power in Greece.”
Today, those political lines couldn’t be more divisive. Papandreou, now prime minister, is guiding Greece through a debt upheaval whose aftershocks have spread throughout the European Union. Samaras, the leader of the political opposition, is trying to block the premier’s agenda every step of the way. The two will provide details of their economic agendas in the city of Thessaloniki over 10 days starting this weekend.
Samaras has set his New Democracy Party against both packages of austerity measures that the EU and international lenders required in return for new loans, the creation of a bailout fund and a bond-exchange and debt-buyback program. He hasn’t changed his position even after political pressure from leaders such as German Chancellor Angela Merkel.
“He’s determined and stubborn,” said Theodore Vardas, head of the Greek retail association SELPE, who has known Samaras for 40 years. “When he believes something, it doesn’t change. He doesn’t compromise.”
Greek two-year notes extended a decline today that pushed yields to a euro-era record of 53.27 percent. Bonds have slumped this year, partly because politicians have struggled to agree on a united front to fight the crisis. They lost 27 percent through Sept. 5, while German debt has returned 7.4 percent, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.
The cost of insuring against default on Greek government debt was near a record today at 2,650 basis points, up from 1,010 at the end of 2010, CMA data show. It signaled an 88 percent chance of default in five years.
Fighting With Vehemence
Samaras would need to embrace the spirit of compromise should he ever come to power, according to George Karvounis, a risk manager at the Federal Bank of the Middle East in Nicosia.
“If he gained power and his principles were wrong, the vehemence with which he fights for what he believes could lead the country to the wrong path,” Karvounis said.
Samaras’s stance hasn’t won him public favor. When asked who was best suited to be prime minister, 32.8 percent of respondents in a Kapa research survey chose Papandreou while 28.9 percent picked Samaras. More than 35 percent said neither. The poll, published in To Vima newspaper, surveyed 1,023 people on Sept. 1 and had a margin of error of 3.06 percentage points.
“He continues missing opportunities to position himself as a formidable leader of the opposition,” said Jens Bastian, the Alpha Bank Fellow for Southeast Europe at St. Antony’s College at the University of Oxford. He isn’t “the captain steering the ship of the opposition parties in parliament,” Bastian said.
Like Papandreou, Samaras comes from a political dynasty. He is the grandson of one parliament member and nephew of another. His great-grandmother, Penelope Delta, a children’s writer, committed suicide on the day in April 1941 that the Nazis entered Athens.
In addition to Amherst, he and Papandreou both attended Athens College, an elite high school in Psychiko near the capital. Other alumni include George’s father Andreas, himself a prime minister in the 1980s and 1990s, and parliament member Kyriakos Mitsotakis. The school was co-founded by one of Samaras’s great-grandfathers.
Samaras grew up among the well-connected families of Athens, playing tennis and going to parties at private clubs, said Lia Daniolou, a New Democracy party official who has known him since their childhood days. He won the Greek Teen Tennis Championship at the age of 17.
“I could see he had the qualities of a sportsman,” said Dinos Arcoumanis, who used to ride the school bus with Samaras and is now deputy vice chancellor at City University London. “At that critical age, what sports can do is give you self-confidence.”
Samaras took his self-confidence and tennis skills to Amherst in Massachusetts, where he distinguished himself, said Walter Nicholson, who taught him in at least three economics classes. The promising student later graduated magna cum laude with a major in economics.
“He had a very good forehand,” Nicholson said in a phone interview, adding that they played four or five times a year. “He was one of the most charming students I ever taught.”
Samaras, 60, and Papandreou, 59, aren’t the only leading Greek politicians who have attended Amherst. Also in the club is Foreign Minister Stavros Lambrinidis, who graduated in 1984.
The 190-year-old college of about 1,700 students has produced such world leaders and notables as President Calvin Coolidge (1895), Prince Albert of Monaco (1981) and Nobel laureate Harold Varmus (1961).
Papandreou went on to earn a master’s degree in sociology from the London School of Economics in 1977 after graduating from Amherst cum laude as an independent scholar. Samaras enrolled in Harvard Business School in Boston.
“It’s difficult to say who is better educated in economics, but that’s not the issue,” said Arcoumanis. “You learn all this in politics because politics and economics are two sides of the same coin.”
Marshall Toplansky, a Harvard classmate, recalled that Samaras always wore the double-breasted blue blazer when he went out in the 1970s, when few students were so dressed. Papandreou at Amherst, by contrast, favored blue jeans and flannel shirts, and carried a guitar, said Tsiaras, who remembers Samaras as “center-right.”
Samaras “was very passionate about the issues he was dealing with, no matter what the issue was,” said Toplansky, who now lives in Irvine, California, and runs Wise Window, a technology company. “He was very interested in Greece and the future of Greece, and in wanting to go back and make a difference.”
At a dinner with classmates at a Greek restaurant near Harvard Square, Samaras made sure everyone knew what dishes they were eating and checked to see that they enjoyed the food, Toplansky said. If not, he ordered replacement dishes, he said.
The year after Samaras graduated from Harvard in 1976, he was elected to parliament for New Democracy at the age of 26. He served as both foreign minister and finance minister before he turned 40.
His unwillingness to compromise, though, cost him his post and, temporarily, his party. After the 1991 breakup of Yugoslavia induced former republic Macedonia to petition for United Nations membership, Samaras led the fight to block international recognition of the name. His view was that it referred to the ancient geographical region of Macedonia, or most of northern Greece.
While he was representing the broad party line, his outspokenness led then-Prime Minister Constantine Mitsotakis to replace him in April 1992. About a year later, Samaras set up his own political party, which consistently failed to win significant numbers of votes over the next 11 years.
Opening the Museum
He rejoined the New Democratic Party in 2004, won a seat in parliament in 2007 and became culture minister in January 2009.
In that job, Samaras arrived at work at 6:30 a.m. and left at 11 p.m., said longtime friend Daniolou, who worked with him at the ministry in the public-relations office. His principal focus was on completing the New Acropolis Museum, a project that had been stagnating for three decades because of delays caused by political disputes, court cases and archaeological finds that slowed construction.
Building the museum was crucial to Greece’s case that the Elgin Marbles -- known in Greece as the Parthenon Marbles -- should return from the British Museum and to a proper home. Construction was mostly complete, though the opening had been delayed repeatedly.
Just days after his appointment, Samaras called Daniolou and asked her to work for him. He told her he wanted the museum to open in March. When she expressed doubt, he said he was willing to push the date back -- to June.
“He put everyone to work,” she said. “We were killing ourselves. He said, ‘I don’t care, we’re going to do it.’”
Three nights before the opening, staff told Samaras the café couldn’t open because there were no waiters and no equipment, Daniolou said. Samaras made some calls, and soon was choosing china, pricing food and wine on the menu and correcting English translations. The museum and café opened on time.
Samaras became opposition leader when Papandreou defeated Konstantinos Karamanlis in an October 2009 election, and the debt crisis exploded. Papandreou, who campaigned on pledges of higher wages, was forced to reverse course and embrace austerity. Savings alone failed to restore Greece’s finances, leading to a 110 billion-euro ($154 billion) bailout package in May 2010 coupled with spending cuts and steps to raise revenue.
As the crisis engulfed Ireland and then Portugal, EU and IMF officials questioned Papandreou’s progress on overhauling the economy amid concerns the country wouldn’t be able to return to debt markets.
They told him to outline a five-year plan of budget cuts and state asset sales that would ensure the country got the next installment, needed to pay bond redemptions, wages and pensions over summer, as well as a new funding package.
Another part of the request: get support across parties. Samaras declined. His intransigence was on public display in June this year at a meeting of European self-styled “center-right” leaders to discuss the second bailout. They pressured him to join with Papandreou and push a 78 billion-euro package of austerity measures in return for European aid to prevent a Greek default.
He lashed out at the “current policy mix” for relying too much on tax increases. In doing so, he was defying Merkel, who had appealed to the Greek opposition “to live up to its historic responsibility.”
“We had a friendly discussion, but also one that said seriously in such a situation everyone has to unite in a country,” Merkel told reporters on June 23, the day of the meeting. “It worked in Portugal, it worked in Ireland and that’s why we made the case for it working in Greece.”
Luxembourg Prime Minister Jean-Claude Juncker, who also chairs euro-area finance meetings, was more blunt.
“I couldn’t take part in the meeting, which should be good news to Mr. Samaras, since I would have insistently called on him to give up his negative stance,” Juncker said that day.
Bastian, the Oxford academic, said the occasion provided an opportunity for Samaras to “define his standing as a constructive opposition. He failed that test big time.” Samaras “chose to score cheap points in the domestic politics of Greece,” Bastian said.
To Vardas, the childhood friend, Samaras’s stance was a matter of principle.
“He could’ve gone to the Europeans and said what they wanted to hear,” he said. Instead, Samaras “took the cost and said no.”
Earlier that month, Samaras declined a Papandreou offer to form a national unity government. During a June 15 telephone call initiated by the prime minister, Samaras suggested Papandreou step down and that neither of them should participate in the next government, according to two people familiar with Samaras’s offer. The Papandreou side said the prime minister was willing to depart once an agreement on a specific agenda with clear goals was reached.
In a national address that night, Papandreou accused Samaras of playing politics and said he would form a new government and then seek a vote of confidence in parliament. Samaras retorted that Papandreou needed to decide whether he was able to govern and accused the premier of backtracking on the offer to form a unity government.
“The question now is whether Mr. Papandreou can govern,” Samaras said. “If he can, then he wrongly sought support from us. If he can’t, then he has to resort to elections. The country can’t remain in this uncertainty.”
Papandreou won the confidence vote and then backing for the 78 billion-euro, five-year package. He faced three parliamentary votes in the space of a week to secure further international aid, stemming defections from members of his Pasok party all the while.
“In a time of crisis, you made a choice that forces you into the same camp as those who are betting on Greece’s failure,” Papandreou told Samaras during the debate over the confidence vote on June 21.
The measure passed, 155-143, with Samaras voting against, as police used tear gas to disperse thousands of anti-austerity protesters in the streets of Athens. The vote paved the way for European leaders to agree on a new bailout package on July 21.
Papandreou and Samaras will lay out their visions starting Sept. 10 at the annual international fair in Thessaloniki in the north, where national leaders try to set the tone for the coming parliamentary session.
They aren’t likely to change their minds.
“It’s a classic case of ‘object in opposition and agree in power,’” said Stuart Thomson, a fixed-income fund manager in Glasgow at Ignis Asset Management, which oversees $125 billion, in a telephone interview. “The markets will assume that if put in the same position of the current Greek leadership, he would comply.”
Thomson said Samaras “was responding to popular opposition, to the cuts, to the austerity. You cannot criticize a politician for responding to popular demands.”
Papandreou was philosophical about his college friend during a July 19 interview at his office in Athens.
“We have a longstanding personal relationship,” he said. In politics, “there we do our sparring,” as well as seek consensus, he said.
“Sometime, after a decade, or so, we may sit down over a glass of wine and think back and say, let’s assess how things have gone in Greece,” Papandreou said.