Syriza throws in the towel and stocks soar as deal on Greek bailout reached

Brussels - Even the proposals presented earlier that Germany rejected were a sell out of most of the campaign promises made by Syriza including the demand for writing off some debt and for a new agreement rather than an extension of the existing bailout.

The new agreement makes it even clearer that Syriza is definitely committed to repudiating those promises, but goes much further. During the four-month extension period of the present bailout, Greece will be subject to exactly the same austerity conditions that were agreed to in the original memorandum of agreement(MofA). The sellout set forth in the original Greek proposals did not satisfy Germany, which wanted even more ironclad guarantees that Greece would keep to the original terms of the agreement. In return Greece managed to convince the EU finance ministers that its target surplus should be tied to its economic situation in 2015. Germany wanted not just a Greek sellout but a super sellout, and got it. The full text of the agreement can be found here. 

 In this article I will analyze specific parts of the deal that show how Syriza has repudiated its campaign promises and agreed to do nothing that would be inconsistent with what the Eurogroup or even the old Troika think is inconsistent with obligations in the original bailout agreement. 

The agreement notes that the extension of the loan(MFFA) is within the framework of the existing arrangement. There is no new deal. The old bailout is back with a vengeance. So is the review "on the basis of conditions in the current arrangement": The Eurogroup notes, in the framework of the existing arrangement, the request from the Greek authorities for an extension of the Master Financial Assistance Facility Agreement (MFFA), which is underpinned by a set of commitments. The purpose of the extension is the successful completion of the review on the basis of the conditions in the current arrangement, making best use of the given flexibility which will be considered jointly with the Greek authorities and the institutions.  

 The Greek government must present a list of reform measures "based on the current arrangement." This means "reforms" consistent with the austerity policies that are part of the current arrangement. Syriza can forget about raising wages, rehiring workers, or any roll back of privatization. There may be some reform measures the Greek government could provide agreeable to the Eurogroup such as improving tax collection that would be consistent with campaign promises but certainly most of the reforms Syriza supported would be opposed to the "current arrangements". The document goes on: The institutions will provide a first view whether this is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review. This list will be further specified and then agreed with the institutions by the end of April. This is a huge semantic victory. Instead of the Troika we now have " the institutions." Under the "current arrangements" the Troika are the "institutions." This renaming goes on throughout the document: Only approval of the conclusion of the review of the extended arrangement by the institutions in turn will allow for any disbursement of the outstanding tranche of the current EFSF programme and the transfer of the 2014 SMP profits. Both are again subject to approval by the Eurogroup. The Troika(institutions) must approve of the conclusions of the review to ascertain whether Greece is meeting the conditions of the bailout. The Eurogroup must also approve.

 The Syriza government faces many hoops to jump through before it gets any money. If it fails to adequately pursue the very austerity policies it campaigned against, it will not get a cent. Contrast what the Greek government agreed to with what Finance Minister Varoufakis said at the end of January: Varoufakis said Greece had no intention of cooperating with a mission from the lending "troika" of the European Union, European Central Bank and International Monetary Fund, which had been due to return to Athens. He said Greece would not seek an extension to a Feb. 28 deadline with euro zone lenders. 

 Now as part of the deal to get a loan, the government commits itself to working again with all three but consistent with the tacit agreement not to call a spade a spade, the Troika are no longer mentioned: In this light, we welcome the commitment by the Greek authorities to work in close agreement with European and international institutions and partners. Against this background we recall the independence of the European Central Bank. We also agreed that the IMF would continue to play its role.  

Although Syriza and Finance Minister Varoufakis several times indicated that they would honour their financial obligations rather than seek a debt write off, the document emphasizes the point: The Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely. During the four-month extension of the loan, the Greek government cannot hope to enact any policies that the "institutions" think would negatively impact what they see as the policies and structural reforms in the original bail out agreement. Forget trying to roll back austerity policies, privatizations, or layoffs:The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions. 

 Varoufakis promised that he would do whatever was necessary to forge a deal that would keep Greece in the euro zone. His government kept that promise. Keeping it pleased the stock markets with the Dow reaching new highs after the announcement of the deal. The crisis is not over yet however. You might say the deal has kicked the crisis can down the road four months. The deal runs out just before a number of Greek debt repayments are due. Syriza will then play Super Sellout Part II. 

There is a slim chance that Syriza might have a surprise Monday. It could present as reforms all the policies it campaigned on. The Eurogroup would be outraged and the stage would be set for a Grexit. That is what Greece should have done long ago but there is no sign of any planning for that step by the Syriza government.

Germany rejects Greek loan extension proposals sabotaging a deal for now

Moments after the European Commission had called the Greek proposals "positive" Germany rejected the proposal. Greece was requesting a six-month extension of its loan program. The complete text of the letter sent to the Eurogroup finance ministers can be found here. A spokesperson for the German finance ministry complained that the Greek proposals were attempting to obtain "bridge financing, without meeting the requirements of the programme. The letter does not meet the criteria agreed upon in the Eurogroup on Monday." The spokesperson also said that the suggestions were "not a substantial proposal for a solution". In the BBC article, at least, the spokesperson does not say exactly why the proposal is not a substantial proposal for a solution nor how exactly the proposals fail to meet the requirements of the program.

Syriza has caved on almost every demand including the demand that there be a new agreement and not an extension of the original agreement. The Greek proposals show Syriza has caved on debt reduction and in effect accepted the bailout terms:"The Greek authorities honour Greece's financial obligations to all its creditors as well as state our intention to cooperate with our partners in order to avert technical impediments in the context of the Master Facility Agreement which we recognise as binding vis-a-vis its financial and procedural content."

 As this Wall Street Journal article explains Greek officials think that they can sign on to an extension of the terms of the loan agreement under the Master Financial Assistance Facility Agreement (MFAFA) without signing on to the bailout austerity conditions in the MoU or original memorandum of agreement. There is only one problem with that position and that is that getting a loan under the MFAFA is part and parcel of the MoU. You cannot get a loan without signing on to the austerity conditions of the MoU. "The availability and the provision of Financial Assistance under this Agreement... shall be conditional upon (i) the Beneficiary Member State’s compliance with the measures set out in the MoU and (ii) the Guarantors deciding favourably, on the basis of the findings of the regular assessments carried out by the Commission in liaison with the ECB ... that the economic policy of the Beneficiary Member State accords with the adjustment programme and with the conditions laid down by the Council in the Decision and any other conditions laid down by the Council or in the MoU. " I have omitted some of the legalese in this quote. For the entire quote in its original form see the article.

Another section of the Greek proposals accepts the supervision of the Troika without using that term:" f) To agree on supervision under the EU and ECB framework and, in the same spirit, with the International Monetary Fund for the duration of the extended Agreement. " So Syriza will not negotiate with the Troika but agrees to their supervision.

Some of the proposals do suggest that the Greek government should reverse some of the austerity measures: "The Greek government expresses its determination to cooperate closely with the European Union's institutions and with the International Monetary Fund in order: (a) to attain fiscal and financial stability and (b) to enable the Greek government to introduce the substantive, far-reaching reforms that are needed to restore the living standards of millions of Greek citizens through sustainable economic growth, gainful employment and social cohesion. " Some of the reforms mentioned in b) would no doubt be inconsistent with present austerity policies tied to the bailout program.

 Mark Lowen of the BBC suggests that there is a rift at the highest level between authorities in Brussels and Berlin. European Commission president Jean-Claude Juncker took the Greek proposals as a positive sign that could pave the way for a reasonable compromise. Any vote on the Greek proposals must be unanimous so Germany can determine the outcome. A Greek government source said after the German rejection of its proposals: "Tomorrow's Eurogroup has just two choices. To accept or reject the Greek request. We will now discover who wants to find a solution, and who does not". Perhaps Germany wants Greece to  exit the euro zone and get rid of what it no doubt considers a trouble maker with uncivilized official who do not wear ties.

Paul Krugman on what ails Europe

An op-ed in the New York Times by the well-known liberal U.S. economist Paul Krugman is titled "What Ails Europe?" Krugman writes from Lisbon in Portugal.

In Portugal Krugman notes that unemployment stands at 13 per cent. While this is bad enough the situation is worse in Greece, Ireland and perhaps in Spain as well. Even the whole of Europe may be sliding back into a recession.

Krugman maintains that several of the stories explaining Europe's situation are simply not true. Both what he calls the Republican narrative and the German narrative are false.

According to the Republican narrative pushed by the likes of Mitt Romney Europe has spent too much on the poor and that too much welfare state spending has ruined the economy and plunged states into debt.

Krugman mentions that Sweden which still has an extensive welfare state is nevertheless doing well economically. NOTE; The welfare state in Sweden has been cut back however. Those countries in the most trouble Greece Ireland Portugal Spain are not in the top five of 15 European euro zone nations. Only Italy is in the top five and still has less of a welfare state than Germany which is one of the strongest economies. These facts surely show that the welfare state spending per se was not the trouble.

The German story is all about the fiscal irresponsibility of nations having debt problems. The story fits Greece to an extent but not the other countries having problems. Italy's deficits happened long ago and Spain and Ireland actually had surpluses. Countries such as the U.S. and Japan can run huge deficits without apparently facing any huge crisis. NOTE: Some analysts might claim that those countries just have not faced up to their crisis as yet!

In spite of their debts the U.S. and Japan as well are able to borrow at very low-interest rates. Krugman sees Europe's main problem as having a common currency without the institutions that are required for the common currency to work properly.

The common Euro led investors to invest huge amounts of capital into countries around the edges of Europe a flow that was unsustainable. These large flows caused both costs and prices to rise making some countries uncompetitive. This in turned resulted in large trade deficits.

The countries involved cannot devalue their currencies and restore competitiveness because they are tied to the Euro. The nations only have painful choices whether they stay with the Euro or leave the zone.

Krugman thinks that Germany could help by reversing its imposition of austerity policies but will not do so. Probably it is not politically doable in any event. What is important for Krugman is that people should realise that the conventional wisdom about the too expensive welfare state and fiscal irresponsibility lead to failed policies that often make the situation worse. For more see the article. Even though these policies make the situation worse over the short term they do weaken labor and do cut spending on social programs. This leaves more of the economic pie for the one per cent. The theory is that once labor costs are low enough and the countries implement more policies favorable to financial capital that investment will flow back into those countries

Germany: Investors on strike as many German bonds receive no bids at auction.

  35 per cent of German 10 year bonds up for auction today failed to get bids. A securities analyst called the results nothing short of a disaster.The same analyst noted that if Germany, the strongest of  European countries in financial terms, has problems marketing its bonds the situation will be much worse for weaker nations.
   The results have been a factor in raising the cost of borrowing in Europe and causing the Euro to decline.
Yields climbed on bond yields for many countries including Greece, Belgium, and France. The German auction had the highest proportion of unsold ten year bonds since 1995.
     Neil Jones head of a European hedge fund said:“If investors do not wish to buy bunds (German bonds), they do not wish to buy Europe,”  Belgium is due to auction 10 year debt on Nov. 28. France and Italy are also due to sell bonds next week. The debt crisis in Europe seems to be continuing in spite of new governments in Spain, Italy, and Greece. For much more detail see this Bloomberg article.

US worried about blowback from renditions

Another obvious reason why the US will not admit Arar's innocence is that Arar still has an appeal in place of the rejection of an earlier suit against the US government.
This is from the Globe and Mail.

A world of Maher Arars
Why won't the U.S. admit Maher Arar's innocence? It may be fear of precedent. Tales of other suspects seized and sent abroad to face torture are beginning to come to light in Europe. This week, those stories helped bring down the Italian government. And as Doug Saunders reports, this could be just the beginning.
DOUG SAUNDERS

From Saturday's Globe and Mail

E-mail Doug Saunders | Read Bio | Latest Columns
On an October evening five years ago, a Gulfstream III executive jet appeared in the sky above Rome and requested a landing at Ciampino Airport, a small military and tourist-flight destination on the ancient Via Appia. On board the 14-seat plane were two pilots, a steward, five CIA agents and a tall, elegant Canadian wearing a green sweater, a pair of jeans and metal shackles.

The Gulfstream, registered to a CIA-connected firm known as Presidential Aviation, was on European soil for exactly 37 minutes. When it had finished refuelling, it left Ciampino at 8:59 p.m. and headed to Amman, Jordan. There, Maher Arar was carried off the plane, beaten, and loaded into a van headed to Damascus, where he would face 10 months and 10 days of horrendous torture.

Those 37 minutes are now coming back to haunt Europe.

Mr. Arar's ordeal, and the wealth of investigations and recriminations that have followed in Canada, has provoked a deep sense of alarm in European politics this week. This Syrian-Canadian's case, the abject apology he received from Prime Minister Stephen Harper last month and the bewildering lack of acknowledgment from Washington, has made a half-dozen governments realize that they may soon face similar public self-examinations.




The possibility, revealed in a European Union report last week, that as many as 20 more Arar-like cases may be emerging within Europe, is souring relations between Europe and the U.S. in anti-terrorism operations, and between European governments and their own people in electoral politics.

Major court cases are under way in Germany and Italy against domestic and U.S. agents for kidnapping citizens and sending them to Muslim countries to be tortured — cases that could implicate senior government officials and tarnish national leaders, as they have in Canada.

It is fair to say that Mr. Arar's spectre claimed its first major victim on Wednesday in Rome, when a parliamentary conflict over co-operation with the U.S. "war on terrorism," tainted by the use of Italian airports to transport Mr. Arar and others to sites of torture, led to the collapse of Italy's government.

Those 37 minutes that Mr. Arar spent on the tarmac in Rome, apparently with the consent of Italian authorities under anti-terrorism agreements with the U.S., have now become part of the controversy. An Italian magistrate, Salvatore Vitello, will travel to Canada later this winter as part of his investigation to determine whether Italians and Americans were guilty of kidnapping.

Across Europe, prosecutors such as Mr. Vitello have shifted their energies from charging potential al-Qaeda terrorists to investigating officials who may have overstepped the bounds of law in their pursuit of antiterrorism.

"We are investigating Mr. Arar's transit through Rome, which is itself a crime if behind it there was an actual crime — that is, if in the U.S. he was illegally kidnapped. If that is the case, if he was kidnapped, then Rome was part of it," Mr. Vitello told The Globe and Mail. "The fact that he was in Rome for those 37 minutes — somebody must have given permission for that."

A year ago, his investigation would have been another colourful sideshow in the flamboyant world of European jurisprudence. But Mr. Arar's precedent has changed that.

In Canada, the Arar case has led to the resignation of RCMP chief Giuliano Zaccardelli, to an apology from Prime Minister Stephen Harper and the payment of $11.5-million in damages to Mr. Arar, and to tensions between a Conservative government and a U.S. Republican administration. Foreign minister Stockwell Day has engaged in a heated showdown with his U.S. counterparts over his demand that Mr. Arar be removed from an American no-fly list. And the Liberal Party, in a forthcoming election, will be confronted with its indifference and possible collusion in the Arar case.

The issue of "extraordinary rendition" — the U.S. practice of seizing suspected terrorists, placing them on unmarked airplanes, and sending them without charge or trial to countries that practice torture — has festered for years in the background of European politics. But it has been an issue that has mainly concerned political parties and activists on the far left, groups that are predictably anti-American. In mainstream politics, it has simply been part of the War on Terrorism's background noise.

There has now been a palpable change. The carte blanche given after the Sept. 11, 2001, attacks to U.S. authorities to conduct anti-terror operations on European soil has become a menacing liability, and the subject of potentially destructive investigations, in several European countries. Governments are also reducing military co-operation with the U.S: This week saw Britain and Denmark announcing plans to withdraw troops from Iraq, with others expected to follow.

And when the European Parliament last week released a report condemning the 1,245 CIA flights made in Europe and the 20 European citizens subjected to "rendition," the responses no longer fell along predictable left-right lines.

European leaders are now looking nervously to Canada. Mr. Arar's "rendition" in 2002 was probably the first major use of the practice to come to light, and Canada is the first country to have been scorched politically by the explosive discovery that innocent people were tortured as a result of the practice.

Senior Canadian government officials and European Union diplomats have told The Globe and Mail that they believe the U.S. is avoiding any apology or acknowledgment of wrongdoing in the Arar case because it could open a Pandora's box of recriminations from Europe, where two cases almost identical to Mr. Arar's are being tried in Germany and Italy and at least 18 more could be pending.

American intelligence officials are facing criminal charges in European courts, and an admission that mistakes have been made could transform transatlantic relations into an enormous forensic investigation, they say.

Europe is now feeling the pain that Canada has undergone, in part as a result of information unearthed in the half-dozen inquiries into Mr. Arar's treatment. In Italy, the fallout has centred on the case of Hassan Mustafa Osama Nasr, a Milan cleric also known as Abu Omar, who was seized by CIA agents in 2003 and flown to Cairo, where he was tortured and sexually abused in prison. He was released this week.

Last Friday, Italy had its Arar moment. Milan magistrate Armando Spataro indicted 26 U.S. citizens, including Italian CIA station chief Robert Seldon Lady, and five Italians in the rendition of Abu Omar. All of them face charges of kidnapping. The Italian officials include the head of intelligence, Nicolo Pollari, who like the RCMP chief was forced to resign over the case, which is known in Italy as the Imam Rapito ("kidnapped imam") affair.

The U.S. has refused to acknowledge the Italian prosecution or to admit that the rendition occurred. It has also refused the magistrate's request to extradite the defendants (the Italian government has also decided not to press the extradition request at the highest levels). But Italian law allows people to be tried, convicted and sentenced in absentia, so the case will continue, likely revealing embarrassing information about high-level support for the renditions in Italian governments.

In Germany, a case strikingly similar to Mr. Arar's has led to arrest warrants against 13 CIA officers and damning revelations about German complicity in kidnapping. That case involves Khaled el-Masri, who was seized while on vacation in 2003 and sent to Afghanistan for five months (similarly, Mr. Arar, a computer programmer, had been returning from a family vacation). As with Mr. Arar, it appears that Mr. el-Masri has no relationship with terrorism and that his rendition was founded on completely false evidence.

Both Sweden and Portugal are also facing major investigations which accuse their governments of allowing citizens to be seized and sent to Egypt and other countries for torture, without any criminal charges.

Significantly, the case against the U.S. is now being made by judges and officials who have traditionally held pro-American, terror-fighting positions.

Mr. Spataro, the Milan magistrate, is as far from an anti-American firebrand as you can get in Italy: He has spent much of the past 30 years prosecuting terrorist and Mafia groups in Italy, and is not known for a hostility to U.S. interests.

"The job is the same — I have led many investigations against internal terrorism since the early 1970s. Many of my colleagues were killed by terrorist organizations," Mr. Spataro said this week from a Milan office filled with Americana — the wall behind his desk is dominated by a Norman Rockwell print chronicling the integration of southern U.S. schools.

"But we were absolutely sure that it is impossible to fight terrorism without respect for the laws. And with this investigation I hope that we can confirm that it is impossible to win over Islamic terrorism without the respect for law."

The Arar and Abu Omar cases were different in this respect: Along with his indictments of intelligence officials last week, Mr. Spataro laid criminal charges against Abu Omar himself, charging him with membership in a criminal organization (a crime in Italy). Mr. Spataro said that he strongly believes that Abu Omar could have been prosecuted for terrorism far more efficiently if the U.S. practice of rendition had not been followed. But now, he says, the terror-fighters are just as guilty as the alleged terrorist.

"I want to make clear that according to Italian law there is no difference between prosecuting terrorism and prosecuting those who fight terrorism," he said.

That seems to be the bridge that was crossed in Europe this week: It is now the people who were the most stalwart anti-terrorist fighters, the most loyal supporters of George W. Bush's approach to al-Qaeda, who are speaking out against the abuses of that system. With an eye on Canada, the moderates and centre-rightists of Europe are realizing that the U.S. is not prepared to offer a reasonable explanation for those abuses.

That was the case this week with Gijs de Vries, the EU's head of anti-terrrorism, who announced that he will step down in March because he has lost faith in his U.S. partners. He previously had embraced the American approach to counterterrorism, and harshly criticized the European parliament for its rendition-system investigation, with which he refused to co-operate. But on Wednesday, he said that the lack of U.S. explanation for its actions had made it impossible for him to do his job properly.

"The CIA renditions, together with Abu Ghraib, Guantanamo Bay, and the military commissions act, unfortunately have tarnished the image of the United States in the fight against terrorism, among Muslims and non-Muslims," he told reporters. "I hope the United States, now that there is a new political dynamic in the U.S. Congress, can return to a mainstream interpretation of international human rights."

It was this sort of realization, on a larger scale, that led to the collapse of the Italian government on Wednesday. The expansion of a U.S. military base and the presence of Italian troops in Afghanistan were bound to be divisive in Italy, where Communists and other parties of the extreme left always have built a strong base on anti-Americanism. Those parties make up part of the left-wing coalition government of Romano Prodi, which took power from Silvio Berlusconi in last spring's elections.

But the U.S. base became a rallying point for more than just the far left. A public sense that Italian airports and bases have been used for immoral or questionable activities has led the wider Italian public to take part in protests against the expansion, drawing tens of thousands of people.

It created an environment where even the parties of Mr. Berlusconi's right could vote against the pro-American measures without upsetting their constituencies. On Wednesday, it was mainly right-wing politicians who voted against the military-base expansion and the Afghanistan measure, bringing down the government.

Sergio Romano, a former Italian senior diplomat and leading voice of the country's centre-right, told The Globe and Mail that he now believes that the U.S. should not have bases on Italian soil, because it has abused its friendly relationship with its European allies to the point that it can no longer be trusted.

"I believe that the very same people who have been most aware that terrorism is a threat are now the people who are critical in this case of kidnapping," he said from his Milan office. "I think that calling it a 'war on terrorism' has caused a number of mistakes on our part."

It is bizarre to find the likes of Mr. Romano, an ardently pro-American voice, calling for restrictions on U.S. rights in Europe. But with an eye to Mr. Harper's government, European leaders are realizing that it is perilous to support the Bush administration at this awkward political moment.

"I think there is a body of opinion which feels that this kind of thing should be looked at with new eyes," Mr. Romano said "We know very well that the Americans used their bases in Djibouti to attack al-Qaeda in Ethiopia this year . . . If they decide to attack Hezbollah, God forbid, they'll be using Italian bases to do it.

"And we won't be told beforehand. We'll learn the next day. And you become complicit in such things. We do not want that any more."

Doug Saunders is a London-based member of The Globe and Mail's European bureau. His Focus column, Reckoning, will return next week.

German court orders arrest of 13 US intelligence operatives

Interesting that the Bush administration claims it is legal to kidnap a German citizen from another country and ship him off for interrogation under US law! What about international law? It would seem that the German authorities probably knew what was going on as well.


German court orders arrest of U.S. intelligence operatives
The suspects are accused of being involved in a 2004 'extraordinary rendition.'
By Jeffrey Fleishman, Times Staff Writer
February 1, 2007


BERLIN — A Munich court has ordered the arrest of 13 U.S. intelligence operatives in connection with the kidnapping and beating of a German citizen who was interrogated for five months at a secret prison in Afghanistan, prosecutors said Wednesday.

The suspects are said to have been members of a CIA-sponsored team that allegedly flew Khaled Masri, a German citizen of Lebanese descent, from Macedonia to Afghanistan in January 2004. Each of the accused, all but one of whom were identified only by aliases, was charged with kidnapping and causing serious bodily harm.

Police found a "strong suspicion" that the operatives were involved in Masri's disappearance, said a statement released by the Munich prosecutor's office. "According to the information we have, the suspects listed in the arrest warrants are believed to be so-called code names of CIA agents. The investigation will now focus on learning the actual names of the suspects."

Legal experts said it was unlikely the accused, including four pilots, a medic and members of an operations unit, would appear before a German court. CIA and State Department officials have refused to comment in detail about the Masri case, but the Bush administration has said that anti-terrorism laws allow for such covert operations, known as "extraordinary renditions." U.S. officials have denied allegations of torture.

"As far as I know, the German court has never issued an arrest warrant against 13 CIA officials all at once," said Hans-Christian Stroeble, a member of a parliamentary committee investigating the Masri case whose Green Party has criticized the renditions program. "This is a great success."

The intelligence operatives, most of whom are believed to be Americans, are suspected of having been involved in a mission that loaded a bound and drugged Masri onto a Boeing 737 that flew him from Skopje, Macedonia, to Afghanistan.

Masri had been detained weeks earlier by Macedonian security officials when he attempted to cross the Macedonian border with Serbia. He said that he was beaten while in Macedonian custody.

German prosecutors were initially skeptical of Masri's tale: that he disappeared into a hidden dimension in the anti-terrorism fight and was held for interrogation and abuse before being released in the mountains of Albania in May 2004.

But German authorities said they concluded that the car salesman and father of four was telling the truth. They believe Masri was the victim of mistaken identity: a man with the same name as a suspected terrorist linked to Al Qaeda.

Former Interior Minister Otto Schily has told a German government committee that U.S. officials privately apologized.

German officials allege that the operatives, many of whom live in North Carolina, work for Aero Contractors, a contract air carrier that has been linked by news reports and German investigators to the CIA. The company is connected to Premier Executive Transport Services Inc., which held the registration for the Boeing that transported Masri, according to European aviation documents.

The parliamentary committee is investigating whether German agents were involved in the abduction and why Foreign Minister Frank-Walter Steinmeier did not immediately disclose his knowledge of the affair.

The improving relationship between Berlin and Washington has at times been affected. In 2005, after a meeting with Secretary of State Condoleezza Rice, German Chancellor Angela Merkel said she was pleased that the Bush administration "admitted this man had been erroneously taken," speaking of Masri. But a senior U.S. official quickly denied such a characterization, saying that Masri had been released because Washington "no longer had evidence or intelligence to justify" his detention.

*


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jeffrey.fleishman@latimes.com