Papandreou Leaves Office in Disgrace

Having served as Greece’s prime minister since 1981, Andreas Papandreou was forced out of office in 1989 in the wake of a $200 million embezzlement scandal involving his administration and the Bank of Crete.

Summary of Event

The son of Greek prime minister George Papandreou, Andreas Papandreou was drawn into Greek politics early in his life. Shortly after receiving a law degree from Athens University, he was arrested in 1939 for political dissent during dictator Ioannis Metaxas’s regime. Released from prison, he fled to the United States, where he earned a doctorate in economics from Harvard University in 1943. Divorcing his first wife, he married an American, Margaret Chant, to whom he was married for thirty-eight years. Their union produced four children, one of whom, George, served as a member of parliament and as Greek foreign minister. Bank of Crete embezzlement scandal
[kw]Papandreou Leaves Office in Disgrace (July 2, 1989)
Bank of Crete embezzlement scandal
[g]Europe;July 2, 1989: Papandreou Leaves Office in Disgrace[07320]
[g]Balkans;July 2, 1989: Papandreou Leaves Office in Disgrace[07320]
[g]Greece;July 2, 1989: Papandreou Leaves Office in Disgrace[07320]
[c]Government and politics;July 2, 1989: Papandreou Leaves Office in Disgrace[07320]
[c]Crime and scandal;July 2, 1989: Papandreou Leaves Office in Disgrace[07320]
Papandreou, Andreas
Papandreou, George
Papandreou, George, II
Metaxas, Ioannis
Papandreou, Margaret Chant
Liani, Dimitra

Andreas Papandreou became a U.S. citizen and served in the U.S. Navy during World War II. When his father became prime minister of Greece in 1963, however, Andreas returned to Athens, gave up his American citizenship, and was elected to parliament. He was active in the socialistic wing of his father’s government, the Centre Union.

His father was resoundingly defeated in the 1965 election. After a military overthrow in 1967, father and son were imprisoned for eight months. Upon their release, Andreas fled to a foreign exile, but, in 1974, returned and founded the Panhellenic Socialist Movement Panhellenic Socialist Movement (PASOK).

PASOK gained popularity to the point that in 1981 it was swept into power, winning 172 of the 300 seats in the Greek parliament. Papandreou became prime minister, promising social reform and the removal of U.S. military bases from Greece, a move that never materialized. The beneficent social welfare programs that Papandreou promised led to a financial crisis in Greece as the government increasingly had to borrow heavily to support the promised benefits.

Although PASOK won a marked victory in the 1985 election and gave Papandreou his second term as prime minister, crippling financial problems loomed. They saddled the government with a staggering foreign debt that had to be serviced. The result was a burgeoning inflation that affected every level of Greek society.

In 1989, a number of problems emerged for Papandreou that led to his leaving office under a dark cloud of suspicion. In the latter part of his four-year term as prime minister, a serious financial scandal resulted in the dismissal or resignation in disgrace of three of Papandreou’s cabinet ministers. Parliament lodged charges against Papandreou, alleging that he was an active participant in a $200 million embezzlement scheme involving the Bank of Crete.

Andreas Papandreou was educated in the United States and had an American wife.

(Library of Congress)

The accusation against Papandreou contended that he was complicit in this embezzlement because he had officially ordered state corporations to transfer their holdings to the Bank of Crete, presumably to mask shortages that could have substantiated charges of malfeasance. The publicity generated by the charges would in themselves probably have led to PASOK’s defeat in the 1989 elections by the New Democratic Party, whose candidate, Constantine Mitsotakis, was elected prime minister on June 18, 1989. Andreas Papandreou resigned soon thereafter and left office on July 2, 1989.

Papandreou’s downfall in 1989 was accompanied by the severely negative public reaction to his divorcing his American-born wife of thirty-eight years, Margaret Chant Papandreou, to marry Dimitra Liani, an Olympic Airlines flight attendant, thirty-six years his junior, whom he met when she served him on a chartered flight a year earlier. One of Papandreou’s four children, George Papandreou II, who was a member of parliament and later served as Greece’s foreign minister, denounced his father for divorcing Margaret and made it clear in the laudatory remarks he delivered at his father’s funeral that he considered his mother to be Andreas’s legitimate wife, dismissing Dimitra Liani.

On June 19, 1992, the charges against Papandreou for his alleged involvement in the Bank of Crete scandal were officially dismissed. An ailing Papandreou, now serving as a member of parliament and freed from the accusations that forced him out of office, was again elected prime minister in the general elections of October, 1993. A very sick man who required daily dialysis, Papandreou served as prime minister until January, 1996, when ill health forced him to resign. He died in June, 1996.


Any assessment of the political career of Andreas Papandreou must be made in the light of the history of Greece in the last seventy years of the twentieth century. The Greece of Ioannis Metaxas, who was dictator from 1936 until his death in 1941, was a right-leaning political entity that aligned itself with the fascism of Adolf Hitler’s Germany. Greece;government

Despite this, Greece became an important western ally during World War II, when Greek soldiers were actively involved in combat against the Axis forces of Germany and Italy. During this troubled period, Papandreou, who had been imprisoned by the Metaxas regime, fled, on being released from custody, to the United States, where he was first a graduate student in economics at Harvard University and then a professor at various prestigious institutions, including the University of Minnesota and the University of California at Berkeley.

In 1951, Papandreou married Margaret Chant, an American feminist whom he met at the University of Minnesota, where he was teaching. Having served in the Navy and having gained U.S. citizenship in 1944, Papandreou was well on the road to establishing himself as an American when his father, George Papandreou, became Greece’s prime minister in 1963. Andreas realized that he could have a political future in Greece. With his wife and children, he relocated to Athens and, renouncing his U.S. citizenship, carved out a political career for himself.

Papandreou capitalized on the social and political unrest in Greece to create the Panhellenic Socialist Movement, which offered the Greek people a fresh vision of what their futures could hold if they supported Papandreou’s left-leaning party. By 1981, PASOK had gained a sufficient following to assure Papandreou the post of prime minister.

The only way that Papandreou could deliver on his promised social reforms was by borrowing heavily and plunging the Greek economy into a staggering debt. He found it impossible to deliver on his vow to withdraw Greece from the North Atlantic Treaty Organization (NATO) and to force the United States to close its military bases in Greece.

It is remarkable that after his leaving office in disgrace in 1989, Papandreou was elected four years later to his third term as prime minister. The promises of the right-leaning Mitsotakis government, which came to power after Papandreou’s fall in 1989, could not be kept because of the grave underlying political and economic problems that faced the nation. Greece;government
Bank of Crete embezzlement scandal

Further Reading

  • Boatswain, Timothy, and Colin Nicolson. A Traveller’s History of Greece. 3d ed. New York: Interlink Books, 1988. Directed primarily to travelers to Greece, this book contains valuable information about the regimes of Andreas Papandreou. It should be noted that the index is misleading, having no entry for Andreas Papandreou. Look under George Papandreou for relevant information about Andreas.
  • Dubois, Jill, Xenia Skoura, and Olga Gratsaniti. Cultures of the World: Greece. 2d ed. Tarrytown, N.Y.: Marshall Cavendish Benchmark Books, 2003. Richly illustrated volume provides excellent background material. Aimed at a juvenile audience, the book touches only briefly on the career of Andreas Papandreou but will help readers to understand the political climate in which he served.
  • Lyle, Garry. Greece. Philadelphia: Chelsea House, 2000. Directed to young adult readers, this book’s clear, concise account of the political activities of Andreas Papandreou makes a good starting point for those unfamiliar with Greek history.
  • Papandreou, Andreas A. Externality and Institutions. Oxford, England: Clarendon Press, 1994. This book, one of several that Papandreou wrote, was published two years before his death and outlines in detail the author’s economic concepts. Understanding his socioeconomic views will help readers to understand the political and social reforms that Papandreou envisioned for Greece but was unable to implement fully.
  • Woodhouse, C. M. Modern Greece: A Short History. 6th ed. London: Faber & Faber, 1998. Highly readable account of the history of modern Greece. Especially valuable for its depiction of the domestic problems that led to the downfall of Papandreou’s second term as prime minister and of his spectacular political recovery in 1993.

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