Euro under Threat Culture of Corruption Drags Greece Down

Riot policemen march next to a pile of garbage during a trash collectors strike in Athens.
DPA

Riot policemen march next to a pile of garbage during a trash collectors strike in Athens.

By Ferry Batzoglou and Clemens Höges

Part 2: Asking Too Much of the Government


"The problem is that our weak country is expected to overcome the crisis with a strong euro, which is asking too much of the government," says someone with a keen understanding of Papandreou and his team. His villa, on a hill above Athens, is full of antique furniture, modern art and good wine.

Georgios Kyrtzos was a schoolmate of Papandreou -- at a private school, of course -- and graduated with him in 1971. He went on to study at the elite Massachusetts Institute of Technology and the London School of Economics. Greece is a feudal society ruled by upper-class families. Papandreou's father and grandfather were both prime ministers.

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Kyrtzos, a former economic adviser to a conservative government, owns two newspapers. As an adolescent, he agitated for the Communist Party. "I share its criticism of capitalism," he says. "But I like it."

Papandreou, says Kyrtzos, pursues "policies for the people, not for the financial markets. As if they would wait. I wish the world were like that." In one of his campaign promises, Papandreou, seemingly oblivious to the issue of "spread," pledged to give civil servants a pay raise in the coming year. The so-called spread shot up to 2.7 percent after the rating agencies had downgraded Greek debt.

Spread can be as deadly to a country as drinking seawater is to a shipwrecked man. The more debt a country has, the higher the interest rate it is forced to pay on its government bonds. Germany, as Europe's most creditworthy borrower, is the benchmark in the euro zone. A spread of 2.7 means that Papandreou must now pay 2.7 percent higher interest than Schäuble, or about 6 percent on Greek treasury bonds. As a result, Greece is forced to borrow even more.

By now, says Kyrtzos, the economy is no longer capable of financing the state's institutions, which are "completely out of control." According to Kyrtzos, Papandreou, like his conservative predecessors, lacks the power to trim government spending. In the end, Kyrtzos believes, the rich countries will be forced to pay up.

Conjuring Trick

Piraeus is a case in point. In recent months, China's Cosco Pacific Ltd. acquired a large share of the central port near Athens. But the workers at the port are too expensive for the Chinese, which is why they are to be employed elsewhere, where no one needs them -- or eliminated completely with severance pay or early retirement benefits.

The early retirement option is attractive to Greek workers. According to 2007 figures from the Organization for Economic Cooperation and Development (OECD), the average Greek retiree continues to receive 95.7 of his former wages, while German retirees collect only 43 percent.

Nevertheless, the former conservative government promised that the Chinese deal would not burden the national budget -- a Greek conjuring trick. The port authority will likely be stuck with the costs incurred for the unemployed port workers, which some estimate at €60 million.

Schools are another case in point. The Greeks employ about 140,000 teachers. In recent years, the number of children going to school has declined, while the number of teachers has increased. And of the current figure of 140,000, 18,000 have somehow disappeared into the government bureaucracy -- but no one knows where.

Conservatives and socialists continued to inflate the government administration to provide jobs to their supporters. In typically Greek fashion, Athens was particularly adept at taking advantage of the EU's "Stage" program, which is designed to fund short-term jobs for the unemployed, using temporary contracts, to allow them to gain a few months of work experience. There are now 30,000 of these so-called "stagiers" working in the public sector, which is already vastly overstaffed. Some have been gaining work experience in supposedly temporary jobs for five or six years, and they have become a force to be reckoned with. When the Papandreou administration recently announced that it intended to at least allow the stagiers' contracts to expire, the workers affected by the decision demanded full-time government positions.

Take Dina Rovithaki, a petite woman standing next to a wheeled case that weighs almost as much as she does across the street from OGA, the public farmers' pension fund, in Athens. Rovithaki, 40, an attractive and pugnacious mother of two children, has just spent the weekend in Crete to organize the resistance -- which explains the suitcase. She is the chairwoman of the stagier group at OGA.

She has worked at OGA for close to five years, processing documents for a monthly salary of €500, without health insurance. She tolerated the shortcomings of the job, hoping that it would lead to a permanent civil servant position. She and several thousand other stagiers are now suing OGA. They have even occupied the Labor Ministry. According to Rovithaki, the current civil servants are stagiers "without qualifications" who were installed in their positions by the socialists. Now that the socialists are in power, she and her colleagues, considered "conservative protégés," are to be eliminated.

Crisis Guru

Rovithaki's anger over her personal predicament is understandable. But it merely reflects the way the government machine grows, sometimes on the left and sometimes on the right. "This country is organized too expensively and inefficiently. We are constantly paying for new machines," says Babis Papadimitriou, an economic analyst with the ascetic demeanor of a mathematician.

Papadimitriou is the Greeks' crisis guru, an austere star for difficult times. He hosts a daily radio show, appears on the television news in the evening and writes newspaper columns.

Papadimitriou is sitting in the cafeteria of a publishing house, next to an enormous, gloomy oil painting. It depicts a violent thunderstorm off the Greek coast, but it also includes a section of a rainbow. A window next to the painting offers a view of one of the marinas in Athens, where hardly any of the yachts is worth less than €1 million. There are several of these marinas in Athens alone. But fewer than 5,000 people in all of Greece report a gross annual income of more than €100,000 on their tax returns, says Papadimitriou.

Greeks, says Papadimitriou, a Greek himself, may love their nation, but they view the state as a power that must be ransacked. Tax evasion affects 10 percent of value-added tax throughout Europe, but in Greece that numbers jumps to about 30 percent. According to Papadimitriou, tax evasion is rampant in one third of the entire economy. In theory, hundreds of millions in unpaid taxes could be recovered, an approach the new administration supports.

But how? In other countries, tax evaders would receive visits from the tax authorities, and that also happens in Greece. But in Greece deals are made. In return for leaving tax evaders untouched, officials receive "fakelaki" -- envelopes containing bribes. There are even standard rates for bribes. For instance, the going rate for a vehicle exhaust inspection is a fakelaki containing €300.

"We have always been a society built on favors," says Kostas Bakouris, president of the Greek arm of the anti-corruption organization Transparency International, which placed Greece in 71st place -- behind Ghana -- on its list of the world's 180 most corrupt countries. According to Bakouris, the average Greek family pays €1,700 in bribes a year.

Tough Customer

To confront the problem, the socialists brought in Georgios Sorbas after assuming power last fall. Sorbas was an obvious choice, the perfect man to convince the world that the Greek government is determined to truly root out corruption -- despite the fact that the man, with his sharp gaze under bushy eyebrows, is already 70 years old.

Sorbas is impartial and is seen as a tough customer, but a man of integrity. He was a prosecutor for a long time, then served as deputy attorney general and as a senior official in the Defense Ministry. Many of his cases had to do with corruption, such as a case involving the monks of the Vatopedi monastery in Athos, who were accused of having cheated the government with real estate transactions. Sorbas is so intimately familiar with Greece's shady side that he doesn't even think it's funny that monks are trying to cheat the government.

The previous, conservative government brought in Sorbas to develop a financial supervision authority. But soon they stopped giving him positions or computers. Nevertheless, Sorbas began investigating questionable deals involving pension funds. When he tried to gain access to the bank statements of influential men, he was neutralized and his agency was incorporated into the Finance Ministry.

Now the Papandreou government wants Sorbas to head an expert commission charged with drafting a law for a large new anti-corruption agency. "Greece still has a sufficient number of healthy civil servants who can deal with the problem," he says.

Transparency head Kostas Bakouris, who is also 72, says: "I would like to see someone finally end up in prison." If society doesn't change, he adds, "we are truly lost."

Translated from the German by Christopher Sultan

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charlessmyth 12/29/2009
1. Private property rights are vital.
The complication for Greece is that democracy--as in the will of the people, and as expressed at this year's riots--has been employed to literally lead to the logical outcome of democrcay, where the government has been used to destroy everyone's--outside the circle of the elite--rights to private property. So Dina Rovithaki can hardly complain, since she has achieved exactly what she and like-minded others, sought to achieve, but does not like the impact of the outcome. For Greece to have any hope of recovery, the Greeks will have to totally abandon communism, and embrace capitalism and its principles.
Clarence De Barrows 12/29/2009
2. So what's new?
The United States vis-a-vis Greece - same story, different jurisdiction. When will "the people" say enough and take things in hand? As the English philosopher, Herbert Spencer opined, "The ultimate result of shielding men from the effects of folly is to fill the world with fools." It appears there's not too much space left for sanity in either Country!
komninos 12/29/2009
3. Postmodern pulp
Zitat von sysopThe Greek government has pushed the country to the brink of national bankruptcy, threatening the whole euro zone as a result. But the elite believes that other members of the EU's currency union will pay up -- despite widespread inefficiency and corruption. http://www.spiegel.de/international/europe/0,1518,669235,00.html
What a crazy piece. It is quite postmodern pulp First “Sakiroglou”: Ali Sakiroglou and the other sailors in Greece's large commercial fleet have kept their country afloat for many years…..Sakiroglou presses the start button to watch a German porno film called "Mermaids on the High Seas." He can't understand what the actors are saying, but that doesn't matter….Sakiroglou, 53, has a wife and six children in northern Greece, where there are many Greek Muslims…."Greece is finished," he says. "Who knows what will happen to my pension?" Then the ‘Swiss banker” and the collapse of Euro: "Then the chief currency expert at the major Swiss bank UBS also advised investors to sell euros, noting that the currency was likely to lose value, partly because of Greece. This, according to the UBS expert, would bring down the euro even further, because "foreign central banks have to assess the risk of a possible collapse of the euro zone." The Government and corrupted citizens: “conservatives and socialists who took turns running the country borrowed as if there were no tomorrow. Through mismanagement and nepotism, they drove their country to the brink of bankruptcy. Citizens, for their part, reacted by engaging in corruption and fraud.” The wisdom of George Kyrtzos, a schoolmate of prime minister Papandreou back in 1971-- at a private school: “Greece is a feudal society ruled by upper-class families”. Chinese in Piraeus: “Cosco Pacific Ltd., the workers at the port are too expensive for the Chinese, which is why they are to be employed elsewhere, where no one needs them.” Lost schoolteachers: “The Greeks employ about 140,000 teachers…[of which] 18,000 have somehow disappeared into the government bureaucracy -- but no one knows where.” Papadimitriou the Greeks' crisis guru.. sitting in the cafeteria of a publishing house, next to an enormous, gloomy oil painting: “tax evasion is rampant in one third of the entire economy” And finally the Tough Customer: Sorbas 70 years old. By the way: Ferry Batzoglou that wrote the piece probably forgot “Otto Rehagel die Taktik bestimmt und seiner Elf eine "kontrollierte Offensive" verordnet.” (http://www.jurnalo.com/authors/6694?l=d)
sonical 12/31/2009
4. Another insider's view...
I am afraid your reporting and commenting are quite dead on, in contrast to similar articles that surfaced in the (non-financial) UK press, which,in my view, bordered sensationalism. However, to take the point a bit further, one wonders what today's ashtonished EU officials were doing all these years, with the Greek Statistics being accepted at face value. Were the Greeks so cunning, so clever and such geniouses in manipulating the numbers that they had the entire EU fooled for some 28 years? All us Greeks have known that money were been syphoned off all over the place; we just couldn't find the "who" and the exact "how". Thankfully, one case that gave out a few names was the Siemens one; what a strange coincidence it came out of an American Law Firm, just doing their jobs, not the EU gravy train. Your article needs to focus more on opportunity and means, not only on motive, in my opinion.
Desfa 01/03/2010
5. Germany and England needs a corrupted Greece
The article is precise. Yet, an economically healthy Greece is a country were BMW, Siemens, will sell 10 times less than now. Greece is a country of four industries (naval, agricultural, Tourist industry and public service "industry") and nothing else. An example; Germany has a strong car industry and a poor tourist industry. Greece has a poor car industry and a strong tourist industry. Yet, in Germany there are museums, hotels and all the elements of tourist industry while in Greece there is not a single car company to compete Fiat or Wolkswagen in Athens. This has to be changed, if E.U. wants a healthy Greece. And it will. No matter what E.U. wants
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