Corruption and the crisis of Greece

1. Introduction

Greece is currently facing one of its biggest post-war crises with its massive debt. It is a crisis where a small European country might determine the future of the EU. How did Greece end up in such a poor state? This paper will investigate the landscape of corruption and linkage between the current crisis and corruption in Greece. And suggest a few solutions on how to combat corruption in Greece

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2. Landscape and brief history of corruption in Greece

Corruption in Greece is present at both private and public sectors. In the public sector corruption is present at the political, judicial and bureaucratic sides. When researching corruption in Greece one finds the longevity of the corruption tradition in Greece. According to Kleomenis S. Koutsokis it is impossible to understand corruption in Greece without understanding the long ranging past of it. In his research he divides the corruption in Greece to three different phases. The first of the phases he calls bureaucratic corruption which dates from 1946-66. This post war corruption was fuelled by foreign investment flooding to the country after the war. However, the country’s legal and bureaucratic traditions were a hindrance, and in many cases the only way to make things happen was through the means of corruption through a clientele-system. Kleomenis S. Koutsokis lists the second phase of Greek corruption as cynical corruption 1967-74. This was the period of the authoritarian military junta in Greece. The junta had set as one of its priorities to abolish corruption from the country, but in fact only worsened the situation. Corruption became much more direct at his time. The third phase called structural corruption 1974-2000, perhaps ranging to today also. This period is marked by the return of democracy and a range of institutional and structural changes. During this time the state both privatized industry and took over private industries. Greece joined the EU during this time (Koutsokis pgs 27-28). The long and grave persistency of corruption has resulted in Greeks becoming suspicious or even hostile towards the state, further being fuelled by a various amount of corruption scandals. During the late 1980s the early 1990s Pan-Hellenic-Socialist Movement, PASOK, and liberal New Democracy Party of Greece were both involved in waste corruption scandals. These parties are to date major players in the political field of Greece (Koutsokis pg 29). Politically this has meant that the Greeks have lost fate in their political system. A great majority of Greeks feels that politicians are active in politics only for their own good. The scandals have resulted in political apathy amongst the voters; several votes casted are blank during general elections reflecting their mistrust towards the political system (Koutsokis pg 34). This is alarming, because another research conducted on corruption in Greece found that general elections and the Ombudsman in Greece are currently the strongest institutions against corruption (NIS pg 7). 

The most vulnerable sectors for corruption in Greece are the executive, media and business according to a National Integrity System Assessment of Greece. The study criticizes the executive branch of power, stating that it is a too dominant player in the Greek political system. NIS also found that governments fall often under patron-client relationships, and organized interests, as they cling to power (NIS pg 5). Political corruption-scandals at the top level of politics are not unheard of in the politics of Greece. NIS criticizes that the parliament does not have enough monitoring powers over the government, especially on the budgetary issues (NIS pg 8). Regarding the media NIS criticizes the freedom of the press, stating that it often falls under political pressure, and that media owners politicize its content (NIS pg 5). Corruption in private sector, NIS found that there are differences between corporations listed that companies listed in the Athens Stock Exchange and those that are not. Listed companies were noted to follow international standards. Whereas companies that were not listed to the stock exchange were found to be very un-transparent, this in combination with ‘’the complexity of the legal and fiscal environment, entrenched bureaucracy, and frequently changing policies on entrepreneurship, all create an environment highly conducive to corruption.’’ (NIS pg. 6) Regarding the public sector NIS found that there is a substantial divide between law and practice, further stating that the decades of lack of transparency have left their marks on the public sector. This has resulted in corruption practices (NIS gp 6).

When we look more closely at the corruption in Greece, through empirical data provided by Transparency International Greece we can see that corruption in Greece is dominated by the public sector. Based on the following: ‘’Replies only from those who in the past 12 months have been asked to pay a bribe in order for their affairs in the Public or Private sectors to be attended to more quickly or settled’’ (TIG pg 4) we can see that corruption in the public sector, private sector an both persisted at the following in 2011: 67,3% public sector, 27,7% private sector and 5% in both (TIG pg 4). These figures have been quite stable during the period between 2007 and 2011. Transparency International Greece estimated that a total of €554 million were paid in bribes in Greece in 2011. Estimated amount of households affected of corruption in Greece is around 271-thousand in the public sector, and 124-thousand in the private sector. This is a large amount of money, and households affected but say nothing of the society as a whole affected by corruption. For instance €554 million and the damage caused by corruption are potentially much higher than these figures show.

3. Consequences of corruption in Greece

It is perhaps impossible to calculate the total amount of economic, social, political and human costs the Greek people are paying due to corruption. Greece today is in the midst of a great tragedy due to their debt crisis. It is beyond question that the Greeks are paying a great price for the misconducts accumulated during the decades of corruption. There are several forms of corruption such as embezzment, bribery, favoritism, fraud and so forth. Corruption as earlier mentioned has led to lower participation in election in Greece (Koutsokis pg 7). In combination with the NIS study which also mentioned above stated that Greek national elections are one of the most important institutional factors in combatting corruption in Greece. This means that Greece has effectively been partly lacking one of their most important assets against corruption. It is a serious issue for democracy itself that citizens feel that way. Politically the representatives of the people have to some degree not represented the will of the people. The alarming part in the case of Greek corruption is that corruption has been frequently found on the very political top (Koutsokis pg 29). Corruption at the political top has certainly contributed negatively to the present financial crisis in Greece. Politicians have potentially extracted public resources to their private interest, through methods of embezzlement and fraud and favored private rather that public interests (Amundsen pg 6). Greek politicians have potentially also attempted to preserve their power through corrupt means, using methods of favoritism, clientelism and vote buying (Amundsen pg 7). This raises questions of the health of democracy itself in Greece. Even if the politicians, perhaps, have not been corrupt, as stated above by the findings of Koutsokis, most Greeks still thought they were.

The public sector also suffers from corruption and thus of infectivity. Recruitment to public offices can for instance be based on favoritism rather than merits. Thus the quality of the public sector suffers. Tax evasion is a well-known problem in Greece, and largely made possible through ineffective public administration and corruption, both which can be regarded as the result of corruption. Tax evasion is one of the largest issues facing the present financial crisis in Greece. It is estimated that Greece loses around €30 billion each year due to tax evasion, which accounts of about twelve per cent of the total GDP (Randall). An ineffective public sector is overall wasteful for a country’s economy. Not to mention that foreign investments are likely to snub a corrupt state.

- Negative attitudes and mistrust towards the state itself are another important factor in tax evasion.

Greece’s culture of corruption can also be seen in the fraud in joining the Eurozone. Had Greece never been so corrupt as it is it could be argued that much of Europe’s and Greece’s troubles today wouldn’t have occurred. According to the BBC Greece’s public spending soared after the country joined the Euro, a country which manipulated its way into the Eurozone. The BBC reports that consequent governments concealed the figures, until the global financial turmoil which finally forced the Greek government to reveal the truth. It is indeed odd that PASOK and New Democracy, parties that have consequently controlled the cabinet at different times since the country joined the euro; neither party raised the alarm of the previous government’s wrong doings regarding the debt crisis. It is difficult to give reasons as to why this occurred. One explanation could simply be that they wanted to remain in power, while extracting as much resources as possible from the state before being caught. 

Corruption has definitely had a large linkage to the present crisis in Greece. The weak institutions and overall lack of ethics played their part to lead the Greek people to this trap. It is unfortunate because the whole the Greek welfare is in tatters and an increased amount of people are falling into poverty.

4. How to solve the corruption in Greece?

Greece is undergoing massive budgetary austerity measures, imposed by the EU and IMF. Further, Greece’s economy is expected to have shrunk a fifth by the end of this year since the beginning of the crisis in 2008 (BBC). There is more at stake than plainly combatting corruption at present. The most important measure in Greece is to re-establish the trust between politicians and the citizens. Greece needs national unity at this present time to be able to make reforms and to get rid of corruption in the country. The question is whether it can be possible with the present set of parties which are in way symbols of corruption. However, it is possible that they will re-invent themselves and be able to start a fresh. It is however important that the parties and politicians get rid of their self-serving image amongst the citizens. 

Greece has already during the past few decades been making legislation to combat corruption. However, the implementation of these legislations has not always worked. Thus there needs to be real political will and leadership to crack down on corruption. There needs to be political leadership which is determined to implement its reforms rather than just write beautiful words. This leadership has to be able to make transparency reforms for the government and the parliament itself. The parliament should be given increased monitoring powers over the government (NIS pg 8). 

Now that Greece is undergoing these massive austerity measures it would be good to make reforms in the public sector, in order to make it more effective and free of corruption. Reforms have to be made either way, because there are not resources to continue the same way as before. These reforms have to include increased amount of transparency, in order to make it easier to access information for citizens, media and other watchdogs. Good governance requires transparency in order to be tested by an objective and independent judicial system.

It must be remembered, however, that it will be very difficult to combat all these issues at once in Greece. And with the shrinking resources the quality of public administration, judicial system are at risk. Greece is a weakened state with both internal and external international pressure.

References:

Authors

Amundsen, I. (2006) "Political Corruption" U4

Koutsoukis, K. S. (2003) "Political Corruption in Greece" in Bull, M. J. & Newell, L. N. (2003) "Corruption in Contemporary Politics", Palgrave MacMillan.

Randall, J. (2011) "Greece: It's Corruption, Stupid!" (The Telegraph online, accessed 23.1.2013)

Organzations:

Transparency International Greece (2012) "National Integrity System Assessment Greece - Executive Summary" (TI online , accessed 3.2.2013)

Transparency International Greece & Public Issue (2011) "National Survey on Corruption in Greece" (TI online, accessed 3.2.2013)

Media:

BBC News (2012) "Eurozone crisis explained" (BBC online, accessed on 3.2.2013)