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Christina Vasilaki: Corruption erodes economic recovery

While austerity and the doctrine of fiscal adjustment are increasingly tightening their grip on the member-states of the European Union, corruption is not only being insufficiently dealt with as a key cause of the crisis, but it also continues to function as a deterrent on the road to recovery. According to the first report of the European Commission regarding this phenomenon in the EU, which was released last week, the squandering of public money is draining the treasuries of deficit countries in particular, while entrepreneurial activity is faced with enormous obstacles to growth due to corruption.

At the European level, more than half of the citizens (56%) believe that the level of corruption in their respective countries has increased over the past three years. One in twelve Europeans has experienced or witnessed an incident of corruption in the last twelve months, while four out of ten European companies are persuaded that corruption is an obstacle to entrepreneurial activity in the EU.

More specifically, in response to a question of the Special Eurobarometer that was published simultaneously with the report, with regard to whether corruption is a problem for doing business, 50% of the construction sector and 33% of telecoms/ IT companies felt it was a problem “to a serious extent”. The smaller the company, the more often corruption and nepotism appear as a problem for their business activity. Businessmen who are active in the Czech Republic (71%), Portugal (68%), Greece and Slovakia (both 66%) are more likely to face corruption.

In Greece -which once again emerges as a champion of corruption, despite the insistence of the Commission to avoid the formal ranking of member-states- 99% of respondents are persuaded that corruption is widespread in Greece.

According to the Eurobarometer survey, 89% of entrepreneurs and 80% of the general population respondents believe that nepotism and corruption hinder business competition in Greece (EU average: 73% and 69% respectively). Furthermore, based on the Global Competitiveness Index 2013-2014 of the World Economic Forum, Greece ranks 91st among 148 countries, marking a low score in relation to favoritism in decisions of government officials and the diversion of public funds.

Apart from its role as deterrent to investments, however, corruption additionally costs huge sums of money to the Greek public. In particular, petty corruption is estimated to have cost Greece 554 million Euros in 2011 only, whereas the strain on the national budget due to public contracts that result from corruption is extremely burdensome. The report highlights as an example, the illegal payments from a foreign company, without naming it, to officials of both political parties that governed during the periods 1996-2004 and 2004-2009, allegedly in exchange for securing public contracts, which resulted in the loss of two million Euros for the Greek public.

In evaluating the initiatives of Greece to ensure transparency in public procurement, the report stresses that despite the various legislative initiatives, deficiencies in this field have not been successfully addressed yet; in particular, shortcomings remain with regard to the fragmentation of supervision, the need for further strengthening of internal and external controls and improving the level of law enforcement. Moreover, the report notes that there is no evidence concerning the process of systematically checking potential conflicts of interest in public procurement procedures, particularly at the local level.

As far as best practices are concerned, apart from the introduction of “Diavgeia” (i.e. “clarity”) project, which establishes the obligation to publish all laws, administrative acts and other types of acts of governmental and other administrative institutions on the internet, and which is recognized as an important step towards transparency, it is noted that numerous investigations have been launched recently on allegations of corruption incidents. More specifically, the imprisonment of former Minister of Defence, Akis Tsochatzopoulos, and former mayor of Thessaloniki, Vasilis Papageorgopoulos, are considered positive steps.

Particular emphasis is placed on the healthcare sector. Beyond the familiar “fakelakia”, which are mentioned as cases of petty corruption, large-scale cases are also addressed in relation to the certification and procurement of medical equipment, as well as to the approval and supply of pharmaceutical products.[1] Indeed, an example of such a case is reported, which involved the acquisition of medical equipment worth 11,2 million Euros of public funds although it was never put in proper and full operation.

Practices that facilitate tax evasion and pose a significant burden to the Greek state could not be absent from the report. In particular, it is stated that recent studies on the development of the shadow economy estimate the cost of such practices at approximately 24,3% of GDP in 2012. In addition, the inability of the state apparatus to collect fines imposed for tax evasion is described: the report cites the allegations of the Financial Crime Prosecution Unit (Greek SDOE), according to which a mere 20% of these fines are collected, while 40% is usually cancelled and the remaining 40% is retained by officials who are responsible for the process. Based on the same estimates, when it comes to tax refund cases, another 10% of the amount is embezzled by corrupt officials. Particular reference is also made to the Lagarde list, whose investigation is still in progress, whereas allegedly the SDOE is currently examining the assets of 54 serving and former politicians. The report, which is primarily aimed at offering instructions for the successful combating of corruption in all member-states of the EU, notes that Greece has made significant commitments in this area in the context of the Memoranda, while the Task Force of the Commission is providing support to this end. Among these commitments are the establishment of effective policies to combat corruption, the reform of the judiciary and public administration (mainly with regard to public procurement), and the implementation of a strategy for the fight against fraud in the case of projects co-funded by the EU. In fact, specific risks related to corruption are highlighted in relation to the commitment of the Greek government to large-scale privatisations of public assets, along with the need for independent monitoring.



[1] Translator’s note: fakelakia < Greek fakelos = envelope. In modern Greece, such envelopes contain “hush money” (in our case “rush money” would be the best wording) offered to doctors and other healthcare personnel, in order for the giver or his relatives to receive special care and attention.