CORRUPTION IN GREECE

C O N F I D E N T I A L SECTION 01 OF 06 ATHENS 000369



SIPDIS



E.O. 12958: DECL: 02/02/2016

TAGS: PREL, GR

SUBJECT: CORRUPTION IN GREECE



Classified By: Ambassador Charles P. Ries for Reasons 1.4 (b,d)



1. (C) Summary. In his September 10 2005 economic policy

speech at the Thessaloniki trade fair, P.M. Karamanlis

outlined six major problems facing Greeks in their everyday

life. Although the list included issues such as crime,

poverty, unemployment, the very first item was corruption.

This would not surprise many Greeks, who openly express their

concern corruption is pervasive and appears to be getting

worse. Moreover, two major reports by the organization

Transparency International support this contention, with

Greece receiving the lowest rating of any of its EU-15

compatriots. The year 2005 saw an unusually wide range of

high-level Greek officials felled by scandals related to

corruption. These included a deputy minister of economy, the

Vice President of the Supreme Court and even the Metropolitan

Bishop of Attica (where Athens is located). Whether this

represents a laudable less-tolerant approach by the Prime

Minister and the society, or merely bad luck on the part of

the corrupted is unclear. Of greatest concern to this

mission, however, is the negative impact Greek corruption has

on U.S. firms attempting to do business here, particularly in

areas related to government procurement. Although many do

end up winning contracts, many others do not, and under

questionable circumstances. This is a problem post has

raised with the GoG and will continue to do so.

Unfortunately, it appears corruption is so deep rooted in

societal expectations that it will take years before

fundamental change will be seen. End summary.



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TI: Perception of Massive Greek Corruption

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2. (U) Transparency International (TI),the best-known

monitor of global corruption, publishes two major annual

reports, the Global Corruption Barometer (GCB) and Corruption

Perceptions Index (CPI). The GCB is a public opinion survey

assessing perceptions and experiences of corruption that

measures petty and grand corruption (and compares corruption

with other problems in society),evaluates the extent to

which public and private institutions are considered corrupt,

determines where the public believes corruption's impact is

greatest, and measures bribery.



3. (U) The GCB results for Greece are striking: Within the

Western European grouping (represented by the EU-15 minus

Belgium and Sweden),Greece falls dead last in virtually

every measurement, as detailed below.



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GCB I: Corruption in National Institutions/Sectors

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4. (U) Asked to rate the extent to which they assess the

level of corruption in fifteen different sectors, Greeks

produced rankings that were either the worst or next to worst

of any of their Western European compatriots. Greece's

rankings particularly diverge from the European norm

vis-a-vis corruption in political parties, the police, the

legal system, tax revenue authorities, customs, and

particularly religious bodies. Here is a summary of the

Greek results compared to the Western European average, by

sector, on a scale of 1 to 5 (1: not at all corrupt; 5:

extremely corrupt):



Sector Greece WE Avg.

-------------- -------------- --------------

Political Parties 4.1 3.7

Parliament 3.5 3.3

Police 3.3 2.7

Legal System/Judiciary 3.7 2.9

Tax Revenue 3.8 2.9

Business/Private

Sector 3.4 3.3

Customs 3.5 2.7

Medical Services 3.6 2.7

Media 3.7 3.3

Education 2.7 2.3

Utilities 3.3 2.6

Registry and Permits 2.5 2.5

The Military 2.5 2.5

NGOs 2.6 2.5

Religious Bodies 3.7 2.5



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GCB II: Effect of Corruption on Spheres of Life

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5. (SBU) Greeks also gave the lowest ratings among the

Western Europe group when asked the degree to which they felt

corruption affects different spheres of life, including

political life, the business environment and personal/family

life (in this rating, they tied for last place with

Portugal). Worldwide, Greeks were among a select group of

seven countries in which more than 70% said corruption

affected political life to a large extent. The others are

Bosnia and Herzegovina, Bolivia, Israel, Peru, the

Philippines, and Taiwan. Particularly significant for U.S.

commercial interests, more than 50% of Greeks stressed the

negative effects of corruption on the business environment

(for U.S. business perception of the problem, see para.

19-21).



Sector Greece WE Avg.

-------------- -------------- --------------

Political Life 3.7 3.0

Business Environment 3.6 2.7

Personal/Family Life 2.5 1.7



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GCB III: Bribery

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6. (U) Finally, a far larger percentage of Greeks, 12%,

admitted to having paid a bribe in 2004, compared to a

Western European average of 2%. The closest Western European

runner-up was Luxembourg at 6%. Worldwide, this placed Greece

in the second highest category of countries whose citizens

said they had paid a bribe in the previous year.



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The Corruption Perceptions Index: Greece Lags Again

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7. (U) TI,s second major report, the Corruption Perceptions

Index (CPI),is a composite survey reflecting the perceptions

of business people and country analysts, both inside and

outside Greece. The CPI rankings for Greece are based on the

Economist Intelligence Unit Country Risk Service and Country

Forecast, the Institute for Management Development World

Competitiveness Report, the annual report of the Merchant

International Group, the World Economic Forum,s Global

Competitiveness Report, and the annual report of the World

Markets Research Centre.



8. (U) For 2005, the CPI gave Greece the lowest rating

within the Western Europe group, with a score of 4.3. This

compares to the Western European average of 7.6 (on a scale

of 1 to 10).



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TI Greece's Representative: Zafiris Hadjidemetriou

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9. (C) Economic Counselor discussed TI's reports with the

organization's part-time representative in Greece, Zafiris

Hadjidemetriou, an attorney specializing in corporate and

shipping law. He attributed the unusually high level of

corruption in Greece, at least by Western European norms,

largely to cultural causes. Because of its deeply ingrained

nature, he said it was difficult to convince Greeks that

corruption could be changed: "Greeks are raised to believe

Greece is the &poor relative8 of the EU where Western

European modes of behavior don't fit. &Ti na kanoume,

Ellada einai8 (What can you do, this is Greece) is a

pervasive attitude resulting from Greece being cut off

physically and historically from the rest of Western Europe.



10. (C) Hadjidemetriou also noted the lack of trust within

Greek society, which even characterized relations between

close family members: "I've seen brothers break off

relations over business deals gone bad ) even members of the

same Greek family don't trust each other." This tendency, he

said, leads Greeks to assume others are trying to outwit

them, leading everyone to try to outwit others first. He

noted that one of the greatest compliments a Greek can pay

another Greek is to praise their &poniria8, or ability to

outwit others.



11. (C) Hadjidemetriou felt this dynamic also influences

U.S.-Greek relations. Greeks tend to see Americans, whom

they disparagingly call "Amerikanakia", as hopelessly naive,

and unschooled in the real ways of the world. In short, they

view Americans as utterly lacking in "poniria." Ironically,

this contempt for the individual American does not translate

into a similar view of American government, which is viewed

as possessing the ultimate in "poniria" and having caused

almost everything that happens in Greece. As Hadjidemetriou

put it: "The rise of the junta ) the Americans caused it.

The fall of the junta ) the Americans caused it. Turks in

Cyprus ) the Americans caused it..." He said he found this

disconnect a bit humorous if sad and felt it kept Greeks from

learning from American expertise in the areas of good

governance and business.



12. (C) Another way in which the utter lack of trust

manifests itself is in the Greek view of government.

Hadjidemetriou said "Government of the people, by the people

and for the people" is a concept utterly alien to the average

Greek citizen, who believes that Greek government officials

aim simply to enrich themselves. Hadjidemetriou related a

discussion he had with a Greek cab driver a number of years

ago in which he urged the cab driver to be a good citizen and

pay some taxes. "What for? I'm doing a good for the nation

) the more money they have the more power they will have to

screw us("



13. (C) Hadjidemetriou said the average citizen's contempt

for government was based on the experience many had

interacting with mid-level bureaucrats. Although corruption

in Greece was rampant at all levels, he said, it is

especially bad at the day-to-day level involving activities

such as obtaining building permits and dealing with customs

officials. These petty bureaucrats are very powerful, far

more powerful as a group than ministers, and it is almost

impossible to fire them (Note: the vast majority have

lifetime employment). The bureaucrats' power vis-a-vis the

average citizen is only amplified by an extremely complex

legal system that requires innumerable permits for even

simple activities. Of course, many of these laws were

developed by the very public servants who implement them and

can potentially be enriched by them. Hadjidemetriou felt the

bureaucrats' tendencies were only amplified by the highly

"productive" Greek Parliament, which Hadjidemetriou savaged

as being utterly incompetent: "The average Greek politician

is great at formulating complex laws that regulate things

that don't need regulating, and doing so in the most

complicated manner possible." The only potential corrective,

the court system, is unable to fulfill its function as Greeks

are hesitant to use it because they do not trust it to work

efficiently and honestly.



14. (SBU) Hadjidemetriou saw some room for optimism,

particularly when it came to the slowly increasing power of

EU law within the Greek system. EU law was helping change,

in some cases fundamentally, the way Greeks did business in a

number of sectors including corporate governance, consumer

protection, and the environment. Hadjidemetriou also pointed

to the positive influence of laws aimed at combating money

laundering. "Know your customer" laws were helping to root

out bribery and tax evasion in unexpected ways, he stressed.

He also cited the power of a younger generation of Greeks,

who believed in the benefits of individual initiative. These

young people were doing well independent of the Greek state,

which took them out of the closed circle of government

benefits and payoffs.



15. (C) As for the Karamanlis government, Hadjidemetriou

said the PM certainly said the right things, and ministers

such as Sioufas and Alogoskoufis spent enough time in the

opposition to see how things work and try to make

improvements. Unfortunately, Hadjidemetriou lamented, most

politicians, once they've been in power for a while, begin to

accept the system as it is. This doesn't mean they're

corrupt, just human. Although the president of TI was

impressed by Karamanlis when they met last year,

Hadjidemetriou said he was generally taking a wait and see

attitude vis-a-vis the ND government.



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Embassy Observations I: 2005 A Bad Year

for Corruption in Clergy and Courts

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16. (C) Although this Mission cannot claim to know the true

state of corruption in Greece, it is striking to see the

range of high-level Greeks who have been touched by scandal.

Starting with the government, in November 2005, the Greek

Parliament lifted the immunity of three of its members who

have been accused of involvement in bribery:

Petros Mandouvalos (independent, former ND): Accused of

bribing judges and money laundering;

Athanasios Papageorgiou (PASOK): Accused of favoritism in

granting loans while Deputy Governor of the Agricultural Bank

of Greece;

K. Badouvas (ND): Accused of violations of fuel storage

regulations while a businessman;

One deputy minister, Adam Regouzas, was forced to resign as a

result of having told a group of customs inspectors, not that

they should eliminate their request for bribes, but rather

moderate them. His term for the purpose of the bribes,

"grigorosimo" (expedited processing) has now entered the

vernacular as a synonym for corruption in the customs

authorities. It is important to note that Regouzas himself

is a former customs official.



17. (C) The Greek Orthodox Church has also been rocked by

serious corruption allegations. It suspended in 2005 a

senior bishop and an influential priest on the basis of

corruption allegations involving bribery, drug dealing and

sexual favors. The scandal began with the case of

Archimandrite (senior-level Abbot) Yiossakis, who was

originally arrested on charges of stealing from archeological

sites on the island of Kythera. As the case developed,

Yiossakis was also accused of serving as a middleman between

lawyers and judges in an alleged trial-fixing ring. Even

more damaging to the church, the scandal spread up the chain

of command to Metropolitan Bishop of Attica Panteleimon, who

was suspended for six months. According to press reports,

Panteleimon was caught on tape recordings in which he boasted

of being able to manipulate judges. A Director of the GoG's

Financial Crimes Unit told Economic Counselor that

Panteleimon was found to have more than USD 3 million in his

personal bank account. When interviewed on a local TV

station, Panteleimon explained that he was "saving for a

rainy day," to which the interviewer responded that the cost

of a rainy day seemed to have increased significantly.



18. (C) The legal system has suffered the worst barrage of

accusations, with 2005 seeing a record number judges

investigated, dismissed, and even jailed as a result of

corruption. Specifically, over the course of the year 13

justices were dismissed, and nine temporarily suspended from

duty. A further two were being prosecuted for money

laundering and receiving bribes. 17 others had been indicted

and disciplinary action had been initiated against 40 for

charges related to corruption. Most prominently, the Vice

President of Greece's Supreme Court, Achilleas Zisis, was

relieved of his duties as a result of having allowed a Greek

businessman on the lam to pay for the building materials used

in constructing the judge's holiday home on Crete. These

facts only reinforce Greeks' hesitation on relying on their

legal system for recourse against corruption they encounter

in their daily lives.



19. (C) As important as the "grand" corruption outlined

above is to Greek society as a whole, however, it is the

low-level corruption that most directly touches the lives of

average Greek citizens. Be it town tax authority officials,

local law enforcement officers, or any of a wide-range of

similar officials, post hears almost weekly stories of

corruption at this level of Greek society. As Nicos Kouris,

an Athenian venture capitalist with a house outside of Athens

told Economic Counselor recently, "I read about the big

corruption, but what gets me personally angry, and what has

gotten worse over the past ten years, is the low-level petty

corruption I encountered in the village where I'm building my

summer house." To give just one example of local-level

corruption, in August 2005 a trafficking in persons ring was

uncovered in Thrace that included three police officers --

two of whom were reportedly "high ranking" -- who were

accused of bringing dozens of women into Greece from Eastern

Europe. The case also involved a local mayor and members of

the mayor's staff.



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Embassy Observations II:

Corruption in Non-Military Procurement

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20. (C) From the Mission perspective, perhaps the most

worrisome effect of Greek corruption is its effect on U.S.

business interests. The depth of state intervention in the

economy means that there are a large number of state-owned

corporations including utilities, the armaments industry, and

transportation, where civil servants reign supreme. Most

complaints FCS at post encounters involve procurement by

these organizations and directly by government ministries.



21. (C) The mid-level bureaucrats and technocrats at these

companies frequently write specifications that lead to

sole-source suppliers, they often deny approvals for products

that have been approved in the rest of Europe, and have

tenders canceled after financial and technical evaluations of

the bidders have been performed and made public. Very often

picayune and technical non-compliance with bid-requirements

is cited as the reason for cancellation. Although clear

evidence is hard to obtain, the high frequency with which

tenders are canceled gives the appearance that evaluation

committee members are backing companies who would otherwise

have lost. The complexity, uncertainty and corruption of the

courts reinforce the tendency of spurned U.S. companies (or

their representatives) not to go forward with legal action

unless the grounds for doing so are ironclad. On occasion,

according to U.S. companies, senior Greek officials have

acknowledged rampant corruption among mid-level Greek

bureaucrats as having influenced the decision against their

firms. Not surprisingly, Greece's reputation for corruption

reduces U.S. firms, reluctance to enter the Greek market.



22. (C) One U.S. company's bid on a $3.5 million billing

system for Public Power Corporation (PPC),a state-controlled

public utility, is a typical example of the kind of

shenanigans frequently faced by U.S. companies. In spite of

having the lowest price of any bidder (by 22%),and in spite

of having the highest technical score (by 12%),the firm

found out that the tender was canceled as a result of

objections lodged by another company about how the tender had

been handled. It is worth noting that this, and the many

other difficulties encountered by the firm in the tender were

mainly lodged by just one member of the tender committee.

Luckily, however, this story ended up as a success -- the

contract was signed February 2 -- as a result of repeated

interventions by the Mission's commercial section and a

series of five discounts offered by the firm on its product.



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Embassy Observations III:

Corruption in Military Procurement

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23. (C) Military procurement was long rumored to be rife with

corruption. Many believe PASOK Defense Minister Akis

Tzohatzopoulos in particular profited handsomely from large

defense acquisitions. To cite one prominent example,

Tsohatzopoulos is believed to have received huge bribes



SIPDIS

associated with the GoG's sole-source procurement of German

Type 214 submarines in the 1990s. In fact, many Greeks

credit the former Minister's role in this sale as a key

factor in his new-found wealth. Unfortunately, the

widely-held assumption that no military procurement takes

place without corruption dogged the recent F-16 acquisition.

The Ambassador repeatedly and in multiple fora had to explain

that the Foreign Military Sales process left no room for such

practices.



24. (C) PM Karamanlis and MOD Spiliotopoulos have made ending

questionable acquisition practices a centerpiece of their

defense reform efforts. In late 2005, the Defense Ministry

introduced a series of reforms intended to enhance

transparency and ensure that procurement decisions are made

openly and solely based on military need. Although the

government faces a struggle in its effort to change

traditional practices and root out entrenched interests,

there are signs that the Ministry of Defense is moving

forward with the effort. The government's efforts to

investigate allegations of corruption under the government of

the socialist PASOK party have not been successful, with

inquiries stymied by parliamentary jockeying and accusations

that they are driven more by politics than by an impartial

search for justice.



25. (C) The situation faced by most U.S. defense firms

smaller in size and power than Lockheed in still not good.

One U.S. firm encountered the full force and complexity of

the MoD's tendering procedures recently when it submitted its

bid on a linear accelerator for military hospitals. The

firm's bid not only had the best price (by 28%),but also

received the highest combined price/technical score.

Mysteriously, MoD canceled the tender at the last minute --

after the firm's price had been revealed -- only to announce

its decision to "reinstate" the tender at a later date.

Mission has raised this issue with MoD repeatedly, noting

such practices are unfair to U.S. firms, which spend large

amounts of money creating bids that meet very complex Greek

tender specifications.



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Comment

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26. (C) Greek society as a whole suffers tremendously from

the inefficiencies related to corruption, which appear to be

endemic, and unlikely to be reduced significantly any time

soon. Although the Prime Minister's oft repeated rhetorical

stance against the problem is praiseworthy, it is going to

take much more to achieve a fundamental change in the way the

average Greek thinks and acts. One part of the problem is

that, where an American is likely to see a well-defined line

between corruption and legitimate business/political

practices, the average Greek sees a wide swath of shades of

gray. Using one's friends in high places to get something

done that otherwise would be impossible -- a practice called

"meson" -- is such a standard practice that it is sometimes

difficult for even the most forthright Greek to know where

the corruption line exists, if it exists at all.



27. (C) One might think that the presence of 70,000 plus

Greek-Americans in Greece with a knowledge of how things CAN

work -- i.e. in the U.S. -- along with a knowledge of how

things DO work in Greece, could change things for the better.

Sadly, the Greek-Americans with whom we have spoken have

been unanimous in telling us the Greek system is simply

unredeemable. They tell us of trying to build homes in their

Greek villages and having to obtain endless permits from

local bureaucrats, who refuse to do their jobs without extra

remuneration. They cite customs officials who see almost

every import as an opportunity for personal enrichment. Many

tell us they tried hard to bring their American standards

back home with them only to give in to the "Greek way"

through simple exhaustion. It is these conversations above

all that make us pessimistic about our ability to reduce

corruption generally in Greek society over the short term and

medium term. Post will nonetheless continue to promote

transparency through public outreach efforts such as the

Ambassador's recent interview in an English-language paper in

which he promoted the idea of using e-commerce technology in

government contracting. In that vein, the Ambassador and

Mission staff will continue to promote aggressively a level

playing field in Greek government procurement that gives U.S.

firms a fair chance to win official contracts.

RIES