BULGARIA’S southern neighbour has been rocked by an apocalypse of journalistic revelations about the endemic graft and corruption within the legal system, the Greek Orthodox church, and their intertwined links.
While the new centre-right government has taken up the cudgel to rid Greece of corruption and engaged in a truthful audit of high government debt levels, significant reform still needs to be undertaken to put the country on a long term path to sustainable prosperity.
In recent weeks, at least 10 judges have been earmarked for dismissal and prosecution by the president and a special investigatory working group of the Court of Cessations because of their involvement in fixing court case outcomes. Greek justice, long criticised for being cumbersome and slow, has moved very swiftly against those within its own ranks who have disgraced their office. A further 30 are still being investigated and several journalists have been called to testify and present the results of their ground-breaking investigations. Quite a few of these judges had underground links to a priest, Iakovos Yosakis, currently being held in prison while the investigation proceeds, who it appears acted as the middle man for passing on bribes from lawyers and their clients to the judges. Yosakis was no stranger to controversy, since he has on many occasions been the subject of embezzlement allegations, both in Greece and in a parish in Chicago, but was never disciplined for his behaviour by the church. He narrowly escaped an arrest warrant in the US by taking flight to Panama with the help of church contacts. It was revealed that one judge with whom he had contact allegedly was a pimp for Russian prostitutes.
And the revelations fuelled by secret phone taps and hidden cameras continue. It is also alleged that the metropolitan bishop of Athens had millions in private bank accounts, tried to influence judges, had at least three male lovers despite his vow of chastity, and also had built an illegal villa by the sea in complete breach of building code regulations. Swift action was taken against him by Christodoulos, the Archbishop of Athens and All of Greece. He has been suspended for six months while the matter is further investigated, and it appears almost a certainty that he will be defrocked.
The new centre-right New Democracy government has been actively pursuing a campaign against corruption in the public service and cleaning up government procurements, infrastructure contacts and defence spending. This zero tolerance for corruption policy emboldened investigative journalists, who, armed with hidden cameras and recording devices, were able to crack the court case fixing ring. Of course in Greece, like many countries in the region, it is illegal for journalists to use hidden cameras and tapping devices, but the evidence can be taken into consideration in any court case or prosecution, if the evidence is deemed to be in the public interest, without any heavy- handed sanction against the journalists. The involvement of the clergy in the case fixing ring sparked further investigation into the Byzantine intrigues of the church hierarchy. A whole container load of tapes detailing intimate conversations between certain members of the upper most church hierarchy, the synod, has come to the fore and been aired. Most religiously sensitive Greeks have been shocked and revolted by what they have been seeing and hearing on their television sets over the past three weeks and now are publicly demanding that the church undergo a cathartic process and throw out corrupt church leaders. For the first time in history more than half of Greeks surveyed want a long overdue separation of church and state.
However, some sceptics doubt whether Archbishop Christodoulos will be able to lead the charge against church corruption that has rocked the foundations of the institution. He himself has admitted to authoring a letter of recommendation for a certain drug dealer who later surfaced in Jerusalem to influence the outcome of the appointment of the Greek orthodox metropolitan there. Babilis, who has used several names and different passports, swore on oath that he was allegedly sent by the Archbishop to help the current metropolitan of Jerusalem to win office and has admitted to doctoring and releasing pornographic material to smear the main contender for the position and ensure the Archbishop’s man got the role. Since then, Babilis has been linked by the press to secret services like Mossad and the CIA. According to reports, with the story bordering on a thriller, this same man won Greek police and interior ministry contracts to supply bullet proof vest while an Interpol warrant was still outstanding for his arrest. The Archbishop, despite his vow to clean up the church, is now wounded in public opinion polls with less legitimacy in the eyes of most Greeks. He also has to contend with a powerful faction in the church synod that is completely embroiled in dubious practices that will not easily relinquish their positions.
Turning to the economic state of affairs, the less than a year old new government has its work cut out for it. After several years of strong economic growth, that continued in 2004, buoyed by an expansionary fiscal stance, and the Olympics, growth is slowing to a projected three per cent of GDP in 2005. Rising incomes despite a still high unemployment rate underpin strong consumption, while increased profitability is spurring modest investment spending, especially in construction. However, imbalances have emerged and many longstanding structural impediments persist. Inflation has been well above the euro-area average, eroding international competitiveness and export market shares. This has resulted in large current account deficits.
The fiscal position has deteriorated sharply. Following very sharp statistical revisions, the general government deficit is expected to be somewhere in the region of 5.5 per cent of GDP in 2004, and there is a risk of a still worse outcome. Public debt, at about 112 percent of GDP in 2004, has not fallen in recent years. The 2005 budget optimistically aims for significant fiscal consolidation, with the deficit falling by 2.5 per cent of GDP. European authorities view these estimates as being far too optimistic and want further belt tightening. But the government sensing the fragility of certain poorer sectors of the Greek community, like agricultural workers and pensioners, is reluctant to engage in fiscal shock therapy. The end of Olympics spending is an important, and permanent factor, accounting for 1.25 GDP percentage points of the expected fiscal improvement. The 2005 budget also contains a temporary tax amnesties and an emphasis on the collection of arrears from powerful big business cartels.
Despite these efforts, widening economic imbalances threaten future growth prospects. The fiscal position was certainly much worse than earlier thought. Deteriorating competitiveness, due to higher inflation differentials to the rest of the euro area are reflected in poor export performance and a large current account deficit. Greek authorities must engage in a sustained fiscal consolidation effort along with further fiscal transparency.
In 2005 and beyond, fundamentals point to slower growth and a gradual easing of inflationary pressures. The erosion of competitiveness may limit the benefit from any pickup in growth in Europe. Sustained high oil prices and further rises in the value of the euro will necessarily mean even slower growth projections in Greece. Greece still lags significantly behind the EU in real per capita income despite the economic boom. Substantial reforms to improve market performance still need to be undertaken.
Most have welcomed the new government’s launch of a fiscal audit immediately on taking office, which revealed significant past understatements of the deficit and public debt. Further reforms to bolster credibility and ensure the integrity of the data are needed. Some of the reforms mulled include the independence of auditing, ensuring the independence of the statistical agency, closing specially hidden off-balance sheet treasury accounts and implementing a mid-year budget report. These efforts are essential to preserve the government’s credibility and the confidence of investors.
Other important reforms include the containment of the public sector wage bill, cutting government loan guarantees, stronger controls on wasteful health care spending, and a review of dubious defence outlays. Public procurement laws also need urgent reform to prevent graft and corruption. Faster progress is also needed on labour market reform, but serious efforts to build the necessary consensus for moving forward in this area is currently lacking.
More countries in the region could use a militant and brave press like the “take no prisoners” Greek investigative journalists. Some of these journalists haven’t flinched in the search for the truth despite being hit with millions of euro in defamation court actions and even threats against their lives. It has had its downside, in that it has caused a great deal of social turmoil, bordering on a crisis, and some of the revelations have been extremely distressing for mainstream religious and law abiding Greeks. However, they have been a key factor in precipitating a long overdue reflection on ethical values within Greece and serious reform in the judiciary and the church. They can also claim credit for the country graduating to more mature view of the relations between church and state and a clean up of the “minority” of crooked judges and priests.
Another important lesson for the region from the Greek experience is the albatross of high government debt that needs to be avoided, because paying it back with hefty interest is a painful experience and it damages competitiveness. Government debt doesn’t provide any meaningful shortcut to sustainable development and higher incomes, particularly when a significant portion of the money has been swallowed up by dubious government contractors and suppliers, and a woefully inefficient public service.
Nick Peterson has worked for top law firms and bulge bracket investment banks. He currently leads seminars for professionals around the globe, acts as an expert on EU programmes in the region and is an investment banking consultant.
He welcomes your emailed comments: regional_economic_compass@yahoo.co.uk
While the new centre-right government has taken up the cudgel to rid Greece of corruption and engaged in a truthful audit of high government debt levels, significant reform still needs to be undertaken to put the country on a long term path to sustainable prosperity.
In recent weeks, at least 10 judges have been earmarked for dismissal and prosecution by the president and a special investigatory working group of the Court of Cessations because of their involvement in fixing court case outcomes. Greek justice, long criticised for being cumbersome and slow, has moved very swiftly against those within its own ranks who have disgraced their office. A further 30 are still being investigated and several journalists have been called to testify and present the results of their ground-breaking investigations. Quite a few of these judges had underground links to a priest, Iakovos Yosakis, currently being held in prison while the investigation proceeds, who it appears acted as the middle man for passing on bribes from lawyers and their clients to the judges. Yosakis was no stranger to controversy, since he has on many occasions been the subject of embezzlement allegations, both in Greece and in a parish in Chicago, but was never disciplined for his behaviour by the church. He narrowly escaped an arrest warrant in the US by taking flight to Panama with the help of church contacts. It was revealed that one judge with whom he had contact allegedly was a pimp for Russian prostitutes.
And the revelations fuelled by secret phone taps and hidden cameras continue. It is also alleged that the metropolitan bishop of Athens had millions in private bank accounts, tried to influence judges, had at least three male lovers despite his vow of chastity, and also had built an illegal villa by the sea in complete breach of building code regulations. Swift action was taken against him by Christodoulos, the Archbishop of Athens and All of Greece. He has been suspended for six months while the matter is further investigated, and it appears almost a certainty that he will be defrocked.
The new centre-right New Democracy government has been actively pursuing a campaign against corruption in the public service and cleaning up government procurements, infrastructure contacts and defence spending. This zero tolerance for corruption policy emboldened investigative journalists, who, armed with hidden cameras and recording devices, were able to crack the court case fixing ring. Of course in Greece, like many countries in the region, it is illegal for journalists to use hidden cameras and tapping devices, but the evidence can be taken into consideration in any court case or prosecution, if the evidence is deemed to be in the public interest, without any heavy- handed sanction against the journalists. The involvement of the clergy in the case fixing ring sparked further investigation into the Byzantine intrigues of the church hierarchy. A whole container load of tapes detailing intimate conversations between certain members of the upper most church hierarchy, the synod, has come to the fore and been aired. Most religiously sensitive Greeks have been shocked and revolted by what they have been seeing and hearing on their television sets over the past three weeks and now are publicly demanding that the church undergo a cathartic process and throw out corrupt church leaders. For the first time in history more than half of Greeks surveyed want a long overdue separation of church and state.
However, some sceptics doubt whether Archbishop Christodoulos will be able to lead the charge against church corruption that has rocked the foundations of the institution. He himself has admitted to authoring a letter of recommendation for a certain drug dealer who later surfaced in Jerusalem to influence the outcome of the appointment of the Greek orthodox metropolitan there. Babilis, who has used several names and different passports, swore on oath that he was allegedly sent by the Archbishop to help the current metropolitan of Jerusalem to win office and has admitted to doctoring and releasing pornographic material to smear the main contender for the position and ensure the Archbishop’s man got the role. Since then, Babilis has been linked by the press to secret services like Mossad and the CIA. According to reports, with the story bordering on a thriller, this same man won Greek police and interior ministry contracts to supply bullet proof vest while an Interpol warrant was still outstanding for his arrest. The Archbishop, despite his vow to clean up the church, is now wounded in public opinion polls with less legitimacy in the eyes of most Greeks. He also has to contend with a powerful faction in the church synod that is completely embroiled in dubious practices that will not easily relinquish their positions.
Turning to the economic state of affairs, the less than a year old new government has its work cut out for it. After several years of strong economic growth, that continued in 2004, buoyed by an expansionary fiscal stance, and the Olympics, growth is slowing to a projected three per cent of GDP in 2005. Rising incomes despite a still high unemployment rate underpin strong consumption, while increased profitability is spurring modest investment spending, especially in construction. However, imbalances have emerged and many longstanding structural impediments persist. Inflation has been well above the euro-area average, eroding international competitiveness and export market shares. This has resulted in large current account deficits.
The fiscal position has deteriorated sharply. Following very sharp statistical revisions, the general government deficit is expected to be somewhere in the region of 5.5 per cent of GDP in 2004, and there is a risk of a still worse outcome. Public debt, at about 112 percent of GDP in 2004, has not fallen in recent years. The 2005 budget optimistically aims for significant fiscal consolidation, with the deficit falling by 2.5 per cent of GDP. European authorities view these estimates as being far too optimistic and want further belt tightening. But the government sensing the fragility of certain poorer sectors of the Greek community, like agricultural workers and pensioners, is reluctant to engage in fiscal shock therapy. The end of Olympics spending is an important, and permanent factor, accounting for 1.25 GDP percentage points of the expected fiscal improvement. The 2005 budget also contains a temporary tax amnesties and an emphasis on the collection of arrears from powerful big business cartels.
Despite these efforts, widening economic imbalances threaten future growth prospects. The fiscal position was certainly much worse than earlier thought. Deteriorating competitiveness, due to higher inflation differentials to the rest of the euro area are reflected in poor export performance and a large current account deficit. Greek authorities must engage in a sustained fiscal consolidation effort along with further fiscal transparency.
In 2005 and beyond, fundamentals point to slower growth and a gradual easing of inflationary pressures. The erosion of competitiveness may limit the benefit from any pickup in growth in Europe. Sustained high oil prices and further rises in the value of the euro will necessarily mean even slower growth projections in Greece. Greece still lags significantly behind the EU in real per capita income despite the economic boom. Substantial reforms to improve market performance still need to be undertaken.
Most have welcomed the new government’s launch of a fiscal audit immediately on taking office, which revealed significant past understatements of the deficit and public debt. Further reforms to bolster credibility and ensure the integrity of the data are needed. Some of the reforms mulled include the independence of auditing, ensuring the independence of the statistical agency, closing specially hidden off-balance sheet treasury accounts and implementing a mid-year budget report. These efforts are essential to preserve the government’s credibility and the confidence of investors.
Other important reforms include the containment of the public sector wage bill, cutting government loan guarantees, stronger controls on wasteful health care spending, and a review of dubious defence outlays. Public procurement laws also need urgent reform to prevent graft and corruption. Faster progress is also needed on labour market reform, but serious efforts to build the necessary consensus for moving forward in this area is currently lacking.
More countries in the region could use a militant and brave press like the “take no prisoners” Greek investigative journalists. Some of these journalists haven’t flinched in the search for the truth despite being hit with millions of euro in defamation court actions and even threats against their lives. It has had its downside, in that it has caused a great deal of social turmoil, bordering on a crisis, and some of the revelations have been extremely distressing for mainstream religious and law abiding Greeks. However, they have been a key factor in precipitating a long overdue reflection on ethical values within Greece and serious reform in the judiciary and the church. They can also claim credit for the country graduating to more mature view of the relations between church and state and a clean up of the “minority” of crooked judges and priests.
Another important lesson for the region from the Greek experience is the albatross of high government debt that needs to be avoided, because paying it back with hefty interest is a painful experience and it damages competitiveness. Government debt doesn’t provide any meaningful shortcut to sustainable development and higher incomes, particularly when a significant portion of the money has been swallowed up by dubious government contractors and suppliers, and a woefully inefficient public service.
Nick Peterson has worked for top law firms and bulge bracket investment banks. He currently leads seminars for professionals around the globe, acts as an expert on EU programmes in the region and is an investment banking consultant.
He welcomes your emailed comments: regional_economic_compass@yahoo.co.uk
