As Europe frets, Greece flops

ATHENS, Greece — Sixteen European finance ministers meet in Brussels to address problems in Ireland.

Markets tumble following worry that the crisis in the eurozone could spread as far as Spain.

But here's why everyone's eyes should still be on Greece, which a year ago sparked the European debt crisis by revealing its budget deficit was more than double projections.

It’s not just unsustainable levels of government debt. As those who live and work in Greece know, corruption takes a toll on the economy and each family’s pocketbooks.

Greece was recently rated the most corrupt country in Europe according to Transparency International’s 2010 Corruption Perception Index, and 78th out of 178 ranked countries. According to the organization, Greece loses about 8 percent of GDP to corruption. In comparison, if all had gone according to plan, the Greek government’s austerity measures would have brought the deficit down to 7.8 percent of GDP — in other words, no corruption, no deficit.

“The economic situation of Greece could have been tremendously different from what it is today,” said Constantine Bacouris, chairman of Transparency International Greece.

It currently takes two to three weeks on average to open up a business in Greece, according to the Heritage Foundation’s Economic Freedom Index. The Greek government has pledged to bring that number down.

Corruption, “increases the cost of doing business,” Bacouris said. “Therefore we don’t have a lot of new investments”

On the other hand, some businesses accept bribes as part of the cost of doing business. Siemens’ Greek subsidiary outstripped many of the German tech company’s other international offshoots in the 1990s and early 2000s until investigations shut down its bribery rings. Michalis Christoforakos, the former managing director of Siemens Hellas, admitted using a slush fund to bribe officials.

Greece’s fall in Transparency International’s ratings has been steep. In 1997, Greece was rated the 25th most transparent country in the world, when only 52 countries were included. As late as 2007, Greece was 54th out of 180. This year, after being in a three-way tie with Romania and Bulgaria at 71 in 2009, Greece fell to 78th out of 178, last in the European Union and tied with Serbia, China and Thailand, among other countries.

“So we became worse and worse,” Bacouris said. “And of course the economic crisis came and we were totally unprepared and this is where we are.”

The average Greek family pays about 1,500 euros ($2,000) a year in various forms of bribery, according to surveys conducted by Transparency International Greece.

“The biggest problem is the hospitals though,” said Leandros Rakintzis, Greece’s general inspector of Public Administration.

Public hospitals have earned the brunt of criticism for practices ranging from doctors and nurses taking medical supplies to run their own practices to the widely known and rarely confronted practice of “tipping” hospital staff.

Recently, one American expatriate married to a Greek woman had to slip 50 euros to an anesthesiologist and 40 euros to the nurse on duty before seeing his newborn baby. Two days later he plopped an envelope with 1,500 euros cash into their doctor’s hand.

“We are led to believe that this is how it is here and you just have to do it,” said the expat, who did not want to be quoted by name because what he did is illegal even if it is widespread. “This is how, in a lot of ways, things are in Greece.”

Greece’s Socialist Prime Minister George Papandreou — whose father Andreas is credited with creating both Greece’s welfare state and its current culture of corruption in the 1980s — has made fighting such practices a priority. One of his first acts as prime minister was to release a list of 150 doctors in the posh central Athens neighborhood of Kolonaki who reported earnings of about 12 million euros when they had deposited more than 31 million euros in their bank accounts.

Papandreou has rolled out two marquee programs that translate to “transparency” and “good government” in English. The first involves posting state decisions and documents on the internet. The second has consolidated municipalities across the country and targets corruption among local officials.

Local officials foster their own brand of corruption in the form of “expedited” permits, jobs and public works.

“Currently mayors are executing a lot of projects — because the elections are close — without a plan and without open bidding,” Rakintzis said.

Elections are a traditional source of graft. Tax collection has a tendency to turn negligent and Greek politicians since the country’s 19th-century War of Independence have offered “rousfetti,” or favors, in return for votes.

Prior to this month's local elections, local officials sneered at Papandreou's reforms in their campaigns. The electorate, however, chose the prime minister's party, particularly in Attica, the region containing Athens, at a higher rate than expected. As he cast his vote in the first round Nov. 7, Papandreou told the press, “All together, Greece can do it,” which rhymes in Greek.

Rakintzis, the inspector and former supreme court judge who has seen thousands of cases of Greek corruption, agreed. “I believe that the government’s measures will make a difference,” he said.