The Corruption Crisis In Greece

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Valentina Rigamonti at the Task Force’s Transparency International posted today on their blog about Greece, corruption, and how values and culture connect the two. Corruption and tax evasion are seriously undermining the integrity of the Greek state, and are severe contributors to the current crisis in the Euro area. Bribery is endemic, with the cost of the average bribe estimated at €1406 – a massive sum. She writes,

The engagement of people in Greece in these issues is fundamental – not only to help resolve the financial crisis but also in the fight against corruption. Engaging the public is one of the priorities of TI-Greece and they are working on this now, sharing information, and organizing workshops and seminars in cities and towns around the country in order to present the findings of the NIS Report and engender greater discussion and debate.

Greece is facing multiple challenges and the fight of corruption is one of them. The question is whether the citizens of Greece and the political establishment alike understand that important link between the political and economic crises and corruption.

When you go to Greece, it is very striking how deep the crisis is. The public anger is noticeable. On the anti corruption side there is a paradox: on the one hand top public officials say it is not a top priority for the interim government because of other more pressing priorities. On the other hand, there was huge interest in the NIS launch – it received widespread coverage in the Greek media and around the world – and people clearly see a nexus between corruption, the political and economic crisis and financial integrity.

Greece’s problems are so deep and structural that we there is no one cause or aggravating factor that you can point to and solve the problem by eliminating. However, there is plenty that we can do for Greece. We make it too difficult for Greece to track down corrupt money and either prevent it from fleeing the country or from being brought back home. Greece needs help to reestablish rule of law in its country. About a month and a half ago, writing on the subject, I listed three things that the rest of the world can do for Greece:

  • Continue to strengthen the EU Savings Tax Directive (EUSTD), making it more difficult for tax evaders to move their money around European Union member states. Showing horrible timing, Germany is actually getting in the way of the law’s progress right now, as the Task Force’s Nick Shaxson wrote this week.
  • Stop allowing for the creation of anonymous shell corporations, a favorite tool of tax evaders for laundering money. Very wealthy Greek and Italian individuals who seek to evade taxes can easily hide behind them in tax havens.
  • Set up automatic tax information exchange relationships throughout the world. The EU has this in the form of the EUSTD and the U.S. and Canada also have one, but all of major world actors need to be linked together. AETI would be a game-changer for the Greek and Italian tax services, and they would very quickly be able to shrink the size of tax evasion in their countries. Chris Lawton made this argument about the U.S. and Mexico this month, and it applies just as well to Greece and Italy.

None these steps would by themselves directly correct any kind of values deficit present in Greece. However, they would make it easier for the Greek government to take the first steps on curtailing corruption. Over time, a transparent financial system can lead to shifts in cultural norms and values, as authorities are better able to bring back an effective rule of law.