The scope of corruption in Greece

The recently elected prime minister in Greece, Mr. Papandreou, has declared war on corruption. A welcome declaration that has however been made by many past administrations already, with zero success. Nice to hear again; not much optimism however allowed.

I will present below a corruption incident from own experience. To use it as a basis for some thoughts on corruption. It may therefore not be typical. I believe it should seen as a rather extreme case. Even as such, one can easily realise the waste of EC money in Greece for ridiculous projects, set up for the sole purpose of distributing money among executives of the public and private sector alike.

Some ten years ago, a public sector organisation in Greece tendered a study for the design of an industrial project it was, supposedly, planning to implement. The very statement that a paper cultured public institution will implement an industrial project can only bring laughter. The project should have never been allowed on this fact alone.

The tender came out, something like 180 KE, for the business planning of the particular industrial investment. The two main corrupt executives of the organisation found a consulting company and asked them to set up a fake evaluation that would award the contract to some company they would control. The consultant company could not undertake the project on its own because at the same moment it was implementing another industrial investment (!) of the same organisation (!!). A second award would stir suspicion in the market and should better be avoided. So, the consultant set up an evaluation at its own premises (!!!) and selected another, friendly consulting company, to do the job. The maths were simple. The corrupt officials would take half the money, i.e., 90 KE. The first consultant would take 45KE for carrying out the evaluation on behalf of the public institution. The second, the winning, consultant would take the 45KE to actually do the job. This latter consultant had also no idea what the whole thing was about. So he hired some expert in the area (myself), paid him 13KE to do the job and write down a few reports and present them as project deliverables.

The figures are absolutely accurate as, at that moment, I had the opportunity to monitor the exercise in all its steps.

Nothing was ever implemented; the 180KE was wasted and a number of individuals, two public officials and two private consulting companies profited from doing just nothing. A lot of people in the tendering organisation and in its supervising authority knew what was going on. Some were good willed, ethical people. Nobody ever reacted.

The above arithmetic may be extreme. A value of just zero was created out of this project. Overall the use of the EU structural funds may score a bit higher in Greece. For example, in the late 90s, when both Greece and Cyprus where doing a lot of roadworks, you only need take a cursory look on the budget figures on the large signs of the, under construction, motorways. 4-5 ME per km in Greece, less than 2 ME per km in Cyprus. For an identical terrain. Nowadays, we also realise that the motorway pavement quality in Cyprus if far better that the respective Greek. What does the large, cost, difference make up to? Corruption, ignorance and bureaucracy that most of the times co-exist.

One should not restrict to the above, direct arithmetic, of corruption. The impact of the indirect impact is an even bigger problem. The two consulting companies, I mentioned above, are managed by competent people and their staff is also competent. Among the best I ever met in the country. When operating in a country where the extra-fat public sector stinks of incompetence, bureaucracy and corruption, instead of developing real competitive skills they spend their time in business as the above. This is not to say that they do not bear ethical responsibility. Of course they do. What however they also do, is to undermine their long term competitiveness.

In a macro scale, along these lines of practice, we ended up with Mr. Kokkalis, a major local entrepreneur and provider of the public sector, after returning from East Germany, where he grew up. Mr Kokkalis attracted in the 80s the best of the Greek human capital with his promises of creating a high-tech hub in the SE Europe. A promise that never came true. The only business that really turned out successful was his lottery business.

Compare Mr. Kokkalis with Mr. Onasis, who operated and excelled in the 60s in the fierce competitive environment of an already global shipping industry. Mr. Onasis left a trace on the Greek society; Mr. Kokkalis will leave none. His legacy will be washed away in a few decades from now. A memory of “the wasteful 80s” will only remain. Mr. Onasis is still here. The Greek shipping industry is the first in the world, and he was a major contributor of this achievement. Because the leaders of the shipping business were always in the frontline; they were not shuffling around easy EC funds, put on the table by corrupt public employees and channelled, at the end, to posh houses, luxury cars and expensive football players, while generating no social value at all.

Mr. Papandreou has a difficult task ahead. Because all this decay is now taken as the norm in the society at large. However combating corruption is not just an ethical issue; it is first and foremost the only way to create conditions for the Greek economy to excel in some market niches.

Without this, the country is doomed. Running after tax evasion will lead nowhere. The state is completely discredited. Mr. Marinos a top political anlayst in the country called the state "occupation army". If it is really so, Mr. Papandreou should only expect bold resistance to any plans to raise taxes. People will react in all possible ways to pay taxes to the state. To this state.

Looking to tax raising for the solution will result to the Greek game known as "kolokithia". Everybody will point the finger at someone else. The failure of the state ever since the 80s, will however, soon be difficult to hide any more. The yearly deficit amounts at three times the market value of the National Bank of Greece (NBG). We need to sell three NBGs every year, not, of course, to get out of the red (debt) but just not to go deeper in it (deficit)! What ordinary people say, that the banks should pay the price of this failure may have, from an ethical point of view, some well justified reasons but, given the above arithmetic, is just no solution. Even if in some magic and utterly unrealistic way the state sold all the banking system, public and private alike, that would just grant it a few more years before total collapse. Unfortunately the current standards of living of Greeks, of most Greeks and not just the banks is not sustainable, given the productivity of the country which can only compete with second class African states. This is the true issue; and truth will very soon knock on our door.

To communicate this message to society is no easy task.
Especially given the utterly ridiculous and old fashioned Right wing parties in Greece, as well as the dominant irresponsible mythology of the Left, according to which it is just a matter of taxing the bad rich guys to solve the problem.

Without a new development model the country is doomed. It is so simple. And because we cannot sell the whole banking system to get ourselves a few more easy going years, we will come face to face with the truth in a matter of months.

The new development model may be green or may be any other colour you like. This is a completely secondary issue. The real keyword of this new model will have to be: dramatically less and dramatically more efficient state; whatever is out of the core state role, as perceived everywhere in the developed world (regulation and policy making, education, defence, health) needs to be immediately scrapped. The state has dramatically failed at all these areas of its true jurisdiction. It is a scandal that it remains keen on carrying out business activities! For reasons now obvious to the most naïve.

Society has already credited Mr. Papandreou at the “aesthetic” level; his key administrators seem knowledgeable, young, human and competent people. Which was unfortunately not the case during the sinister period of his predecessor, Mr. Karamanlis.

His determination for the unconditional war he has promised on corruption, as a first step to a re-engineered state, serving the citizen and not itself, remains now to be seen.
In a very limited period of time, left to us to engineer the solution ourselves and not delegate it to the IMF and other foreign bodies, ready to take action on our behalf.

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