This record is a partial extract of the original cable. The full text of the original cable is not available.

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

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.

------------------------------------------ TI: Perception of Massive Greek Corruption ------------------------------------------

¶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.

--------------------------------------------- ----- GCB I: Corruption in National Institutions/Sectors --------------------------------------------- -----

¶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

--------------------------------------------- -- GCB II: Effect of Corruption on Spheres of Life --------------------------------------------- --

¶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

---------------- GCB III: Bribery ----------------

¶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.

--------------------------------------------- ------ The Corruption Perceptions Index: Greece Lags Again --------------------------------------------- ------

¶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).

--------------------------------------------- ----- TI Greece's Representative: Zafiris Hadjidemetriou --------------------------------------------- -----

¶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.

--------------------------------------- Embassy Observations I: 2005 A Bad Year for Corruption in Clergy and Courts --------------------------------------

¶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.

-------------------------------------- Embassy Observations II: Corruption in Non-Military Procurement --------------------------------------

¶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.

---------------------------------- Embassy Observations III: Corruption in Military Procurement ----------------------------------

¶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.

------- Comment -------

¶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