Financial Times: Greece to probe debt racked up by former ruling parties

31 Μαρ 2016

Alexis Tsipras, the Greek prime minister, has announced an official parliamentary probe into how the opposition conservative and socialist parties racked up hundreds of millions of euros in unserviced debt while in government, at the same time as they steered the country into a disastrous financial crisis.

   Speaking on Tuesday night in a parliamentary debate on alleged government interference in the judiciary, the leftwing premier said a special committee would investigate debts owed by political parties as well as Greek media groups and report back to the house by the end of May.
   “We’ll examine everything right down to the last radio antennaThis game of letting those responsible off the hook must stop - whether its political parties or media groups, Mr Tsipras said.
   Mr Tsipras strongly criticised a law passed in 2013 by the New Democracy-Pasok coalition giving a blanket exemption from prosecution to boards of directors at Greek banks, even if they continued to grant loans to political parties and media groups that were heavily in debt.
   The premier has vowed to cut the close links between Greek bankers, politicians and media groups known as diaploki (entanglement), which is seen by Greece’s creditors as a source of widespread corruption in public life and one of the biggest obstacles to implementing structural reforms.
   Yet in the eyes of many Greeks, the Syriza-led government risks falling into the same trap as its political predecessors. Since Syriza took office last year as the country’s first leftwing government, several cabinet ministers and senior party officials have built ties with some of Greece’s most influential business groups.
   Greece’s struggling media groups are believed to have combined non-performing loans of more than €1.2bn owed to the country’s four systemic banks. The centre-right New Democracy party owes €214m, mostly to the formerly state-controlled Agricultural Bank of Greece in loans that have not been serviced for almost a decade. The Panhellenic Socialist Movement (Pasok) owes over €120m, almost all to Agricultural Bank.
   The two parties took turns in government for a decade before teaming up in 2012 to form a coalition government to implement Greece’s second international bailout by the EU and the International Monetary Fund. But both parties brushed aside the creditors’ proposals on overhauling the financing of political parties and making it more transparent.
   Under a new leader, Pasok sacked most of its staff and carried out an audit of the party’s accounts but failed to tackle its accumulated debt. New Democracy turned to private sponsors to finance the party’s operations while in government while similarly ignoring its debt.
   Tuesday’s debate was prompted by a prosecutor’s claim this month that she was pressured by Dimitris Papangelopoulos, Syriza’s deputy justice minister, into dropping a case being investigated in relation to a leading Greek businessman over his alleged involvement in the 2013 collapse of Laiki (Popular) Bank, the second-largest Cypriot lender.
   Mr Papangelopoulos said he asked the prosecutor, Georgia Tsatani, to hand back the case file because she was not qualified to take on the investigation. Greece’s supreme court is now examining why the case was dropped following a complaint by the Cyprus justice ministry.
   Andreas Vgenopoulos, the businessman involved in the probe, is founder and chairman of Athens-listed Marfin Investment Group, formerly the largest shareholder in Laiki. He has repeatedly denied any wrongdoing. Mr Tsipras did not address the Laiki case specifically in his parliamentary speech but has rejected calls for Mr Papangelopoulos’s resignation.
   Kyriakos Mitsotakis, who was elected New Democracy leader in January, told parliament he had made it a priority to cut the party’s spending and restructure its debt. He claimed the premier’s move to probe political party and media financing was a “diversionary tactic” to direct public attention away from Greece’s continuing economic woes and the government’s problems over tackling the refugee crisis, with more than 50,000 asylum-seekers stranded in Greece following the closure of borders along the Balkan migrant route.

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