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Corruption severely affects Greece’s business environment, completely distorting market competitiveness. A common form of corruption in Greece is known as ‘fakelaki‘, translating to small envelopes and signifying bribes passed on to officials or other recipients to obtain some form of benefit. Greece’s Penal Code criminalizes several forms of bribery, including passive and active bribery, abuse of office and money laundering, yet ineffective implementation of existing laws have exacerbated corruption in both the higher and lower echelons of government. The tax administration and public procurement are identified as the sectors most affected by corruption. Gifts, bribery, and facilitation payments are widespread despite existing provisions that criminalize these acts.
Last updated: December 2015
Companies contend with a high corruption risk when dealing with Greece’s judiciary. The institution is described as inefficient, slow and vulnerable to corruption and political influence (HRR 2014). Most Greek citizens perceive the judiciary to be corrupt (GCB 2013), and almost half of respondents believe abuse and bribery are widespread among the courts (European Commission, Feb. 2014). The judiciary has become more effective in handling corruption and in enforcing more severe sentences in high-level corruption cases (EACRG, Feb. 2014). Businesses perceive the courts as unreliable in settling disputes or challenging government regulations (GCR 2015-2016). Judicial processes are highly time-consuming and ineffective in, for instance, enforcing property and contractual rights (ICS 2015). Enforcing contracts is three times more time-consuming on average compared to other OECD countries (DB 2016).
The judicial system ensures arbitration proceedings for investment and trade disputes, and commercial laws accord with international norms (ICS 2015). Greece is a member of the International Center for the Settlement of Investment Disputes and complies with the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Companies investing in Greece may be faced with corruption risks when interacting with the country’s security forces. Companies’ perception of police reliability in enforcing law and order and protecting businesses from crime is moderate (GCR 2015-2016). Most Greeks perceive the police to be corrupt (GCB 2013), and giving and taking bribes and abuse of functions are believed to be widespread (European Commission, Feb. 2014). The government has established effective mechanisms to control corruption among the police, but evidence suggests that authorities do not investigate police abuse thoroughly (HRR 2014). During 2014, the Hellenic Police Internal Affairs investigated over 2,000 allegations of state and municipal agency corruption and police impunity (HRR 2014).
Public services carry a high corruption risk for companies operating in Greece, and petty corruption is widespread (GCR 2015-2016). A majority of companies and citizens believe that bribery and the use of connections is the easiest way to obtain a public service (European Commission, Feb. 2014; European Commission, Feb. 2014), and most households believe public officials and civil servants are corrupt (GCB 2013). The public service sector also suffers from a non-merit based selection process, a lack of training in integrity and ethics, the domination of political affiliations in the process of hiring administrative executives, and a culture of indifference towards corrupt practices (NISAG, Feb. 2012). Companies identify ineffective government bureaucracy to be among the most problematic factors to business in Greece (GCR 2015-2016). Businesses complain about complex and overlapping regulations, uneven implementation and arbitrary decision-making, and rent-seeking on the part of public servants (ICS 2015). Starting a business in Greece is more time-consuming compared with the OECD average (DB 2016).
Corruption in Greece’s land administration is reportedly pervasive. More than half of Greeks believe bribery and abuse of power are widespread among construction inspectors (European Commission, Feb. 2014), while another survey reports that six in ten citizens expect to pay a bribe when in contact with officials issuing building permits or inspecting a construction site (TI, Apr. 2012). Property rights are protected by Greek legislation (ICS 2015), but companies report that property rights are not reliably protected in practice (GCR 2015-2016). The land administration is burdened by bureaucracy, discouraging businesses from investing in real property (ICS 2015). The number of procedures required to register property is higher on average compared to other OECD countries (DB 2016). The Greek government is developing a comprehensive land registry with the aim of enhancing overall transparency within the sector (ICS 2015).
Tax corruption and evasion is a serious problem in Greece, and tax authorities are among the most corrupt public services in the country (NISAG, Feb. 2012). More than half of companies believe that tax fraud is widespread, while almost three-quarters of households perceive abuse and bribery to be common among tax officials (European Commission, Feb. 2014; European Commission, Feb. 2014). The actual number of bribery instances in this sector is unknown, as the complicity between tax officials and tax evaders is widespread (Financial Transparency Coalition, Jan. 2013; HRR 2014). Greek citizens have reportedly paid up to EUR 20,000 in bribes to arrange financial audit records, and up to EUR 1,000 to issue a falsified document by tax officials (TI, Apr. 2012).
The Lagarde list, which revealed the names of more than 2,000 potential tax evaders (including high-ranking officials), was a corruption scandal that shocked the Greek government. Giorgos Papakonstantinou, former Greek finance minister, was found guilty of tampering with the Lagarde list and removing three of his relatives’ names (Greek Reporter, Mar. 2015). Yannis Diotis, former head of the Financial and Economic Crime Unit SDOE is also on trial. Diotis allegedly overlooked evidence of tax fraud in the list and failed to carry out the necessary tax audits (To Vima, Oct. 2015).
Businesses may contend with corruption risks when dealing with Greece’s customs administration. Most Greeks perceive abuse and bribery to be widespread among customs officials (European Commission, Feb. 2014), and businesses believe customs procedures, such as formalities regulating the entry and exit of merchandise, to be burdensome (GCR 2015-2016). Companies in Greece should be aware that irregular payments at the border in relation to exports and imports may occur (GETR 2014).
Greece’s public procurement sector suffers from widespread corruption. Almost eight in ten surveyed companies perceive public procurement managed by national authorities to be corrupt, while almost all believe that procurement managed by local authorities is corrupt (European Commission, Feb. 2014). Businesses find that conflict of interest, specifications tailor-made for particular companies, unclear selection or evaluation criteria, abuse of negotiated procedures, collusive bidding, and uncompetitive procedures heighten the risk of corruption in this sector (EACRG, Feb. 2014). The unethical behavior of companies, favoritism among government officials towards well-connected companies and individuals when deciding policies and contracts, and the diversion of public funds due to corruption are also cited as factors hampering competitiveness within the procurement sector (GCR 2015-2016). The evaluation of bids is not transparent and is subject to political influence (ICS 2015).
The Greek Minister of State for Combating Corruption, Panagiotis Nikoloudis, recently found that all contracts concluded between the Greek state and companies included kickbacks amounting to 2-2.5 percent of the total contract. Public officials received commissions of up to 4 percent of the amount of the contract in dealings involving the purchase of weaponry (Greek Reporter, Apr. 2015). In one corruption case in 2010, ex-transport minister Tasos Mantelis admitted to accepting EUR 230,000 in bribes from the German group Siemens. Mantelis received a three-year suspended sentence. This year, new investigations were launched, leading to 19 former executives of the German engineering group Siemens, among 60 other suspects, being investigated for bribery of several officials within the Greek government, with a total of USD 78 million in return for obtaining lucrative contracts. The US-based CorpWatch described the case as ‘the greatest corporate scandal in Greece’s post-war history’ (Business Insider UK, Aug. 2015). Companies are recommended to use a specialized public procurement due diligence tool to help mitigate the corruption risks associated with public procurement in Greece.
The natural resources sector carries corruption risks for businesses in Greece. The forest inspection authorities are among the most corrupt public services in Greece (NISAG, Feb. 2012).
The Greek Penal Code includes provisions against election fraud, passive and active bribery, abuse of power, money laundering and conflict of interest. Greek law also criminalizes facilitation payments. Weaknesses in Greece’s legal framework include an inconsistency in the provisions on active and passive bribery and trading in influence (EACRG, Feb. 2014). The implementation of the law is weak, and the prosecution of official corruption is ineffective (HRR 2014). The provisions addressing foreign bribery and the liability of legal persons are also weak, although the government has tried to address these shortcomings by introducing tougher penalties for official corruption and bribery offenses (HRR 2014). The government has raised the maximum fines for foreign bribery and clarified ambiguities concerning the offense (OECD, Mar. 2015). Attempts to crack down on corruption included the passage of a law to create a general secretariat for combating corruption under the authority of a new minister of state. Another law was passed stipulating that parliamentarians be stripped of certain parliamentary privileges if found guilty of felonies or misdemeanors (ICS 2015). The Greek government also introduced a specific law bringing provisions on state contracts and contractors in line with EU directives and subjects a broader range of people from both the public and private sectors to financial disclosure laws (ICS 2015).
Greece has ratified the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, the United Nations Convention against Corruption (UNCAC), the Council of Europe Civil and Criminal Law Conventions on Corruption and the Additional Protocol. Access the Lexadin World Law Guide for a collection of legislation in Greece.
The constitution of Greece protects freedoms of speech and of the press, and citizens have free access to information. The economic crisis, coupled with political and societal tensions, have led to an erosion of press freedoms and to several attacks on journalists and media outlets (FotP 2015). Increased censorship has been observed by media outlets, while critical reporting often face sanctions. State-owned media tends to be government-oriented, and many media owners, enjoying close ties with members of the government, avoid critical reporting. Social media has become a platform for many journalists and citizens to express their viewpoints, and the internet is generally unrestricted. Greece’s press environment is described as ‘partly free’ (FotP 2015).
Freedom of association is protected by the constitution (HRR 2014). The civil society is still in the development phase, so it lacks proper organization and exerts with little influence (NISAG, Feb. 2012). Greek society has managed to establish some mechanisms for combating corruption, including the ‘I Paid A Bribe’ website (Edosafakelaki), where the public can report cases of bribery (BBC News, Jan. 2013).
- World Economic Forum: Global Competitiveness Report 2015-2016.
- World Bank & IFC: Doing Business 2016.
- US Department of State: Investment Climate Statement – Greece 2015.
- Freedom House: Freedom of the Press – Greece 2015.
- To Vima: ‘Diotis trial over Lagarde list scandal adjourned for 29 October’, 12 October 2015.
- Business Insider UK: ‘Dozens of German business execs are trying to escape prosecution for corruption in Greece’, 30 August 2015.
- Dateline Atlantis: ‘The Lagarde List and the Tooth Fairy’, 8 October 2015.
- Greek Reporter: ‘Combating Corruption Minister Nikoloudis: All Greek Contracts Included Kickbacks’, 6 April 2015.
- Greek reporter: ‘Greek Court: Former FinMin Papakonstantinou Guilty of Misdemeanor, Not Felony’, 24 March 2015.
- OECD: Greece should tackle not only domestic corruption but also foreign bribery’, 20 March 2015.
- Deutsche Welle: ‘Greece indicts 13 Germans over Siemens bribery scandal’, 9 March 2015.
- Business Insider UK: ‘Greece is trying to recover $2.8 billion through a ruthless crackdown on tax evasion’, 11 February 2015.
- World Economic Forum: The Global Enabling Trade Report 2014.
- European Commission: EU Anti-Corruption Report: Annex 8, Greece 2014.
- US Department of State: Country Report on Human Rights Practices – Greece 2014.
- Eurobarometer: Special Eurobarometer 397 – Corruption Report, 2014.
- European Commission: Business Attitudes Towards Corruption in the EU 2013.
- Transparency International: Global Corruption Barometer 2013.
- Sydney Morning Herald: ‘Greek politician Akis Tsochatzopoulos gets 20 years jail for bribery in landmark verdict’, 8 October 2013.
- BBC News: ‘BBC on Greek Fakelaki’, 3 January 2013.
- Financial Transparency Coalition: ‘Reporting Corruption in the Greek Tax system’, 2 January 2013.
- Transparency International: National Integrity System Assessment Greece 2012.
- Transparency International: ‘Greece: The cost of a bribe’, 3 April 2012.