CORRUPTION AND POLITICAL INSTITUTIONS IN GREECE: PRELIMINARY SURVEY C. Kafteranis, A. Bitzenis, P. Kontakos University of Macedonia, Thessaloniki, Greece Sunday, January 11, 8:30 AM-10:45 AM, Capri Room, Riviera Hotel, Las Vegas Session [4]: Investing in Financial & Human Assets, Peak-Load Pricing & Monetary Aggregates 25 th B&ESI Conference 2015 Las Vegas, USA, January 10-13, 2015

2 Note: The current paper is presented under the auspices of the THALES Research Programme. THALES Programme has been co- financed by the European Union (European Social Fund - ESF) and Greek national funds through the Operational Program “Education and Lifelong Learning” of the National Strategic Reference Framework (NSRF).

Foreword to our Project Our aim is to research and measure the various aspects of shadow economy in Greece, including corruption, tax avoidance, social contribution avoidance, undeclared or illegal work, shelf consumption, illegal acts (black or underground economy). It will cover all economic agents in Greece, such as citizens and corporations (e.g. public and private individuals, companies and all professional categories, etc.) The research is also performed at sector levels, e.g. to identify the extent of tax evasion and corruption in the trading of oil in Greece. 3

Foreword to our Project (cont.) Emphasis is given to the qualitative analysis of questionnaire results which it aspires to reveal the opinions of households, enterprises and institutional entities and public services. It does not aim to the precise percentage regarding the measurement of Greek shadow economy but aims to the qualitative analysis and the comprehension of the problem so that we can reach essential and thorough proposals to the government in order to minimize the problem. 4

Agenda 1. Introduction 2.Objectives of our research study 3.Definitions 4. Preliminary results from our questionnaire survey 5. Conclusions 5

1. Introduction Corruption is part of shadow economy and efforts have been made by governments of all developing and developed countries in order to fight it. Corruption is not a new phenomenon as its existence is located since ancient years. Fighting corruption in recent years has decisively involved international organizations (UN, OECD, European Commission) and more attention is paid as most countries have realized that corruption affects in a negative way the national economy, growth and investments, while creating a hostile environment for FDI. It has a negative impact in the implementation of democratic institutions as well as creating an "unethical culture" and "a moral decline phenomenon". 6

2. Objectives of our research study The study of corruption requires explicit knowledge of the workings of the political and social system as well as the functioning of the administrative mechanism of the country under research. In the case of Greece, political parties and political interrelation have contributed significantly in the creation of a culture of corruption through briberies, sponsorships, when Greek state banks (such as ATE) offered uncontrolled loans in the political parties. The present study followed a qualitative field research analysis method in the collected information and data. The study aspires to provide a clearer picture of how the political corruption essentially "institutionalizes" corruption in all social strata and at the same time does not allow the development of a healthy competitive environment. 7

3. Definitions Political corruption is any transaction between private and public sector actors through which collective goods are illegitimately converted into private-regarding payoffs. Political corruption involves political decision makers. It is when the politicians and state agents, who are entitled to make and enforce the laws in the name of the people, are themselves corrupt. Political corruption can be distinguished from bureaucratic or petty corruption, which is corruption in the public administration, at the implementation end of politics. Bribery is the payment of a fixed sum, a certain percentage of a contract, or any other favor in money paid to the state official in charge of making contracts on behalf of the state or otherwise distribute benefits to companies or individuals, businessmen and clients. 8

3. Definitions (cont.) Embezzlement is theft of public resources by public officials, and as such it is understood as another form of misappropriation of public funds. The state official steals from the public institution in which he his employed and from resources he is supposed to administer on behalf of the state and the public. Embezzlement is not considered as corruption from a strict legal point of view. Fraud is a crime that involves some kind of trickery, swindle or deceit, and it is a broader legal and popular term that covers both bribery and embezzlement. Extortion is money (or other resources) extracted by the use of coercion, violence or the threats to use force. “Protection” or “security” money is resources extorted in the classical, infamous mafia style. 9

4. Preliminary results from our questionnaire survey The preliminary results are based on a questionnaire survey and structured interviews performed with public officials in Greece in H2, The areas of questions addressed to the participants have attempted to reveal the following aspects: a. The existence of a positive or negative relation between GDP recession and corruption; b. Their perception regarding corruption ( i.e. to what extent they consider corruption as legal or illegal, or part of the local culture); c. To understand if we have petty, political corruption and corruption from below or from above. 10

4. Preliminary results from our questionnaire survey (cont.) There is petty corruption in Greece; There is “room for manoeuvre” (due to the complicated legal system and low tax morale and weak controlling mechanisms); As corruption has spread in Greece throughout the years (especially after 1980s), the social acceptance of it may have also increased. When it is generally understood that there is a climate of corruption, still more people will believe it is inevitable and expected; Many have argued that corruption is not a crime whenever it is a part of the local culture (e.g. bribing officials to speed-up public procedures/overcome administrative obstacles). 11

4. Preliminary results from our questionnaire survey (cont.) The perception of corruption varies across countries according to the national legislation and national customs (i.e. actions in Greece which can be considered as corruption, whereas the same in other countries NOT; for example abroad a commission for a transaction is legal whereas in Greece counted as under the table.) We have concluded that Greek people have high perception of corruption whereas the corruption is less in practice; this is also due to the misleading theory and fraud definition aggregations as aforementioned. 12

4. Preliminary results from our questionnaire survey (cont.) In theory the level of corruption varies negatively with the level of economic prosperity; as a country grows richer, the level of corruption decreases. The preliminary qualitative data of our interviews conducted under the THALES Programme indicate, however, that despite the contraction in GDP in Greece in the period by approx. 25% cumulative, there is a decrease in the size corruption, although the crisis has turned people to devise ways to support their lost income. This is related to the introduction of stricter control mechanisms (punishment rules / increased number of tax audits and inspections carried out), the e-governance, and the more effective political institutions, which have all contributed to the reduction of corruption due to the risks and penalties associated from being discovered. 13

5. Conclusions According to evidence from the interviews performed, progress has been achieved in recent years in the containment of political corruption despite the significant contraction in GDP growth, which in theory are mainly negatively related. This is primarily related to the enhancement of the control mechanisms and the introduction of e-governance, which is also in accordance with the classical model. As mentioned by the authors, the perception (and to some extent definition) of corruption varies across countries according to the national legislation and national customs; thus corruption is necessary to be interpreted within the specific context of the country under review when country comparisons are performed. 14