Crisis sparks backlash against Greek political graft

ATHENS (Reuters) - Peter Doukas is at the center of an inquiry into one of Greece's biggest political scandals of the past decade -- a land swap between the government and a monastery which cost the state an estimated 100 million euros.

As deputy finance minister under the previous conservative government, Doukas cleared the deal and has been called to testify before a special parliamentary committee that is due to reach its verdict later this month.

But such committees almost never bring politicians to justice. Not a single member of former Prime Minister Costas Karamanlis's government has been convicted of any crime in the "Vatopedi" land deal or the string of other scandals which helped bring down his administration.

Doukas says he was operating under instructions from the prime minister's office and did nothing wrong.

"It doesn't appear that anyone profited from this deal," he told Reuters. "The case is not going anywhere."

That would not go down well with tens of thousands of Greeks who have taken to the streets over the past week to protest government austerity measures and demand that politicians also be forced to pay a price for the country's dire financial state.

For decades Greeks have grudgingly tolerated a political system rife with fraud, in which top officials routinely doled out public money to special interests and were protected by laws shielding them against prosecution.

But the debt crisis now enveloping the country has changed that. Furious Greeks are now piling pressure on Socialist Prime Minister George Papandreou to deliver on his promises to stamp out political corruption and boost government transparency.

Should he fail to act soon, moving aggressively to secure convictions and push through changes to the law, the anger is likely to build, fuelling more unrest and dooming his chances of implementing painful measures his government promised in exchange for 110 billion euros ($147.6 billion) in EU/IMF aid.

The cozy political system that dominated Greece for much of the post-war era must reform itself quickly, politicians and analysts say, or risk implosion.

"There has been a silent agreement between the two main parties for decades that there was no political corruption in Greece," Virginia Tsouderou, a former deputy foreign minister and founder of the Greek branch of anti-corruption watchdog Transparency International (TI), told Reuters.

"But people are so angry now that if the government does not open up and crack down on corruption there will be big trouble."

"SYSTEMIC"

Media coverage of Greece's woes has focused mainly on the impact of petty corruption and tax evasion on the country's strained finances.

Studies suggest the government may be losing more than 20 billion euros annually due to rampant tax dodging. TI estimates small bribes -- known as "fakelaki" -- that Greeks routinely pay their state doctors, tax auditors and town planning officials for special treatment cost the economy an additional 1 billion euros last year.

In 2009, Greece fell in TI's annual corruption ranking for a fourth straight year to 71st place, behind countries like Montenegro, Ghana and Kuwait.

But political corruption, which is not fully reflected in the TI survey and whose financial impact is more difficult to calculate, has also cost Greece dearly, says Kleomenis Koutsoukis, an emeritus professor at Panteion University.

He says political corruption in Greece has been "systemic" ever since 1974, when the country ended a painful period of military rule, restored democracy and began to modernize.

"It has infected governments of the left and right. None have been immune and no one was ever punished," Koutsoukis said.

In addition to Vatopedi, named after the 1,000-year old monastery on the Aegean Sea that did the lopsided land deal, Karamanlis's government was hit by a wire-tapping affair dubbed the "Greek Watergate," a bribes-for-contracts scandal involving German firm Siemens and a controversy over government-issued bonds that were sold to state pension funds at inflated prices.

Before those scandals, Papandreou's father Andreas, who founded the ruling PASOK party and led Greece in the 1980s and part of the 1990s, was also tarnished, most notably by the "Koskotas" case involving embezzlement at the Bank of Crete.

PANDORA'S BOX

Some fear the younger Papandreou may be reluctant to take bold steps due to concerns they would open up a Pandora's Box of scandals that could end up hurting his own party.

Among the steps that are urgently needed are reforms of Greece's laws on political financing, said former parliamentary president Anna Benaki-Psarouda.

Although politicians must declare their assets each year, they have no obligation to reveal the source of those assets and their declarations are filed away without proper auditing.

Greek law also gives parliamentarians effective immunity by requiring prosecutors to refer all cases involving lawmakers to parliament before charging them. Once the cases land there, they are often thrown out by investigative committees reluctant to expose crimes.

A page on Facebook demanding an end to parliamentary immunity had lured over 260,000 fans by Tuesday, reflecting rising pressure from young Greeks who helped Papandreou into office and are less tolerant of corruption than their parents.

Some Greek politicians see the widening gap in public trust as a disaster in the making. A group of 48 mostly younger lawmakers from PASOK signed a letter last week asking that investigations be launched into the assets of all officials who have held high office in the past 20 years. If any gaps appear, they say assets should be confiscated.

"We have to be very frank and open with the voters, we need to show them we are not afraid of the truth, whatever it might show," said Costas Cartalis, one of the signatories.

"This is a very important period for the political system in Greece. The confidence in politicians has been badly damaged and we need to repair it."