* Former official, two arms dealers arrested
* Arms spending contributed to Greek debt woes
* Scandal touches raw nerve with austerity-hit Greeks
(Adds second arms dealer's testimony)
By Harry Papachristou
ATHENS, Jan 3 Greece will overhaul arms
procurement to make it more transparent, Defence Minister
Dimitris Avramopoulos said on Friday, after a wide-ranging
corruption inquiry led to the arrest of a former defence
official and two arms dealers.
Heavy arms spending was one of the reasons Athens piled up
debt and had to be rescued with European Union and IMF bailouts
totalling 240 billion euros ($328 billion) in 2010 and 2012.
These were accompanied by strict conditions that have
increased poverty and unemployment, so the scandal has touched a
raw nerve with many Greeks.
Avramopoulos said the ministry's proposals would be
submitted to parliament "in the immediate future".
His statement followed court testimony by Antonis Kantas,
deputy armaments chief at the ministry between 1997 and 2002,
who openly admitted to taking $16 million in bribes relating to
arms deals with foreign companies from countries including
Germany, France, Russia, Brazil and Sweden.
Two arms dealers named by Kantas, who was arrested and
charged with graft in December, appeared in court on Friday to
respond to bribery charges.
One of the pair, 83-year-old Panagiotis Efstathiou, admitted
before investigating judges to bribing Kantas and also making
payments to at least seven high-ranking officers of the Greek
armed forces, according to a transcript of his testimony
obtained by Reuters.
Efstathiou, who was released on 500,000 euros' bail, said he
paid the bribes on behalf of German defence company Atlas. The
firm told Reuters in a statement on Monday it was carrying out
an internal investigation into the matter and would then "decide
on the steps to follow".
Kraus-Maffei Wegmann (KMW), another German company named by
Kantas according to his testimony obtained by Reuters, said in a
statement on Friday it was also carrying out investigations.
"KMW has neither paid bribes nor made anyone pay bribes, and
obliges its employees and business partners to strictly comply
with the law," it said.
The second arms dealer interrogated on Friday, 78-year old
Dimitris Papachristos, was detained in jail after his testimony
in which he also admitted he paid Kantas, according to court
According to Kantas's testimony and court sources,
Papachristos represented Wegmann in Greece at the time alleged
bribes were paid.
Greece had the highest defence expenditure in the European
Union in relation to economic output over the past decade. Its
military spending stood at about 4 percent of output in 2009,
when its debt crisis started. Most contracts were awarded to
Athens has already convicted a former defence minister and
Kantas's immediate superior at the ministry for money
($1 = 0.7322 euros)
(Additional reporting by Karolina Tagaris in Athens and Sabine
Siebold in Berlin; Editing by Mark Trevelyan)