Corruption and tax evasion are endemic in Greece. There has been a general perception that politicians have been immune from prosecution. Members of parliament (MPs) enjoy parliamentary immunity, which must be lifted by parliament before they can face a trial. Moreover, the constitution limits liability of ministers to two years after the parliament in which they served; hence, many allegations have not been pursued in the courts because of the statute of limitations. This has caused deep resentment among an electorate that is bearing the brunt of austerity. However, politicians and the judiciary have stepped up efforts to crack down on the culture of impunity in politics, business and the civil service.
Bribery is widespread. So-called fakelakia ("envelopes") are necessary to secure everything from a driver's licence to a higher place on a state hospital waiting list. It is alleged that political parties have accepted campaign contributions and ministers kickbacks in order to secure government procurement contracts.
Meanwhile, tax evasion is rife, with only those having tax deducted at source paying the full charge. Companies and the self-employed have been notorious for under-reporting income. If audited, a commonplace settlement was said to be 4-4-2: 40% going to the inspector, 40% remaining with the company or individual and just 20% being paid to the Exchequer.
Courts crack down on embezzlement
Judicial authorities have been cracking down on embezzlement by politicians and businesspeople. In the past three weeks, two high-profile prosecutions have concluded.
Other investigations under way
On March 6th, the Athens prosecutor's office filed charges, again for wealth declaration irregularities, against three former cabinet ministers: former minister of finance Yannos Papantoniou (Pasok), ex-deputy finance minister Petros Doukas from the centre-right New Democracy (ND) and former minister of public order Georgios Voulgarakis (also ND). A parliamentary committee is probing the handling by a former finance minister, George Papaconstantinou, of a list of over 2,000 people with bank accounts in Switzerland provided to him by Christine Lagarde in 2010 when she was French finance minister (now head of the IMF).
Moreover, 11 men who in 2007 sat on the board of directors of the Public Power Corporation (DEI) have been charged with breach of duty for signing a contract to commission a power plant that subsequently lost the company some EUR100m. Three of those directors, who were in public posts when the charges were laid on March 8th, have denied any wrongdoing but resigned pending the outcome of investigations. They were Takis Athanasopoulos, former chief executive of DEI, who was serving as head of the state privatisation agency, and board members Georgios Mergos and Spyros Efstathopoulos, general secretaries at the ministries of finance and development, respectively. Meanwhile, 10 people who between 2008 and 2009 sat on the board of AMEL, the company which runs the Athens Metro, face felony charges in connection with a series of illegal hirings.
Banking secrecy ends for suspects in tax evasion cases
As far as the tax evasion issue is concerned, the state has repeatedly failed to meet budget revenue projections through political interference, lax collection and inadequate auditing. In order to combat the problem, the General Secretariat for Revenues (GGDE) has been made virtually autonomous, answering only to the finance minister himself. It is to have its own budget and assume responsibility for the Financial Crimes Investigation Unit (SDOE), an armed squad modelled on the FBI, with powers to combat all forms of tax evasion from smuggling to fraudulent accounting. The first head of the restructured GGDE is Haris Theocharis, who also heads the General Secretariat for Information Systems (GGPS) that operates the digital Taxis network for electronic payment of tax. Links have been established with banks and from March 19th the SDOE will have automatic access to the bank accounts of companies and individuals under investigation.
Targets set to collect arrears
Hard data are difficult to come by but the state is said to be owed some EUR50bn in outstanding tax, of which EUR13bn might be collectable. The government committed itself under the EU/IMF bail-out programme to try to collect EUR1.9bn, but this year's budget targets a sum of arrears of just EUR1.2bn. A special department has been created at the Ministry of Finance to pursue the 1,500 largest cases of outstanding arrears, either of tax or of contributions to state-subsidised social security funds. The authorities are committed to conduct full audits of the 750 largest enterprises by year-end. Last year, the ministry managed to collect EUR1.1bn but found that nearly 40% of the firms and individuals pursued were bankrupt, while in many cases no assets could be linked to those responsible. In recent months, dozens of merchants, businesspeople and professionals with outstanding obligations of EUR500,000 or more have been arrested. Most have been fined but allowed to negotiate payment over time with penalties.
A major problem has been a lack of qualified staff and resources. A 106-page report submitted to the finance ministry in January by technical staff attached to the troika of EU/IMF invigilators revealed that some employees of the office responsible for controlling large enterprises did not even have their own desks or computers and their number was sorely inadequate. On March 10th, the ministry authorised the appointment of 4,091 new staff to help in the cross-checking process, although it is understood that most of these will come from other public-sector positions under a staff reduction "mobility" scheme and will require training before they can begin their new task.
According to a press account, the finance ministry's internal affairs department has found evidence that 130 tax inspectors are among persons discovered to hold foreign bank accounts, while the SDOE appears to be cautious about bringing prosecutions. The deputy Supreme Court prosecutor who heads the authority against money laundering told a parliamentary committee on February 27th that he had investigated 3,191 cases last year and prepared case files in 497 instances. Of these, he said only 279 were referred to a prosecutor. Hence, despite the progress made in recent months, rapid improvements in tax collection and in reducing instances of tax evasion are unlikely in the short term.
March 19, 2013
Political outlook: Political forces at a glance
The centre-right New Democracy (ND) party, led by Antonis Samaras, won a narrow victory at the general election in June 2012 and holds 129 out of 300 seats in parliament; the June election was a repeat of the May 2012 election, which had been inconclusive. Thanks to support from ND's traditional centre-left rival, the Panhellenic Socialist Movement (Pasok), with 33 seats, and a small party, the Democratic Left (DIMAR), with 17, the government holds 179 seats in parliament. The next general election is not scheduled until 2016, but the fragile nature of the coalition government makes an early election likely. The Economist Intelligence Unit believes that an early election will take place by 2014, by which time Greece will have to restructure some of its public debt again and receive another international bail-out if the country is to avoid euro exit. Ongoing fiscal austerity will entrench economic hardship and increase the likelihood that the next election will be won by anti-austerity forces, especially Syriza Unifying Social Front (Syriza; previously known as the Coalition of the Radical Left), which almost won the two snap elections in May and June 2012.
| General election
results | ||||||
| 2009 | May 2012 | Jun 2012 | ||||
| Party | % of vote | No. of seats | % of vote | No. of seats | % of vote | No. of seats |
| New Democracy (ND) | 33.5 | 91 | 18.9 | 108 | 29.7 | 129 |
| Syriza Unifying Social Front
(Syriza) | 4.6 | 13 | 16.8 | 52 | 26.9 | 71 |
| Panhellenic Socialist Movement (Pasok) | 43.9 | 160 | 13.2 | 41 | 12.3 | 33 |
| Independent Greeks (AE) | - | - | 10.6 | 33 | 7.5 | 20 |
| Golden Dawn (XA) | 0.3 | - | 7.0 | 21 | 6.9 | 18 |
| Democratic Left (DIMAR) | - | - | 6.1 | 19 | 6.3 | 17 |
| Communist Party of Greece (KKE) | 7.5 | 21 | 8.5 | 26 | 4.5 | 12 |
| Popular Orthodox Rally (LAOS) | 5.6 | 15 | 2.9 | - | 1.6 | 0 |
| Others | 4.5 | - | 16.1 | - | 4.3 | - |
| Total | 100 | 300 | 100 | 300 | 100 | 300 |
| Source: Ministry of the Interior. | ||||||
Download the numbers in Excel
Download text file (csv format)
July 27, 2012
Official name
Hellenic Republic
Legal system
Based on the constitution of 1975
National legislature
Unicameral Vouli (parliament) of 300 members, which is directly elected by a form of proportional representation for a four-year term, although early dissolution is possible.
Electoral system
Universal direct suffrage over the age of 18
National elections
June 17th 2012 (legislative). The next legislative election is not scheduled until 2016, but the fragile nature of the current coalition government makes an early election by 2014 likely.
Head of state
President, without executive powers, elected by parliament for a five-year term. Karolos Papoulias, a former foreign minister from the centre-left Panhellenic Socialist Movement (Pasok), was elected on March 12th 2010. The president must be elected by a three-fifths majority of parliament. If this is not possible, parliament is dissolved, an election held and the president can be elected by a simple majority of deputies in the new house.
National government
Council of Ministers responsible to the legislature, headed by a prime minister appointed by the president on the basis of ability to gain support in parliament. On June 20th 2012, Antonis Samaras from the centre-right New Democracy (ND) party was sworn in as prime minister. ND is the senior partner in a coalition government with Pasok and the small Democratic Left (DIMAR) party. However, the cabinet consists entirely of ND members and independent technocrats.
Main political parties
New Democracy (ND); Syriza Unifying Social Front (Syriza); Panhellenic Socialist Movement (Pasok); Independent Greeks (AE); Golden Dawn (XA); Democratic Left (DIMAR) and Communist Party of Greece (KKE).
Key ministers
Prime minister: Antonis Samaras (ND)
Administrative reform & e-governance: Antonis Manitakis (Indep.)
Development, competitiveness & transport: Kostis Hatzidakis (ND)
Education, religious affairs, culture & sport: Konstantinos Arvanitopoulos (ND)
Environment, energy & climate change: Evangelos Livieratos (Indep.)
Finance: Yannis Stournaras (Indep.)
Foreign affairs: Dimitris Avramopoulos (ND)
Health: Andreas Lykourentzos (ND)
Interior: Evripidis Stylianidis (ND)
Justice, transparency & human rights: Antonis Roupakiotis (Indep.)
Labour, social security & welfare: Giannis Vroutsis (ND)
Macedonia–Thrace: Thodoris Karaoglou (ND)
National defence: Panos Panagiotopoulos (ND)
Public order & citizen protection: Nikos Dendias (ND)
Rural development & food: Athanasios Tsaftaris (Indep.)
Shipping: Kostas Mousouroulis (ND)
Tourism: Olga Kefalogianni (ND)
Minister of state: Dimitris Stamatis (ND)
Government spokesman: Simos Kedikoglou (ND)
Central bank governor
Giorgos Provopoulos
March 18, 2013
Outlook for 2013-17
Review
March 18, 2013
Fact sheet
| Annual data | 2012 | Historical averages (%) | 2008-12 |
| Population (m) | 11.4 | Population growth | 0.3 |
| GDP (US$ bn; market exchange rate) | 249.1 | Real GDP growth | -4.4 |
| GDP (US$ bn; purchasing power parity) | 282.0 | Real domestic demand growth | -6.4 |
| GDP per head (US$; market exchange rate) | 21,813 | Inflation | 3.0 |
| GDP per head (US$; purchasing power parity) | 24,691 | Current-account balance (% of GDP) | -9.8 |
| Exchange rate (av) €:US$ | 0.8 | FDI inflows (% of GDP) | 0.6 |
Download the numbers in Excel
Background: After 400 years of Ottoman rule, Greece emerged as a nation state in 1830. A devastating civil war followed the retreat of German occupying forces in 1944. The rebuilding of the shattered economy was launched with Marshall Plan aid, but left-right antagonism persisted. Between 1967 and 1974 a military junta ruled the country, but since then a democracy has been in place. In 1981 Greece joined the European Community, now the EU. It became a member of economic and monetary union (EMU) at the start of 2001. However, it was given undue leniency in compliance with public finance conditions. Its rising debt has proved unsustainable and put Greece's continued membership of EMU in question.
Political structure: Greece is a parliamentary republic. The prime minister and the government hold executive powers. The president is elected by the 300-member parliament to serve a five-year term. The government must have the support of parliament to hold office. Following the general election on June 17th 2012, seven political parties are currently represented in parliament: the centre-right New Democracy (ND), Syriza Unifying Social Front (Syriza), the centre-left Panhellenic Socialist Movement (Pasok), the nationalist Independent Greeks (AE), the neo-Fascist Golden Dawn (XA), the Democratic Left (DIMAR) and the Communist Party of Greece (KKE). After the election, a coalition government consisting of ND, Pasok and DIMAR was formed, led by the ND prime minister, Antonis Samaras. The government mainly comprises ND ministers plus several technocrats, as Pasok and DIMAR refused to participate in the cabinet.
Policy issues: The primary focus of the new government is to cut the fiscal deficit and public debt and improve the business environment to make economic recovery possible. The dire condition of the public finances and a consequent weakening of the banking sector put continued euro membership at risk. The previous two governments and the current one have imposed successive draconian austerity packages. They have also in principle made sweeping structural economic reforms to meet the conditionality attached to two bail-out packages totalling EUR240bn from euro zone governments and the troika of the European Commission, European Central Bank (ECB) and IMF. However, implementing these reforms has so far proved difficult. In 2012, Greek public debt held by the private sector was restructured.
Taxation: The tax rate on corporate profits is 26% and that on distributed dividends is 10%. The basic top rate for personal income tax is 42% for income over EUR42,000. Value-added tax (VAT) is levied at rates of 23%, 11% and 5.5%.
Foreign trade: In 2012 goods exports (fob) were worth EUR22bn and imports (cif) EUR41.6bn, according to the Bank of Greece (the central bank). The current-account deficit was EUR5.6bn (2.9% of GDP; substantially down from a peak of 14.9% in 2008).
| Major exports 2011 | % of total | Major imports 2011 | % of total |
| Mineral fuels etc | 30.0 | Mineral fuels etc | 27.2 |
| Manufactured goods | 25.4 | Manufactured goods | 21.6 |
| Food & live animals | 14.2 | Machinery, transport equipment | 18.5 |
| Chemicals & related products | 10.3 | Chemicals & related products | 15.8 |
| Leading markets 2011 | % of total | Leading suppliers 2011 | % of total |
| Germany | 9.6 | Germany | 10.7 |
| Italy | 8.0 | Italy | 9.3 |
| UK | 7.9 | Russia | 9.2 |
| Bulgaria | 6.2 | South Korea | 5.7 |
Download the numbers in Excel
Download text file (csv format)
March 19, 2013
Data and charts: Annual trends charts
March 18, 2013
Greece: Country outlook
FROM THE ECONOMIST INTELLIGENCE UNIT
POLITICAL STABILITY: A general election on May 6th 2012 produced a highly fragmented parliament that was unable to form a government, necessitating a new election, which was held on June 17th 2012. That repeat election was won by the centre-right New Democracy (ND) led by Antonis Samaras, ahead of the left-wing Syriza Unifying Social Front (Syriza). The two traditional mainstream parties that have governed Greece since 1974, ND and the centre-left Panhellenic Socialist Movement (Pasok), lost a significant share of the vote at the May election, although ND then regained some support as many voters feared that a Syriza victory could lead to a Greek euro exit. There is broad public discontent with the corruption, cronyism and vested interests associated with Pasok and ND. Nonetheless, the two parties were able to form a coalition government after the June 2012 election, along with the small Democratic Left (DIMAR).
ELECTION WATCH: Despite defections, the coalition government still has a majority in parliament (167 seats out of 300), boosted by the return of four previously ousted Pasok members of parliament (MPs) in February 2013. However, Pasok and DIMAR are unreliable partners for the ND-led government. Evangelos Venizelos remained Pasok leader after a party congress in early March 2013--despite considerable internal resistance to his leadership--but his proposal for a centre-left alliance with DIMAR was rejected. Both Pasok and DIMAR have seen their ratings collapse in opinion polls because of their support for the harsh austerity agenda. Mr Venizelos' politicking puts at risk the future of the coalition.
INTERNATIONAL RELATIONS: Greece's international standing will remain fragile, given its dependence on EU/IMF loans. There is a significant risk that it will come into conflict with its creditors, leading to a disorderly default and departure from the euro zone. The Economist Intelligence Unit believes that, in the eventuality of the country leaving the euro zone, it would still be possible for Greece to remain a member of the EU, although temporary derogations from EU rules on the free movement of capital would be needed.
POLICY TRENDS: Greece faces a harsh choice. It can continue down the road directed by its EU/IMF creditors, which has so far caused an ever-deeper depression with rapidly rising unemployment (especially among young people), widespread corporate bankruptcy and increasing homelessness and deprivation. Or it can risk a step into the unknown and a partial breakdown of the economic system (at least in the short term) through a disorderly default, probably followed by a collapse of the banking system, requiring a new national currency to revive it.
ECONOMIC GROWTH: From its pre-crisis peak in the third quarter of 2007 to its latest trough in the fourth quarter of 2012, the Greek economy contracted by more than 26%. After five years of depression (including a 6.4% contraction in real GDP in 2012), we expect the economy to contract further, by 5% in 2013 and 1.5% in 2014. The economy should then recover from 2015, boosted by foreign trade (with weak imports because of depressed domestic demand and stronger exports as demand in key trade partners in the EU recovers) as well as by returning business and consumer confidence following the expected OSI. Serious downside risks remain, however. This forecast assumes that OSI occurs in 2014 and that Greece remains in the euro zone.
INFLATION: After muted inflation of 1% in 2012 (EU harmonised measure), we expect stagnating consumer prices (0%) in 2013 and low inflation (0.7%) in 2014, before a slight acceleration in 2015-17 (to average 1.4%). In February 2013 inflation stood at 0.1%. Weak domestic demand and lower wages across the public and private sectors will continue to put downward pressure on inflation. We expect external price pressures to be only moderate, as we forecast that the oil price in 2013 will be lower than in 2012.
EXCHANGE RATES: The euro has strengthened since mid-2012 as the debt crisis in the single currency zone has eased and as global risk tolerance has increased. The euro reached US$1.37:EUR1 in late January 2013 before retreating to US$1.30:EUR1 in mid-March. The euro's appreciation will be capped by continuing weakness in euro zone economies, as well as stronger growth in the US. We expect the exchange rate to average US$1.33:EUR1 in 2013 and US$1.28:EUR1 in 2014-17, although there is a significant risk of sharp movements either way. In the medium term, the possibility of a break-up of the euro zone cannot be dismissed.
EXTERNAL SECTOR: With austerity measures sharply cutting domestic demand and imports for most of the forecast period, we expect Greece's current-account balance to improve further, from a deficit of 2.9% of GDP in 2012 to an average surplus of 2.1% of GDP in 2015-17.
March 25, 2013
Country forecast overview: Highlights
Country forecast overview: Key indicators
| Key indicators | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
| Real GDP growth (%) | -6.4 | -5.0 | -1.5 | 0.8 | 2.6 | 2.4 |
| Consumer price inflation (av, %; EU harmonised measure) | 1.0 | 0.0 | 0.7 | 1.2 | 1.4 | 1.6 |
| Government balance (% of GDP) | -6.6 | -5.0 | -3.5 | -2.1 | -0.9 | -0.1 |
| Current-account balance (% of GDP) | -2.9 | -0.8 | 0.8 | 1.9 | 2.4 | 2.0 |
| Commercial banks' prime rate (av; %) | 7.3 | 7.2 | 7.5 | 7.7 | 7.9 | 7.8 |
| Exchange rate US$:€ (av) | 1.29 | 1.33 | 1.31 | 1.27 | 1.26 | 1.26 |
| Exchange rate US$:€ (year-end) | 1.31 | 1.32 | 1.31 | 1.26 | 1.26 | 1.26 |
| Exchange rate ¥:€ (av) | 102.87 | 123.36 | 124.03 | 122.24 | 122.85 | 121.71 |
Download the numbers in Excel
Download text file (csv format)
March 19, 2013
Land area
131,957 sq km
Population
10.79m (2011 census)
Main cities
Population in '000 (2011 census):
Greater Athens (capital): 3,812
Thessaloniki: 1,104
Patras & district: 311
Iraklion & district: 304
Larisa & district: 284
Climate
Mediterranean
Weather in Athens (altitude 107 metres)
Hottest month, July, 18-41°C; coldest month, January, 0-18°C (1997 data); driest month, July, no rainfall; wettest month, March 164 mm rainfall
Language
Greek
Weights and measures
Metric system
Currency
Euro (€)=100 cents
Time
2 hours ahead of GMT in winter; 3 hours ahead in summer
Public holidays
January 1st; January 6th; March 2nd; March 25th; April 17th; April 19th; April 20th; May 1st; June 7th; June 8th; August 15th; October 28th; December 25th; December 26th
January 01, 2013