di Megan Green
Just before Christmas, I met with former Greek Finance Minister George Papaconstantinou, and he talked about how excited he was to spend the holidays abroad, where -- unlike in Greece -- he could roam freely without a security detail. His holiday didn’t go quite as expected.
On Dec. 28, Papaconstantinou was accused of removing names from a list of Greeks with Swiss bank accounts -- the so-called Lagarde list -- and he was expelled from the socialist Pasok party. This week, Greek legislators will debate whether to start a parliamentary investigation against him.
Not so in Greece, a country that international creditors have repeatedly lambasted for its tolerance of rampant tax evasion. While the Lagarde list included about 2,000 Greek depositors, successive Greek governments did not use it to collect a single cent from tax evaders.
No TrustSo what did the government do with the list? That depends on whom you ask. Most Greeks I speak to about this tell me without hesitation that the Lagarde list was used for extortion. There is no proof of this, but it demonstrates clearly the level of trust that Greeks have in their politicians.
Papaconstantinou was the first Greek official to receive the list from Lagarde. In a TV interview last week, he said he immediately asked the Financial Crimes Squad in Athens to check a sample of names. Then he says he transferred the data onto a memory stick and gave the full list to the squad.
After Papaconstantinou left office as finance minister in June 2011, the list disappeared until September 2012, when the current finance minister, Yannis Stournaras, apparently learned of its existence from the press and said he had never received it. Evangelos Venizelos, the finance minister serving between Papaconstantinou and Stournaras, responded to Stournaras’s statement by saying he didn’t know the whereabouts of the Lagarde list. A few days later, he nevertheless presented it to the authorities, declaring that he had never read it but instead only briefly glanced at it, noticing that there were three Jewish names on it (whatever that means).
The mishandling of the Lagarde list is the result of extremely weak -- and, in some cases, failed -- institutions in Greece. The Financial Crimes Squad should have conducted a full investigation of the names on the list, with the finance minister then authorizing a course of action to recoup revenue from identified tax evaders.
That this scandal should have happened at all is bad enough, yet the government’s proposed remedy is worse. On Dec. 28, a total of 71 members of the ruling coalition signed a petition demanding that Papaconstantinou -- alone -- should be investigated, for allegedly removing the names of three of his relatives from the list.
If Greece’s parliamentarians vote in favor of this plan this week, it would be yet another reflection of institutional failure in Greece.
No MotiveThe accusation against Papaconstantinou is hardly clear- cut. Papaconstantinou’s relatives have presented evidence to the Financial Crimes Squad that their deposits in Switzerland were legal and properly declared. If this evidence is accepted, then the former finance minister had no obvious motive for removing their names, raising the question of whether he, or someone else, did so and why.
More important, Papaconstantinou is only one of many people involved. Venizelos’s recollection of the list evolved as the scandal unfolded. He not only failed to start an investigation into the names on the list, but also took the list with him when he left office. Should Venizelos not be under investigation, as well? Additionally, any complete inquiry should include senior members of the crimes squad, who received the list from Papaconstantinou and also sat on their hands.
The proposed parliamentary investigation against Papaconstantinou has already ruffled some Greek feathers. Last week, two members of the Democratic Left were expelled from their party for demanding a more complete inquiry. The Independent Greeks and neo-fascist Golden Dawn parties have demanded that former prime ministers also be included in the investigation.
The real threat to the government, however, comes from the main opposition party, Syriza. No matter who is investigated, Syriza stands to gain support from the Lagarde-list saga given the party’s status as an outsider to the cozy political establishment that has run Greece into the ground.
So far, the coalition has managed to hold on to power because no party has had the incentive to bring it down. But this may be changing. Syriza has led the charge in demanding that the Lagarde-list inquiry include a number of politicians and officials. The party probably smells Pasok’s weakness and is going in for the kill.
If Syriza can use the Lagarde-list scandal to come close to attracting enough support to form a majority government, we can expect it to incite even more anti-austerity sentiment in the electorate than we have seen so far, with the goal of forcing early elections.
Impossible ReformsThe public outcry would make further austerity measures and structural reforms almost impossible to implement, and members of parliament would probably continue to resign under pressure from international creditors to meet target conditions for the loans that keep Greece afloat. The coalition’s numbers in the 300-seat parliament have already dwindled to 164 from 179 since the June election.
Most analysts equate a Syriza government in Greece with the country’s exit from the euro area, given party leader Alexis Tsipras’s saber rattling before the June election. The party’s language has softened recently, with Tsipras swapping demands for a moratorium on debt payments with calls for a more constructive debt conference to renegotiate the terms. This week, Tsipras began a public-relations blitz in Germany and the U.S. to manage his party’s image abroad.
So once in government, Syriza might just back down and fall into line with the demands of the European Union, the European Central Bank and the International Monetary Fund. Then again, it might not. Following the decision of European finance ministers in late 2012 to grant Greece some public-debt relief, most investors concluded that the euro area’s problem child would remain out of sight, at least until after the German elections in September 2013. The Lagarde-list saga could bring Greece back into focus earlier than anyone was expecting.
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