While banks are pressing austerity-crushed Greeks to pay back their loans in full despite big pay cuts, tax hikes and slashed pensions, prosecutors are probing why the New Democracy and PASOK Socialist parties who are partners in a coalition government haven’t paid 250 million euros ($339.4 million) in loans.
Financial prosecutor Grigoris Peponis said he would only invite the party officials, not compel them, to explain why they were able to so easily get loans when banks have shut off credit to almost everyone else. New Democracy is the party of Prime Minister Antonis Samaras, whose administration has yet to pass legislation giving loan relief to citizens who can’t pay their loans, causing 25 percent of them to default.
The newspaper Kathimerini reported that Peponis has only requested officials from the two parties to answer questions on Feb. 18 about their outstanding loans. Besides the unpaid loans, the two parties receive about 37 million euros ($50.2 million) a year in free money from the treasury, but still haven’t paid their staff. There is no public accounting of where the money goes.
New Democracy reportedly owes some 105 million euros ($142.5 million) to the state-operated ATEbank, which had to be taken by Piraeus over because of bad loans, and 15 million euros ($20.3 million) to Piraeus Bank. PASOK reportedly has borrowed 97 million euros from ATEbank,($131.72 million) along with 22 million euros ($29.8 million) from Attica Bank, 10 million euros ($13.5 million) from Marfin and 5 million euros ($6.79 million) from Piraeus.
The only collateral the parties pledge is their taxpayer funding, which is some 800 percent less than they borrowed, and while banks are hounding Greek citizen for full repayment there’s no indication they are trying to collect from the political parties. That has led critics to complain that the banks are operating as kind of legal slush funds for the politicians, providing them with hundreds of millions of euros in loans that aren’t being repaid because they are dependent on the government for favorable policies.
Last year, Reuters reported that Leandros Rakintzis, Greece’s independent inspector-general of public administration, said, “This is all about the exchange of favors,” he said. “These parties cannot pay the debt so it’s a vicious circle in which they come to depend on the banks. It creates an interdependence of politicians and banks.”
Samaras’ coalition, which also includes the Democratic Left, has given 7 billion euros ($9.5 billion) from a recent 9.2 billion euros ($12.5 billion) loan from international lenders directly to the banks as part of a recapitalization in which they will ultimately get 50 billion euros ($67.9 billion) while taxpayers have been waiting as long as year for overdue tax refunds.
Kathimerini said that Peponis is investigating the circumstances under which these loans were granted and whether any laws were broken. Both parties are thought to have mortgaged future state funding, which all Parliamentary parties receive, to obtain the loans.
Peponis’s move comes as PASOK leader Evangelos Venizelos plans to make better financial management within his party one of the main themes for the Socialists’ congress, due to take place at the end of the month. Venizelos proposes creating a five-member financial oversight panel to deal with PASOK’s dire finances.
He has also suggested posting all of the party’s income and expenses online, with revenues coming from party membership and functions and state funding. Samaras hasn’t offered to reveal how his party spends the money it gets from taxpayers and banks.