For Greece, Oligarchs Are Obstacle to Recovery
By RACHEL DONADIO and LIZ ALDERMAN
Published: December 5, 2012
ATHENS — A dynamic entrepreneur, Lavrentis Lavrentiadis seemed to represent a promising new era for Greece. He dazzled the country’s traditionally insular business world by spinning together a multibillion-dollar empire just a few years after inheriting a small family firm at 18. Seeking acceptance in elite circles, he gave lavishly to charities and cultivated ties to the leading political parties.
Icon/Reuters
Petros Giannakouris/Associated Press
Lavrentis Lavrentiadis, who took control of Proton
Bank in 2009, paid $65 million to avoid prosecution. Nonetheless, he and
26 others were charged with fraud and other counts in March.
But as Greece’s economy soured in recent years, his fortunes sagged and
he began embezzling money from a bank he controlled, prosecutors say.
With charges looming, it looked as if his rapid rise would be followed
by an equally precipitous fall. Thanks to a law passed quietly by the
Greek Parliament, however, he avoided prosecution, at least for a time,
simply by paying the money back.
Now 40, Mr. Lavrentiadis is back in the spotlight as one of the names on
the so-called Lagarde list of more than 2,000 Greeks said to have
accounts in a Geneva branch of the bank HSBC and who are suspected of
tax evasion. Given to Greek officials two years ago by Christine
Lagarde, then the French finance minister and now head of the
International Monetary Fund, the list was expected to cast a damning
light on the shady practices of the rich.
Instead, it was swept under the rug, and now two former finance
ministers and Greece’s top tax officials are under investigation for
having failed to act.
Greece’s economic troubles are often attributed to a public sector
packed full of redundant workers, a lavish pension system and
uncompetitive industries hampered by overpaid workers with lifetime
employment guarantees. Often overlooked, however, is the role played by a
handful of wealthy families, politicians and the news media — often
owned by the magnates — that make up the Greek power structure.
In a country crushed by years of austerity and 25 percent unemployment,
average Greeks are growing increasingly resentful of an oligarchy that,
critics say, presides over an opaque, closed economy that is at the root
of many of the country’s problems and operates with virtual impunity.
Several dozen powerful families control critical sectors, including
banking, shipping and construction, and can usually count on the
political class to look out for their interests, sometimes by passing
legislation tailored to their specific needs.
The result, analysts say, is a lack of competition that undermines the
economy by allowing the magnates to run cartels and enrich themselves
through crony capitalism. “That makes it rational for them to form a
close, incestuous relationship with politicians and the media, which is
then highly vulnerable to corruption,” said Kevin Featherstone, a professor of European Politics at the London School of Economics.
This week the anticorruption watchdog Transparency International ranked
Greece as the most corrupt nation in Europe, behind former Eastern Bloc
states like Bulgaria, Romania and Slovakia. Under the pressure of the
financial crisis, Greece is being pressed by Germany and its
international lenders to make fundamental changes to its economic system
in exchange for the money it needs to avoid bankruptcy.
But it remains an open question whether Greece’s leaders will be able to
engineer such a transformation. In the past year, despite numerous
promises to increase transparency, the country actually dropped 14
places from the previous corruption survey.
Mr. Lavrentiadis is still facing a host of accusations stemming from
hundreds of millions of dollars in loans made by his Proton bank to
dormant companies — sometimes, investigators say, ordering an employee
to withdraw the money in bags of cash. But with Greece scrambling to
complete a critical bank recapitalization and restructuring, his case is
emblematic of a larger battle between Greece’s famously weak
institutions and fledgling regulatory structures against these
entrenched interests.
Many say that the system has to change in order for Greece to emerge
from the crisis. “Keeping the status quo will simply prolong the
disaster in Greece,” Mr. Featherstone said. While the case of Mr.
Lavrentiadis suggests that the status quo is at least under scrutiny, he
added, “It’s not under sufficient attack.”
In a nearly two-hour interview, Mr. Lavrentiadis denied accusations of
wrongdoing and said that he held “a few accounts” at HSBC in Geneva that
totaled only about $65,000, all of it legitimate, taxed income. He also
sidestepped questions about his political ties and declined to comment
on any details of the continuing investigation into Proton Bank.
http://www.nytimes.com/2012/12/06/world/europe/oligarchs-play-a-role-in-greeces-economic-troubles.html
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