As Yannis Stournaras, the governor of the central bank of Greece, settled into his seat for the three-hour flight from Athens to Frankfurt, he felt a sense of relief that one of the many problems in his in-tray was about to be resolved.
Attica Bank, the country’s fifth-largest lender, was poised to install a new management team he thought was capable of turning round the struggling lender. The only step left was for Attica’s board to officially approve the appointment of Theodoros Pantalakis, a former chairman of Agricultural Bank of Greece, as its new chief executive.
When he landed in the German city that afternoon in early September, however, he realised something had gone wrong. While he was in the air, the government in Athens reversedthe decision to award the job to Mr Pantalakis. It was his introduction to a web of allegedly related events, ranging from a raid on his wife’s business to an unsuccessful bid for TV rights backed by Attica loans.
According to sources, government figures arranged with the Engineers and Public Contractors Pension Fund (TSMEDE), Attica’s largest shareholder, to hand the job instead to Constantine Makedos, a civil engineer with little banking knowledge. Attica has close ties to Syriza, Greece’s ruling party, through links with the trade union that controls TSMEDE.
The move was a direct challenge to the clear preference expressed by the Bank of Greece, Attica’s regulator. And it put Mr Stournaras in an awkward spot, given the difficulties at Attica. A confidential report on Attica carried out this year by the European Central Bank, the eurozone’s top bank supervisor, and seen by the Financial Times, cited “severe findings” of poor governance and inadequate controls on lending. With some 70 per cent of its loans rated as non-performing, Mr Stournaras and others believed Attica urgently needed a professional banker at the helm. Government sources denied any intervention in the process to select Attica’s CEO.
The episode is cited by critics of Syriza, led by prime minister Alexis Tsipras, as one example of an authoritarian streak that they say is becoming more visible as its leaders battle a slide in opinion polls and a resurgence in support for the opposition party, New Democracy.
Thanos Veremis, emeritus professor of history at Athens University, says Syriza “would like to put every independent institution under state control — it’s part of their ideology.”
Others counter that recent events are simply a more visible reflection of longstanding problems in Greece when it comes to failure to uphold the independence of key public institutions.
Mr Stournaras responded to the reversal on Attica by setting in motion the central bank’s screening process for new bank executives, intended to weed out anyone not deemed “fit and proper” for the job. He also slapped a lending ban on Attica.
What followed was an incident that worried ECB officials and stimulated wider fears about the state’s willingness to use intimidation to get its way.
On September 15, just hours before it was announced that Mr Makedos had failed the fit-and-proper test, the offices of Mindworks Business Solutions, a communications company owned by Mr Stournaras’s wife, Lina Nicolopoulou, were raided by anti-corruption police. The state prosecutor’s office said the raid was part of a probe into alleged kickbacks involving an EU-funded contract. Ms Nicolopoulou refutes this, telling the FT: “It wasn’t my company they were after. The real target was Yannis.” She strongly denies wrongdoing.
She said the public prosecutor leading the raid refused to identify himself and that the search warrant was an unsigned photocopy. In Greece, it is illegal to enter premises without a signed search warrant. She has filed an appeal to Greece’s supreme court to annul the probe.
“I called my lawyer and he came round to the office while the search was going on. He explained that they [the prosecutor and the police] didn’t have the proper documentation. I was furious but also shocked that this could happen in a democratic country,” Ms Nicolopoulou said in a telephone interview.
Government sources have denied that there was any political motive behind the investigation into Ms Nicolopoulou.
Critics who see a political motive behind the raid on Ms Nicolopoulou’s offices point to the lending ban imposed by Mr Stournaras. The ban came in the middle of a sensitive, and controversial, tendering process for digital TV licences being overseen by the government. Its effect was to scupper a loan that Attica was arranging for Christos Kalogritsas, one of the government’s preferred bidders for the four licences on offer, forcing him to pull out of the contest.
It was later revealed that the land on the island of Ithaca that Mr Kalogritsas had posted as collateral for the loan was not a hotel site, as he claimed, but a rocky patch of pasture for goats.
Rule of law concerns
The clash over Attica was only the latest flare-up between Mr Stournaras and the Syriza-led government that came to power in 2015 on a wave of Greek anger against anti-EU austerity. Party officials made a failed bid to remove him from power during its early days in office.
Greece has had a tumultuous relationship with Brussels during six years of bailout programmes. In 2015, Syriza brought Greece to the brink of leaving the eurozone in a stand-off with creditors. Now there are fears that Greece could become another front in the EU’s quest to beat back threats to core principles of good governance and respect for independent institutions.
The European Commission is in the middle of a prolonged row with Poland’s rightwing government over the independence of the judiciary. It has also clashed with Viktor Orban, Hungary’s prime minister, over the constitutional court and pressure on the central bank.
Evangelos Venizelos, a former leader of Greece’s socialist party Pasok — a rival to Syriza — and a constitutional lawyer, claims there is a threat to the rule of law in Greece that is “comparable with Hungary and Poland”.
“It’s not as intense but the methodology is the same,” he says. “This is a very big issue that concerns the independence of the judiciary.”
Among Greece’s international bailout monitors, there is an awareness that lack of respect for independence of some institutions — notably the judiciary — could become an Achilles heel in the country’s bid to turn a corner and attract outside investment.
Within the country, there are fears that a culture of political interference in the public sector could be deepening, instead of improving.
Panagiotis Pikrammenos, former president of the Council of State, Greece’s highest administrative court, and a former caretaker prime minister, says the country has reached a “tipping point”. “Little by little, adherence to the rule of law in Greece has been diminishing,” he said in an interview. “I feel that every day that passes, Greek citizens are growing more distant from European citizens. The big question is how are we going to restore it?”
The auctioning procedure for the TV licences eventually collapsed after the Council of State backed complaints from opposition parties that the process was illegal. The court ruled that an independent panel, rather than the government, needed to allocate the licences.
But this only came after further scandal — notably accusations that leading government figures had sought to woo the council with promises of higher pay and an increased retirement age.
The government has committed to comply with the Council of State’s decision on the TV licensing procedure. Government sources denied inappropriate attempts to influence members of the council and argued that Syriza’s approach to the auction was the result of blocking tactics by the opposition that made it impossible to set up an independent board to oversee the process.
The raid on Ms Nicolopoulou and the failed auction are just two among a number of recent incidents that have raised eyebrows among Greece’s international creditors, and that have been flagged up by opposition parties.
Another incident occurred in early 2016 when the government tried to oust Dimitris Kyritsakis, president of the competition commission, and his deputy Dimitris Loukas, by redrafting rules for the agency in a way that seemed specifically tailored to exclude them.
Following a complaint from Brussels over interference in a regulatory body, the government rowed back. Both officials have kept their jobs.
International concerns about the Greek government’s level of respect for independent institutions predate Syriza’s ascent. One source of tension between Athens and Brussels has been the repeated investigations into Andreas Georgiou, the former head of the national statistics office, Elstat.
The investigation of Mr Georgiou began in 2011 under an interim coalition government led by former central bank governor Lucas Papademos, continued under the next government led by the New Democracy party and was revived this year with the Syriza-led administration. It centres on accusations, repeatedly refuted by EU authorities, that Elstat’s calculations of Greece’s deficit were deliberately exaggerated.
Mr Georgiou was acquitted by an appeals court in December of a charge of violation of duty unrelated to the alleged inflation of the deficit. But a week before Christmas, the court’s decision was annulled and he will have to face trial again on the same charge.
Another five cases involving Mr Georgiou are still being investigated. A criminal investigation that had been dropped was relaunched in August. If tried and convicted in the case, he could face life in prison. Mr Georgiou has repeatedly denied wrongdoing. “It is astounding and truly disappointing that official statisticians are politically persecuted and relentlessly prosecuted within the borders of the EU,” he said.
Syriza argues that the allegations of a decline in the rule of law are an attempt to smear the country’s first government since the restoration of democracy in 1974 not to be drawn from the established centre-right and centre-left parties. Government sources say that the administration is under attack precisely because it is pursuing economic reforms and other policies that challenge entrenched, vested interests. They argue that baseless accusations of politicisation of the justice system are a retaliatory stick to beat it with.
But, in an indication of how widespread the concerns have become, it is clear that the opposition will make them an issue in Greece’s next general election campaign, which must take place by October 2019. Kyriakos Mitsotakis, leader of the opposition New Democracy party, says: “We have expressed serious concerns that we have been witnessing an erosion of the quality of our democratic institutions since Syriza came in.”
One source of hope is how many of the alleged plots simply fell apart, or in some cases seemed to even backfire: Mr Stournaras remains central bank governor; the TV licensing process has been restarted; and Mr Pantalakis is firmly in place as Attica Bank’s chief executive.
Mr Veremis puts this down, at least in part, to flawed tactics. Syriza, he says, “lack a strategy, so they improvise and this leads to bungling and in the end they can’t carry it off”.
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