Countries that have a hard time keeping corruption at bay are also the ones that have been hit hardest by the European debt crisis. The correlation was uncovered in a new report by graft watchdog Transparency International.
The report points to the fact that crisis-hit countries such as Greece, Spain and Portugal also feature some of the highest levels of corruption in Western Europe.
“A number of countries in southern Europe – Greece, Italy, Portugal, Spain – are shown to have serious deficits in public sector accountability and deep-rooted problems of inefficiency, malpractice and corruption, which are neither sufficiently controlled nor sanctioned,” the report reads. “The links between corruption and the ongoing financial and fiscal crisis in these countries can no longer be ignored.”
Greece, the country where the Eurozone debt crisis started and which is still struggling to find a viable solution for its economic woes, scored the top spot in terms of prevalence of bribery.
Finn Heinrich, Transparency International’s research director, noted that there was a widespread practice of paying an official to “knock a zero off someone’s tax bill or to speed up health care” in Greece.
“But as well as front-line bribery there’s also bribery on a grand scale, such as with public procurement, and the oversight of public spending is too weak,” he noted, as quoted by The Wall Street Journal.
The report also found fault with the auditing institutions of Greece, Portugal and Spain. The independence of Greece’s Court of Audit was called into question, as it was accountable to the government and not the parliament as in most countries.
The findings of the report also support the fact that Western Europe is divided between north and south in terms of corruption and fiscal problems.
“When it comes to Western Europe, there is clearly a North-South divide here,” Heinrich noted.
This is very much in line with a recent pan-European poll. It showed that 98 per cent of Greeks believe corruption to be a major problem, compared to just 19 per cent of Danes.
Eastern Europe is also a cause for major concern, where “high-profile scandals involving public procurement continue to occur.” The problem is most severe in Bulgaria, the Czech Republic, Romania and Slovakia, where many managers believe they have to resort to graft, kickbacks or other incentives to obtain a public contract.
Overall, the report’s conclusions aren’t mollifying.
“Across Europe, many of the institutions that define a democracy and enable a country to stop corruption are weaker than often assumed,” Transparency International’s managing director Cobus de Swardt said in a statement. “This report raises troubling issues at a time when transparent leadership is needed as Europe tries to resolve its economic crisis.”
In Italy, the economic crisis has spelled prosperity for the mafia, with reports of money laundering rising by 147 per cent in the past two tumultuous years, the deputy director of the Bank of Italy said in a testimony to parliament.
Many of the cases of suspicious transactions involved people linked to the mafia, with a quarter of those reported in the north of the country, an area that has historically been outside the mafia’s grip.
“Money laundering is anti-cyclical, and so it increases in times of crisis,” Anna Maria Tarantola noted to parliament.
The explanation for the phenomenon is fairly simple. Banks fall short on cash in times of crisis, and so criminal networks step in with investments into the real economy.
In fact, organized crime generated a total income of 140 billion euros, or seven per cent of the country’s GDP, and had more cash on hand than any of the country’s banks, a January report by anti-crime group SOS Impresa stated.
Alberto Mingardi, the director-general of the Bruno Leone Institute, an economic think-tank, believes the mafia’s grip on the economy is pretty firm.
“One thing you can see is the grip of [the] mafia on the Italian economy is particularly strong now because the mafia has cash,” he noted to RT. “And you’ve got plenty of small business, especially in the south and the center of the country that are running short of cash and have some kind of relationship with the mafia because they were forced for many years to buy protection from the mafia. They may turn to the mafia as investors in their capital; they may go into the black sector for getting money they cannot get out of the official banking sector. This is very troublesome.”
Mingardi suggested the government should take notice of the problem, and reduce taxation, so as to make more legitimate money available to Italian businesses in order to reduce their reliance on borrowing from the mafia.