Fantastic Loans And Where To Find Them

Unraveling the Greek political parties’ bank loan adventures.

Luna Svarrer
Published in
12 min readJan 19, 2017


The Greek political parties are having some interesting adventures with bank loans, especially New Democracy and PASOK. The issue has been ongoing since 2012, and with new legislation implemented in 2014 things should have changed, but they haven’t. This year, for the first time ever, a committee has been investigating the generous loans. How did it go so far? And will there, in the end, be any consequences?

Part 1: What is going on? Bad, bad bank loans

For several months intense hearings have been taking place at the Hellenic Parliament.

CEOs of the biggest banks in Greece, financial officers and representatives from political parties have been invited to give their testimonies concerning bank loans to political parties.

Normally, party funding is provided partially by the state, according to the size of the party, and through membership fees and donations, but party funding in Greece seems to be heavily dependent on loans.

The official bank loan sum is registered as being 284,900,000 euros, but according to Socrates Famellos, chairman of the Inquiry Committee and SYRIZA MP, loans to Greece’s political parties sum up to 417,000,000 euros.

The final concluding report from the committee was supposed to be published at the end of 2016, but even before an official statement of a delay was issued, journalists working within the parliament had foreseen it. The report was delayed till 16th of January, and was then delayed further, the date is now the 23rd of January. In the meantime, a summary of the report published Monday, tells us that the committee hasn’t found any evidence of serious wrongdoing and hence no criminal liability.

The report, which was leaked by SYRIZA rapporteur Spyros Lappas, also states that the total bank loans to media organisations totals 1,27 billion euros. Which might be one of the reasons why this scandal is being reported quietly in the Greek media landscape.

George Gerapetritis, lawyer and associate Professor of Constitutional Law in the Faculty of Law, University of Athens, has never heard of any similar cases concerning these sorts of high-level bank loans, internationally or in the rest of Europe.

“It is rather a unique phenomenon,” he says, explaining how political tradition since the 80s, especially regarding politically dominant players, PASOK and New Democracy, has over the years provided a de facto collateral guarantee; the stable political landscape ensured future public funding.

“It was such a strong system that one could easily compare this to the English or the American model,” he explains. “An average of 70–80 percent of the public funding went to these two parties. However with the collapse of the parties in power, which happened in 2012, PASOK and New Democracy went down from 35 and 40 percent of voters, to 8 and 18 percent, which meant essentially a curtailment of public funding, resulting in a cut of 25 percent of their funding,” he continues.

According to the official bank loan data, New Democracy and PASOK stand out as the parties with the highest amount of debt. New Democracy is dealing with 49.8 percent of the debt, which is 137,100,000 euros, and PASOK with 44.5 percent; in cold cash 118,300,000 euros.

New Democracy and PASOK’s bank loans are, according to the data provided by Vouliwatch, essentially not being paid back. The loans held by SYRIZA, 8,800,000 euros, and The Communist Party (KKE), 7,000,000 euros, on the other hand, are.

Despite the worsening economic situation in Greece the parties managed to borrow 54 million euros in 2011 and 48 million in 2010, while the number in 2009 was 68 million euros. This happened even though no one else in Greece was granted loans.

These hundreds of millions euros in debt have been lent within the last ten years, but as several documents are considered confidential, these numbers and the information publicly available only provide part of the picture.

“The numbers are not the complete picture for many reasons,” explains Maria Nathanael, a spokesperson from the independent parliamentary watchdog, Vouliwatch.

“Partly because we lack basic information on certain parties, and because some numbers refer to loans that were taken out before 2005. However, the numbers reaffirm the general idea that political parties in modern Greek history, especially PASOK and New Democracy, have been given serious amounts of loans. And the guarantee wasn’t real estate or other kinds of property. No, the guarantee was the future funding the parties would get from the Greek state,” she says.

Where did all the money go, you might ask? That’s difficult to ascertain exactly, but a PASOK staff member has previously admitted that the party funding was sometimes spent “poorly”. For instance, in 2009 the party built a fully-equipped gym at its new headquarters and among other things, employed a personal trainer. This was reported by Reuters in 2012. PASOK was once a popular centre left party, but today they have only 5.5 percent of the vote, which is not enough to entitle them to receive the large amounts of state funding they enjoyed in the past.

George Gerapetritis points to the highly decentralized structure of political parties in Greece, which resulted in much of the money going to local party branches; their employees and rent.

“These people were essentially political professionals so essentially we created a whole column of a new industry which was political professionals,” he says.

Part 2: Legislation says transparency… but not so much

The Inquiry Commission has been trying to clear up a big mess. A mess that should have been monitored by another committee; ‘The Committee of Control’ which was set up in 2002 to monitor MPs’ bank accounts. Transparency legislation was further expanded in 2014, when the committee was also given the task of controlling the parties’ budgets, financing, and their funding. That task was to be done by a public database with the parties’ information. However, this database hasn’t been created yet, which is one of the reasons why investigating the parties’ budgets, funding, and loans is difficult. The law also made clear that political parties were only allowed three bank accounts, as well that the potential of future public funding as a bank loan guarantee is regarded as illegal.

“Greek legislation is very fair and socially just, but it is not applied,” Maria Nathanael explains. “So, it’s not that we have a lack of good legislation. We have good and advanced legislation compared to other European countries, we just don’t apply it. That is our problem.”

The law of 2014 was an effort to regulate parties’ bank loans, among other things, and to secure transparency. The law stated that the income of political parties could be managed through a maximum of three bank accounts, and that these accounts should be monitored by a committee, who would have access to the accounts and hence be able to cross check and log all loans and donations, as well as non-financial support.

The law also affirms that it’s illegal for a party to obtain a loan on the basis of its future funding and that legal responsibility rests with the person in charge of the parties’ financial affairs. A penal sentence of up to two years can be imposed on offenders, and it also holds to account the entity that granted the loan; the banks.

The committee should have had the first report ready a maximum of five months after receiving data from the parties, but now, two years after this law was implemented, nothing has been registered or changed.

This issue puts stress on, not only the political parties and the banks, but also the bureaucratic system, which is not living up to its responsibilities.

According to George Gerapetritis the monitoring system has been poor and “superficial.”

“The committee consist of 50 MPs, who are going through the accounts, but they do not have the capacity or the willingness to go deep into the accounts of the political parties because they themselves are involved,” he explains.

“They are not taking any sort of expert opinion, or external consultancy, which is a very dominant factor in checking the accounts of any legal entity. So they don’t have any external expertise and are not in a position to do any technical, substantial control upon the political parties funding,” he continues, and calls for an independent committee outside of the parliament, which should rely on external and expert consultancy.

Part 3: The banks and the fantastic loans

Since the summer of 2016, CEOs from Greece’s four biggest banks have given their testimonies in the hearings. This included George Poulopoulos from Piraeus Bank, Dimitris Mantzounis from Alphabank, Leonidas Fragiadakis from The National Bank, Fokion Karavias from Eurobank, and Alexander Anagnostopoulos from Atticabank.

Piraeus Bank stands out as the most generous bank; lending 131,400,000 euros to New Democracy and 108,100,000 euros to PASOK.

Piraeus Bank was among the fastest growing banks in the 90s and 00s. It was privatized in 1991, and since then it has expanded its total assets, including loans, from less than the equivalent of 4 billion euros in 1998 to 57 billion euros in 2010.

“Aggressive and willing to innovate, Piraeus swallowed several smaller lenders as well as branches of foreign banks in Greece. It expanded into the Balkans and bought the Marathon National Bank of New York,” wrote Stephen Grey of Reuters in a report investigating the bank and its former CEO Michalis Sallas.

Today, the bank is often understood as the weakest of Greece’s big four banks; around half of the loans on its balance sheet are non-performing, as is the case with the loans to New Democracy and PASOK.

Earlier this year, Piraeus Bank saw a lot of changes. In January, Anthimos Thomopoulos, the chief executive of Piraeus Bank, resigned. He was, according to the Financial Times, under pressure from state authorities. Later in July, the board chairman of Piraeus Bank, Michalis Sallas, resigned after an extraordinary board meeting. The National Herald alleged that the resignation masked “how he was pushed out by the country’s international creditors.

Michalis Sallas led Piraeus to become the country’s largest bank. He was elected to head up the bank by the government in 1991, 25 years ago, as it was privatized.

Not only did he run the bank, he and his wife and his two children ran a series of private investment companies alongside.

Public records show that these companies earned millions of euros doing real estate deals with Piraeus bank; they bought properties with loans from Piraeus and then rented several of the buildings back to the bank, which used them as branches.

It is also known that Piraeus bought properties from these companies, and financed other buyers to buy properties from them too. A case which could be understood as one man buying, selling, and lending to himself.

This information was documented in 2012 by Reuters, but Sallas stayed in office until 2016, and not only that, Sallas sued Reuters for distortion and undermining his reputation, demanding 50 million euros in compensation. The lawsuit, however, was dismissed for technical reasons:

“The Court dismissed the bank’s case on a technicality, because the bank failed to properly bring Reuters into the case,” Reuters Head of Communications, Barb Burg, said in a statement. “Equally important, however, the bank has not proven its case against Reuters or that the article at issue contained any falsehoods or inaccuracies. We continue to stand by our reporting.”

Michalis Sallas on the other hand was never charged with any wrongdoing. Today, he is known as one of Greece’s most prominent oligarchs.

As a final remark, Michalis Sallas was also a founding member of PASOK, and he is thought to be a supporter of PASOK’s Andreas Papandreou, who was Prime Minister of Greece from 1993 to 1996: two years after Michalis Sallas became the CEO of Piraeus Bank.

George Poulopoulos, the current CEO of Piraeus Bank, stated at the hearing in July that the largest loans to New Democracy and PASOK had originally been issued by the Agricultural Bank of Greece, a loan which it passed onto the Piraeus Bank in 2012 when they merged.

This information was also laid out in 2012, according to banking sources and a senior source in the Greek parliament, putting stress on former CEO of the Agricultural Bank of Greece, Demetrios Miliakos. He was appointed as CEO by New Democracy in 2004 and is generally understood as ‘best man’ to Kostas Karamanlis, Prime Minister from New Democracy 2004–2009.

Following his time as Chairman at the Agricultural Bank, Demetrius Miliakos has been faced with prosecution. Employees at the bank sued him for economic crimes committed between 2004–2009. The committee investigating this case has not yet come to a conclusion.

Part 4: The Parties and the lack of responsibility

Greece is no stranger to corruption, and the public is quick to point its finger at the political system as the institution that is most affected by corruption. According to Transparency International’s index on corruption, 66 percent of Greeks say they feel their government’s efforts to fight corruption are inefficient.

“Since the crisis broke out, now we are six years in, there has only been one politician sentenced to jail for corruption,” Maria Nathanael says, referring to Akis Tsohatzopoulos, the former defense minister from PASOK who was found guilty of fraud in 2013.

The people who are currently responsible for the parties’ finances are Athanasios Skordas for New Democracy, Nikos Sallagiannis for PASOK, and from SYRIZA Mimis Dariotis, but as the investigation on the loans covers the last ten years, Rovertos Spyropoulos, who was responsible for the finances of PASOK from 2004–2012, is also liable.

This September he was charged with criminal charges of breach of faith and fraud, and currently he is under investigation concerning irregularities in the management of the party’s funds.

But who should really be responsible for these fantastic bank loans? The parties? The banks’ CEOs? The monitoring system?

George Gerapetritis addresses the two first aspects:

“In my opinion there are two parties to blame: the political parties themselves, because they didn’t have any internal audit function. They spend and spend and spend, under the assumption that they will always be in a dominant position. And secondly the banks themselves, because even though it seemed reasonable at the time, the truth is, you can not rely on future public funding as the basis of a strong guarantee. You never know how the political environment goes. So political funding as collateral is not a credible guarantee,” he says.

“There is also a part of the blame to be placed on the leaders of the political parties. They didn’t see, at an earlier stage, that they needed to establish a better mechanism to prevent bankruptcy. But the truth is that the political parties’ structures were also flawed, because they didn’t enforce auditing,” he continues, explaining why an independent monitoring committee needs to be established.

Part 5: Thoughts about the future — can a party go bankrupt?

As PASOK and New Democracy struggle to pay back their debt, the question of whether or not a political party can go bankrupt has emerged.

“It’s a very delicate and difficult issue, constitution wise,” George Gerapetritis starts out.

“According to law, the political parties are legal entities, so they do have legal personality, which means they have legal rights and commitments, as does any other legal person, company, union or association,” he tells.

“Unions, companies, and associations of standard commercial law can go bankrupt if they can’t pay their commitments. However, political parties, according to the constitution, enjoy a preferential status. There are specific laws in the constitution, which say that political parties can not be dissolved through a state act, which means either an administrative act or even a judgment,” he explains. This means that there is no way a political party can be dissolved, unless it is a decisions of the members of the party for self-dissolution.

“Given this clause it is debatable whether a political party could constitutionally, even on the ground of bankruptcy, be dissolved,” he concludes. What could happen instead, George Gerapetritis explains, is that the parties could stop functioning.

“They could become totally inactive,” as George Gerapetritis put it. A scenario which seems most relevant in terms of PASOK, who are at an all time low with an estimated 5.5 percent of the vote.

Thanks to collaborators of this article: Vouliwatch and Alex Bou

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