Hired in 2010 to reform the discredited Greek Statistics Authority ELSTAT, Georgiou discovered the e-mail breach weeks into the job.

“The police told me that the hacker had been entering multiple times a day into my account from day one of my work at ELSTAT and had accessed and downloaded thousands of my e-mails,” Georgiou told Reuters. “All trust was broken.”

Greece’s debt crisis engulfed the euro zone after the country revealed in 2009 its deficit had been massively under-reported. Now the American-educated Greek brought in to stop such practices is also trapped in the storm.

Last November, he was called before parliament to answer accusations by former Statistics Authority board members that he had inflated Greece’s 2009 budget deficit as part of a German-led conspiracy to plunge the country into deeper austerity.

Last month, financial crimes prosecutors charged him with falsifying official data. The rationale behind such charges has not yet been released, but he may be convicted of breach of faith – a crime that usually applies to those who embezzle or misuse public funds. If he is, he could face at least five years in jail.

Georgiou, 52, says he did nothing wrong and merely applied EU statistical standards, such as ensuring data-collectors are free of political influence. “That this is happening in the middle of the euro zone is a strange and surreal experience,” he said. “I am being prosecuted for following the law.”

His supporters, including EU partners who are bankrolling Athens with hundreds of billions of euros, say the affair reflects continuing political reluctance in Greece to confront many of the country’s structural flaws.

Eurostat, the EU’s official statistics authority, has rushed to Georgiou’s defense, issuing public statements in his support. A spokesman for the German finance ministry said he knew of the investigation, but had heard nothing about Germany’s alleged part.

“I don’t even know the accusations. Nonsense,” he said.

The current Greek government has also backed Georgiou, although it is clearly hesitant to interfere in the judicial process.

“The outside world doesn’t understand and, to be honest, we have a huge difficulty explaining to our partners what is happening here,” said a senior Greek finance ministry official on condition of anonymity.

“What we stress is that we stand behind the current numbers underpinning the economic program. They have been verified by Eurostat and we have full confidence in Mr. Georgiou.”

POLITICAL MEDDLING

Government officials say part of the problem with Greece’s statistical service was that, until recently, it was controlled by the finance ministry and at the mercy of ministers. In the past, some may have wanted to keep GDP low to collect more EU subsidies, while others wanted to boost GDP to keep the deficit ratio within EU rules, said officials.

Eurostat regularly used to give Greece’s numbers “reservations”, meaning it doubted their validity.

In 2004, then-finance minister George Alogoskoufis told Brussels that Greece had under-reported its budget deficit for years, including for 2001, the year it joined the euro zone.

Two years later, Greece stunned its European partners again by announcing that it was revising up its GDP by 25 percent after including money laundering and prostitution. Eurostat objected and approved only a 9 percent revision, but not before Greece had been ridiculed by international media.

“Greece managed to get by somehow, with reservations on its statistics, for some time,” said Georgiou, who has a Ph.D. in economics from the University of Michigan and held senior posts at the International Monetary Fund from 1989 to 2010. “It was an approach and a culture. But it led to a wiping out of the credibility of the statistics of the country.”

That credibility suffered further with a new finance minister. Socialist George Papaconstantinou announced in late 2009 that the budget deficit would come to 12.7 percent of GDP instead of a previously estimated 6 percent. He blamed his Conservative predecessor.

Eurogroup head and Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels at the time: “The game is over – we need serious statistics.”

The revision was followed by another new deficit estimate of 13.6 percent in April 2010.

It was at that point, as part of an international bailout that rescued Greece from bankruptcy, that Papaconstantinou created a new, independent statistics authority and brought in Georgiou.

The new statistics boss, plucked from his career in Washington, came with a reputation for a mild manner, a fondness for pastel ties, and a black belt in Jujitsu.

In October 2010, he re-examined the 2009 budget deficit figure with Eurostat and revised it again, this time to 15.4 percent.

Alogoskoufis declined to comment on how the statistics service had operated when he was minister. Papaconstantinou says it was during his tenure that the agency started functioning without political interference. As for the charges against Georgiou, he said, the final arbiter of the veracity of any EU member’s data is Eurostat, whose rules national statistical agencies are required to apply. “I therefore fail to see how and why this is an issue for the Greek courts.”

BOARD CLASHES

Georgiou compares the task of reshaping the authority to Hercules cleaning the Augean stables – which the mythological hero achieved by rerouting two rivers.

“I said we are going to do things differently, according to European law and international statistical standards – no ands, ifs or buts,” he said. As well as his martial arts expertise, he has written a book on the ancient Greek sport of Pankration, a blend of boxing and wrestling with hardly any rules.

But there were challenges at ELSTAT from the start, he says. Board members included some of those who had applied for the top job, as well as an appointee of the finance minister, an appointee of the central bank and a labor union representative.

Board members wanted more direct involvement in producing numbers. Georgiou insisted that should be solely the work of statisticians, both Georgiou and board members said.

“Some board members went to the staff and told them they wanted to help Greece minimize the deficit and debt. That’s a no-no,” Georgiou said. “I explained that the technical staff had to do their jobs independently.”

He said that in the past two and a half years, Greece has produced sets of figures five times without any Eurostat reservations – for the first time in years. Eurostat confirmed the 2009 deficit figure after scrutiny.

But clashes continued, including with the ELSTAT trade union, whose president Nikos Klouvatos has asked for Georgiou to step down pending his trial.

“He wanted board members to be decorative plants in the room,” said Klouvatos. “He wanted to change everything and we told him we agree but he had to do it slowly.”

The finance ministry official said Georgiou may not at first have received full support. “It looks like the first attempt was to have an internationally minded president who could talk convincingly with foreigners but to surround him with people controlled by the government,” he said.

In September 2011 then-finance minister Evangelos Venizelos dismissed the ELSTAT board, and in April 2012 a new law created an advisory council instead.

Since then, former board members have alleged that Georgiou deliberately inflated the 2009 budget deficit, leading Greece’s euro zone partners to demand tougher austerity measures in return for bailing out the country. One of their number, an applied econometrics professor from the University of Thessaloniki, insists her concerns are technical.

“They say I am politically motivated and vengeful because I was fired. This is nonsense,” said Zoe Georganta. “I noticed anomalies with the numbers and I expressed my doubts.”

Georganta says the draconian austerity measures imposed on Greece are still based on incorrect figures. Her calculations show that Greece’s GDP “is underestimated by at least 30 percent,” she said. “I estimated that our (2012) deficit is not over 4 percent of GDP.”

Georgiou rejects those figures and the allegation that he overstated the deficit. The IMF and the EU put Greece’s deficit in 2012 at 6.6 percent of GDP.

THE BACKLASH

In Greece, battle is joined. One newspaper called Georgiou the Trojan horse of the international lenders. But former premier George Papandreou slammed the prosecutors, saying the attack on the statistics boss was an assault on his own days in office, and that earlier statistics officials had fiddled the figures for years.

The union of Greek prosecutors hit back, calling Papandreou’s statement an unacceptable meddling in justice.

It could take a year or more for the case to come to court. Given investigators have not yet finished their work, it remains possible the charges will be dropped.

Georgiou says the country needs serious statistics. “Serving the national interest is to produce official statistics according to international statistical standards, correct methodology and EU law. This is how we best serve our country,” he said.

“I came here because I loved Greece and I still love it despite everything.”

(Additional reporting by Gernot Heller in Berlin; Editing by Richard Woods and Sara Ledwith)

Hired in 2010 to reform the discredited Greek Statistics
Authority ELSTAT, Georgiou discovered the e-mail breach weeks
into the job.

“The police told me that the hacker had been entering
multiple times a day into my account from day one of my work at
ELSTAT and had accessed and downloaded thousands of my e-mails,”
Georgiou told Reuters. “All trust was broken.”

Greece’s debt crisis engulfed the euro zone after the
country revealed in 2009 its deficit had been massively
under-reported. Now the American-educated Greek brought in to
stop such practices is also trapped in the storm.

Last November, he was called before parliament to answer
accusations by former Statistics Authority board members that he
had inflated Greece’s 2009 budget deficit as part of a
German-led conspiracy to plunge the country into deeper
austerity.

Last month, financial crimes prosecutors charged him with
falsifying official data. The rationale behind such charges has
not yet been released, but he may be convicted of breach of
faith – a crime that usually applies to those who embezzle or
misuse public funds. If he is, he could face at least five years
in jail.

Georgiou, 52, says he did nothing wrong and merely applied
EU statistical standards, such as ensuring data-collectors are
free of political influence. “That this is happening in the
middle of the euro zone is a strange and surreal experience,” he
said. “I am being prosecuted for following the law.”

His supporters, including EU partners who are bankrolling
Athens with hundreds of billions of euros, say the affair
reflects continuing political reluctance in Greece to confront
many of the country’s structural flaws.

Eurostat, the EU’s official statistics authority, has rushed
to Georgiou’s defence, issuing public statements in his support.
A spokesman for the German finance ministry said he knew of the
investigation, but had heard nothing about Germany’s alleged
part.

“I don’t even know the accusations. Nonsense,” he said.

The current Greek government has also backed Georgiou,
although it is clearly hesitant to interfere in the judicial
process.

“The outside world doesn’t understand and, to be honest, we
have a huge difficulty explaining to our partners what is
happening here,” said a senior Greek finance ministry official
on condition of anonymity.

“What we stress is that we stand behind the current numbers
underpinning the economic programme. They have been verified by
Eurostat and we have full confidence in Mr. Georgiou.”

POLITICAL MEDDLING

Government officials say part of the problem with Greece’s
statistical service was that, until recently, it was controlled
by the finance ministry and at the mercy of ministers. In the
past, some may have wanted to keep GDP low to collect more EU
subsidies, while others wanted to boost GDP to keep the deficit
ratio within EU rules, said officials.

Eurostat regularly used to give Greece’s numbers
“reservations”, meaning it doubted their validity.

In 2004, then-finance minister George Alogoskoufis told
Brussels that Greece had under-reported its budget deficit for
years, including for 2001, the year it joined the euro zone.

Two years later, Greece stunned its European partners again
by announcing that it was revising up its GDP by 25 percent
after including money laundering and prostitution. Eurostat
objected and approved only a 9 percent revision, but not before
Greece had been ridiculed by international media.

“Greece managed to get by somehow, with reservations on its
statistics, for some time,” said Georgiou, who has a Ph.D. in
economics from the University of Michigan and held senior posts
at the International Monetary Fund from 1989 to 2010. “It was an
approach and a culture. But it led to a wiping out of the
credibility of the statistics of the country.”

That credibility suffered further with a new finance
minister. Socialist George Papaconstantinou announced in late
2009 that the budget deficit would come to 12.7 percent of GDP
instead of a previously estimated 6 percent. He blamed his
Conservative predecessor.

Eurogroup head and Luxembourg Prime Minister Jean-Claude
Juncker told reporters in Brussels at the time: “The game is
over – we need serious statistics.”

The revision was followed by another new deficit estimate of
13.6 percent in April 2010.

It was at that point, as part of an international bailout
that rescued Greece from bankruptcy, that Papaconstantinou
created a new, independent statistics authority and brought in
Georgiou.

The new statistics boss, plucked from his career in
Washington, came with a reputation for a mild manner, a fondness
for pastel ties, and a black belt in Jujitsu.

In October 2010, he re-examined the 2009 budget deficit
figure with Eurostat and revised it again, this time to 15.4
percent.

Alogoskoufis declined to comment on how the statistics
service had operated when he was minister. Papaconstantinou says
it was during his tenure that the agency started functioning
without political interference. As for the charges against
Georgiou, he said, the final arbiter of the veracity of any EU
member’s data is Eurostat, whose rules national statistical
agencies are required to apply. “I therefore fail to see how and
why this is an issue for the Greek courts.”

BOARD CLASHES

Georgiou compares the task of reshaping the authority to
Hercules cleaning the Augean stables – which the mythological
hero achieved by rerouting two rivers.

“I said we are going to do things differently, according to
European law and international statistical standards – no ands,
ifs or buts,” he said. As well as his martial arts expertise, he
has written a book on the ancient Greek sport of Pankration, a
blend of boxing and wrestling with hardly any rules.

But there were challenges at ELSTAT from the start, he says.
Board members included some of those who had applied for the top
job, as well as an appointee of the finance minister, an
appointee of the central bank and a labour union representative.

Board members wanted more direct involvement in producing
numbers. Georgiou insisted that should be solely the work of
statisticians, both Georgiou and board members said.

“Some board members went to the staff and told them they
wanted to help Greece minimise the deficit and debt. That’s a
no-no,” Georgiou said. “I explained that the technical staff had
to do their jobs independently.”

He said that in the past two and a half years, Greece has
produced sets of figures five times without any Eurostat
reservations – for the first time in years. Eurostat confirmed
the 2009 deficit figure after scrutiny.

But clashes continued, including with the ELSTAT trade
union, whose president Nikos Klouvatos has asked for Georgiou to
step down pending his trial.

“He wanted board members to be decorative plants in the
room,” said Klouvatos. “He wanted to change everything and we
told him we agree but he had to do it slowly.”

The finance ministry official said Georgiou may not at first
have received full support. “It looks like the first attempt was
to have an internationally minded president who could talk
convincingly with foreigners but to surround him with people
controlled by the government,” he said.

In September 2011 then-finance minister Evangelos Venizelos
dismissed the ELSTAT board, and in April 2012 a new law created
an advisory council instead.

Since then, former board members have alleged that Georgiou
deliberately inflated the 2009 budget deficit, leading Greece’s
euro zone partners to demand tougher austerity measures in
return for bailing out the country. One of their number, an
applied econometrics professor from the University of
Thessaloniki, insists her concerns are technical.

“They say I am politically motivated and vengeful because I
was fired. This is nonsense,” said Zoe Georganta. “I noticed
anomalies with the numbers and I expressed my doubts.”

Georganta says the draconian austerity measures imposed on
Greece are still based on incorrect figures. Her calculations
show that Greece’s GDP “is underestimated by at least 30
percent,” she said. “I estimated that our (2012) deficit is not
over 4 percent of GDP.”

Georgiou rejects those figures and the allegation that he
overstated the deficit. The IMF and the EU put Greece’s deficit
in 2012 at 6.6 percent of GDP.

THE BACKLASH

In Greece, battle is joined. One newspaper called Georgiou
the Trojan horse of the international lenders. But former
premier George Papandreou slammed the prosecutors, saying the
attack on the statistics boss was an assault on his own days in
office, and that earlier statistics officials had fiddled the
figures for years.

The union of Greek prosecutors hit back, calling
Papandreou’s statement an unacceptable meddling in justice.

It could take a year or more for the case to come to court.
Given investigators have not yet finished their work, it remains
possible the charges will be dropped.

Georgiou says the country needs serious statistics. “Serving
the national interest is to produce official statistics
according to international statistical standards, correct
methodology and EU law. This is how we best serve our country,”
he said.

“I came here because I loved Greece and I still love it
despite everything.”

Greek statistics agency ELSTAT head Andreas Georgiou has
denied wrongdoing and the European Union’s own Eurostat
statistics agency has defended him, saying the deficit was
calculated in line with its standards.

“The ministry does not doubt in any way the statistical data
on which the present (economic) programme is based,” a senior
finance ministry official told Reuters on condition of
anonymity.

The Greek debt crisis was triggered in late 2009 when the
then Socialist government revealed the budget deficit was
grossly underestimated. Georgiou was appointed in 2010 in an
effort to restore the credibility of Greek statistics.

Government officials defended his record, saying he worked
closely with Eurostat to streamline methods and provide credible
figures, despite resistance from within the agency, echoing EU
statements.

“Eurostat has been clear that it finds the revision of the
Greek republic’s finance data for 2009 by the Greek statistics
service ELSTAT to be reliable and … Greek data followed all
the EU rules applicable,” said Emer Traynor, a spokesperson for
Algirdas Semeta, the EU commissioner in charge of tax policy.

However, an economic crimes prosecutor formally slapped
felony charges on Georgiou and two other ELSTAT employees on
Thursday, on evidence that they falsified the country’s 2009
fiscal data, a court official said.

The case stems from allegations by an ELSTAT employee who
was dismissed that Georgiou inflated the deficit numbers as part
of a German-led conspiracy to justify harsh austerity measures
to accompany a bailout.

Georgiou, a 52-year old veteran International Monetary Fund
statistician, said Greece’s decision to ask its international
partners for help was based on statistics produced by his
predecessors, long before he was put in charge of ELSTAT.

“It is striking that a criminal prosecution … did not take
place when Greek statistics were a constant source of concern,”
he said in a statement. “I will continue to apply the law,
despite the adversities.”

He has denied similar allegations in the past, describing
them an “unprecedented” case of statisticians being investigated
for producing figures under EU regulations.

The charges reopen last year’s domestic political row on
whether wrong fiscal data in late 2009 were to blame for forcing
Athens to seek an international bailout that has since swollen
to 240 billion euros – the biggest sovereign rescue in history.

In November 2010, shortly after Georgiou took over, the 2009
budget deficit was revised again to more than 15 percent of
gross domestic product from 13.6 percent, indicating the scale
of Greece’s fiscal derailment and deepening the country’s
crisis.

If convicted on charges of breach of faith – a crime that
usually applies to those who embezzle or misuse public funds -
Georgiou could face at least five years in jail.

With EU partners starting to praise Greek efforts to exit its worst crisis in decades and some economic indicators showing fledgling signs of recovery, demands are increasing on the government to give up crippling austerity and reforms.

“What scares me is the big pressure from society, media and parliamentary deputies from all parties to ease the programme. We must resist … it’s too early to declare victory,” he said from his office on Syntagma square overlooking parliament.

Stournaras, an economist recruited by Prime Minister Antonis Samaras’s conservative-led coalition after it won elections in June, said there were signs Greece was starting to exit the three-year debt crisis that shook the euro zone.

Money is returning to Greek banks, bond prices are rising and the 2013 primary budget will do better than the troika of international lenders predicted for the year, registering a 0.4 percent surplus, despite a crippling recession.

“The primary deficit is what we are judged on. The troika expects it at zero but we believe we will do slightly better,” he said. “This means that there is a good chance our partners may further reduce our debt.”

The International Monetary Fund agreed on Wednesday to pay the next aid tranche under the country’s 240-billion-euro international bailout and said Athens was moving in the right direction. But IMF chief Christine Lagarde urged it to do more to boost productivity and lower prices.

Greece’s euro area partners agreed last year to extend the maturities and reduce the interest on the nation’s bailout funds to help cut its debt mountain to a more sustainable level of 124 percent of GDP in 2020, from an estimated 173 percent this year.

More debt relief might follow if Greece hits its fiscal targets and posts a balanced budget in 2013, they said.

Stournaras ruled out this including another debt buyback and said there was no discussion of a haircut of the country’s debts to its euro area partners. Debt reduction may instead come in other ways such as cutting interest rates, he said.

He acknowledged unemployment, the euro area’s highest at 26.8 percent in October, would take longer to start declining and only after the economy starts to grow, which is expected in late 2013. GDP is expected to decline 4.5 percent this year, the country’s sixth consecutive year of contraction.

“Unemployment is our big thorn,” he said. “There is a time lag between GDP growth and unemployment decreasing and it’s a serious problem, both economic and social.”

A public fed up with waves of tax hikes and salary cuts has taken to the streets, in often violent protests, and lashed out at politicians they hold responsible for the crisis.

Stournaras, who served as chief economist for the socialist government that brought Greece into the single currency in 2001, said people must show patience and solidarity for one more year.

“We are facing a huge crisis, we have not yet left the hot zone of bankruptcy,” he said. “We are doing better but we can’t say that we have escaped all danger. The year 2013 will determine whether we will.”

GOOD NEWS

Greece expects to meet this year’s privatisation revenue target of 2.6 billion, with investor interest coming mainly from China and Russia for state companies going on the block, including natural gas distributor DEPA and gambling firm OPAP (OPAr.AT: Quote, Profile, Research, Stock Buzz), Stournaras said.

The banking sector has almost completed its consolidation through a wave of mergers and may not need all of the 50 billion set aside from Greece’s massive international bailout for bank recapitalization.

“Synergies from mergers have not been taken into account – National with Eurobank, Alpha with Emporiki, Piraeus with Agricultural and General. In the end, they may need less than 50 billion,” Stournaras said.

It will be more difficult to keep the lenders in private hands as investors seem reluctant to put up cash for the 10 percent requirement to avoid nationalization.

Stournaras said the government did not want to manage state banks but would take them over if needed, not to run but supervise them.

“If the crisis has taught us something, it’s that supervision was lacking,” said Stournaras, who has also served as head of Emporiki bank.

The minister dismissed concerns the shaky ruling coalition may buckle under pressure, saying Samaras and his junior leftist partners were fully committed. The government has seen its majority in parliament fall as deputies have been leaving in protest of harsh legislation.

But he said he was more fortunate than others in the government because, as a technocrat, he did not have to face a political cost.

“I’m not a politician and that’s an advantage in a crisis, Stournaras said. “Right now, I am under pressure from media, social groups, professional groups, special interest groups and even MPs on whatever you can imagine — not to shut down tax offices, to lower the tax on heating oil, to raise salaries, to relax the programme.

“I will not be the one to destroy what we have achieved with sweat and tears in the last six months,” he said. “Credibility is very hard to build and easy to lose.”

(Editing by Mike Peacock/Jeremy Gaunt)

With EU partners starting to praise Greek efforts to exit
its worst crisis in decades and some economic indicators showing
fledgling signs of recovery, demands are increasing on the
government to give up crippling austerity and reforms.

“What scares me is the big pressure from society, media and
parliamentary deputies from all parties to ease the programme.
We must resist … it’s too early to declare victory,” he said
from his office on Syntagma square overlooking parliament.

Stournaras, an economist recruited by Prime Minister Antonis
Samaras’s conservative-led coalition after it won elections in
June, said there were signs Greece was starting to exit the
three-year debt crisis that shook the euro zone.

Money is returning to Greek banks, bond prices are rising
and the 2013 primary budget will do better than the troika of
international lenders predicted for the year, registering a 0.4
percent surplus, despite a crippling recession.

“The primary deficit is what we are judged on. The troika
expects it at zero but we believe we will do slightly better,”
he said. “This means that there is a good chance our partners
may further reduce our debt.”

The International Monetary Fund agreed on Wednesday to pay
the next aid tranche under the country’s 240-billion-euro
international bailout and said Athens was moving in the right
direction. But IMF chief Christine Lagarde urged it to do more
to boost productivity and lower prices.

Greece’s euro area partners agreed last year to extend the
maturities and reduce the interest on the nation’s bailout funds
to help cut its debt mountain to a more sustainable level of 124
percent of GDP in 2020, from an estimated 173 percent this year.

More debt relief might follow if Greece hits its fiscal
targets and posts a balanced budget in 2013, they said.

Stournaras ruled out this including another debt buyback and
said there was no discussion of a haircut of the country’s debts
to its euro area partners. Debt reduction may instead come in
other ways such as cutting interest rates, he said.

He acknowledged unemployment, the euro area’s highest at
26.8 percent in October, would take longer to start declining
and only after the economy starts to grow, which is expected in
late 2013. GDP is expected to decline 4.5 percent this year, the
country’s sixth consecutive year of contraction.

“Unemployment is our big thorn,” he said. “There is a time
lag between GDP growth and unemployment decreasing and it’s a
serious problem, both economic and social.”

A public fed up with waves of tax hikes and salary cuts has
taken to the streets, in often violent protests, and lashed out
at politicians they hold responsible for the crisis.

Stournaras, who served as chief economist for the socialist
government that brought Greece into the single currency in 2001,
said people must show patience and solidarity for one more year.

“We are facing a huge crisis, we have not yet left the hot
zone of bankruptcy,” he said. “We are doing better but we can’t
say that we have escaped all danger. The year 2013 will
determine whether we will.”

GOOD NEWS

Greece expects to meet this year’s privatisation revenue
target of 2.6 billion, with investor interest coming mainly from
China and Russia for state companies going on the block,
including natural gas distributor DEPA and gambling firm OPAP
, Stournaras said.

The banking sector has almost completed its consolidation
through a wave of mergers and may not need all of the 50 billion
set aside from Greece’s massive international bailout for bank
recapitalisation.

“Synergies from mergers have not been taken into account -
National with Eurobank, Alpha with Emporiki, Piraeus with
Agricultural and General. In the end, they may need less than 50
billion,” Stournaras said.

It will be more difficult to keep the lenders in private
hands as investors seem reluctant to put up cash for the 10
percent requirement to avoid nationalisation.

Stournaras said the government did not want to manage state
banks but would take them over if needed, not to run but
supervise them.

“If the crisis has taught us something, it’s that
supervision was lacking,” said Stournaras, who has also served
as head of Emporiki bank.

The minister dismissed concerns the shaky ruling coalition
may buckle under pressure, saying Samaras and his junior leftist
partners were fully committed. The government has seen its
majority in parliament fall as deputies have been leaving in
protest of harsh legislation.

But he said he was more fortunate than others in the
government because, as a technocrat, he did not have to face a
political cost.

“I’m not a politician and that’s an advantage in a crisis,
Stournaras said. “Right now, I am under pressure from media,
social groups, professional groups, special interest groups and
even MPs on whatever you can imagine — not to shut down tax
offices, to lower the tax on heating oil, to raise salaries, to
relax the programme.

“I will not be the one to destroy what we have achieved with
sweat and tears in the last six moths,” he said. “Credibility is
very hard to build and easy to lose.”

(Editing by Mike Peacock/Jeremy Gaunt)

Police said a bullet pierced the window of the office that conservative Prime Minister Antonis Samaras maintains in the building near the city centre, but no one was hurt.

The early morning gun assault follows a spate of makeshift bomb attacks against journalists and political figures in the past week, some claimed by leftist groups angry at Greece’s deep financial crisis.

Greece is in the sixth year of a recession that has fuelled anger against foreign lenders and the political class, blamed by Greeks for bringing the country close to bankruptcy.

Addressing supporters outside his party office on Syngrou Avenue late on Monday, Samaras condemned the shooting.

“You can shoot a person or at building, as they did, but you cannot shoot democracy,” he said. “Let them hear it then, those who must: Democracy will not be terrorized.”

Political violence is not uncommon in Greece but deadly attacks are rare.

Officials said Samaras no longer uses his office on Syngrou Avenue and was not present at the time of the shooting.

“At about 3 a.m. (0100 GMT), guards saw two men coming out of a black car and firing with a Kalashnikov at the building, which was empty at the time,” said a police official speaking on condition of anonymity.

He said at least nine bullet casings were recovered from the scene and police were examining a burnt-out car found a few kilometers (miles) away. Anti-terrorism police cordoned off the area and were checking security cameras near the party building.

Government spokesman Simos Kedikoglou said even a symbolic attack on the prime minister was unheard of.

“This is a new, worrying escalation of the effort to create terror in our society,” he said.

SPATE OF ATTACKS

The recent attacks have targeted public figures. On Sunday, the Athens home of Kedikoglou’s brother was hit by a petrol bomb and three New Democracy offices in the city were targeted on Friday. No injuries were reported in the attacks.

Police blamed Sunday’s attack on far-left protesters angry at a police raid last week that cleared a squat popular with anti-establishment groups. About 100 people were arrested.

On Friday, a number of small homemade bombs exploded outside the Athens homes of five Greek journalists working for major media outlets. In an Internet statement, a group going by the name ‘Lovers of Lawlessness’ claimed responsibility, accusing the journalists of doing the bidding of politicians.

The conservative-led coalition government has imposed harsh tax hikes and salary cuts in its six months in power to secure vital international cash for Greece, where unemployment has reached about 27 percent and living standards have plunged.

The government says Syriza, the radical leftist main opposition party, tacitly backs anti-establishment groups and their attacks. Party spokesman Panos Skourletis denied that.

“This is certainly a dangerous escalation of terrorist attacks of blind violence, which are completely condemned by Syriza,” Skourletis said of Monday’s attack.

(Additional reporting by Lila Chotzoglou and Karolina Tagaris; Writing by Dina Kyriakidou; Editing by Jon Boyle and Louise Ireland)

Police said a bullet pierced the window of the office that conservative Prime Minister Antonis Samaras maintains in the building near the city centre, but no one was hurt.

The early morning gun assault follows a spate of makeshift bomb attacks against journalists and political figures in the past week, some claimed by leftist groups angry at Greece’s deep financial crisis.

Greece is in the sixth year of a recession that has fuelled anger against foreign lenders and the political class, blamed by Greeks for bringing the country close to bankruptcy.

Addressing supporters outside his party office on Syngrou Avenue late on Monday, Samaras condemned the shooting.

“You can shoot a person or at building, as they did, but you cannot shoot democracy,” he said. “Let them hear it then, those who must: Democracy will not be terrorised.”

Political violence is not uncommon in Greece but deadly attacks are rare.

Officials said Samaras no longer uses his office on Syngrou Avenue and was not present at the time of the shooting.

“At about 3 a.m. (0100 GMT), guards saw two men coming out of a black car and firing with a Kalashnikov at the building, which was empty at the time,” said a police official speaking on condition of anonymity.

He said at least nine bullet casings were recovered from the scene and police were examining a burnt-out car found a few kilometres (miles) away. Anti-terrorism police cordoned off the area and were checking security cameras near the party building.

Government spokesman Simos Kedikoglou said even a symbolic attack on the prime minister was unheard of.

“This is a new, worrying escalation of the effort to create terror in our society,” he said.

SPATE OF ATTACKS

The recent attacks have targeted public figures. On Sunday, the Athens home of Kedikoglou’s brother was hit by a petrol bomb and three New Democracy offices in the city were targeted on Friday. No injuries were reported in the attacks.

Police blamed Sunday’s attack on far-left protesters angry at a police raid last week that cleared a squat popular with anti-establishment groups. About 100 people were arrested.

On Friday, a number of small homemade bombs exploded outside the Athens homes of five Greek journalists working for major media outlets. In an Internet statement, a group going by the name ‘Lovers of Lawlessness’ claimed responsibility, accusing the journalists of doing the bidding of politicians.

The conservative-led coalition government has imposed harsh tax hikes and salary cuts in its six months in power to secure vital international cash for Greece, where unemployment has reached about 27 percent and living standards have plunged.

The government says Syriza, the radical leftist main opposition party, tacitly backs anti-establishment groups and their attacks. Party spokesman Panos Skourletis denied that.

“This is certainly a dangerous escalation of terrorist attacks of blind violence, which are completely condemned by Syriza,” Skourletis said of Monday’s attack.

(Additional reporting by Lila Chotzoglou and Karolina Tagaris; Writing by Dina Kyriakidou; Editing by Jon Boyle and Louise Ireland)

Police said a bullet pierced the window of the political office that conservative Prime Minister Antonis Samaras maintains in the building, but no-one was hurt.

The early morning gun assault follows a spate of makeshift bomb attacks against journalists and political figures in the past week, some claimed by leftist groups angry at Greece’s deep financial crisis.

Greece is in the sixth year of a recession that has fuelled anger against foreign lenders and the political class, blamed by Greeks for bringing the country close to bankruptcy.

Government spokesman Simos Kedikoglou condemned Monday’s shooting, saying even a symbolic attack on the prime minister was unheard of.

“This is a new, worrying escalation of the effort to create terror in our society,” he said.

Political violence is not uncommon in Greece but deadly attacks are rare.

Officials said Samaras no longer uses his party office on Syngrou Avenue near the center of Athens and was not present at the time of the shooting.

“At about 3 AM (0100 GMT), guards saw two men coming out of a black car and firing with a Kalashnikov at the building, which was empty at the time,” said a police official speaking on condition of anonymity.

He said at least nine bullet casings were recovered from the scene and police were examining a burnt-out car found a few kilometers away. Anti-terrorism police cordoned off the area and were checking security cameras near the party building.

SPATE OF ATTACKS

A spate of attacks recent have targeted public figures. On Sunday, the Athens home of Kedikoglou’s brother was hit by a petrol bomb and three New Democracy offices in Athens were targeted on Friday. No injuries were reported in the attacks.

Police blamed Sunday’s attack on far-left protesters angry at a police raid last week that cleared a squat popular with anti-establishment groups. About 100 people were arrested.

On Friday, a number of small homemade bombs exploded outside the Athens homes of five Greek journalists working for major media outlets. In an Internet statement, a group going by the name ‘Lovers of Lawlessness’ claimed responsibility, accusing the journalists of doing the bidding of politicians.

The conservative-led coalition government has imposed harsh tax hikes and salary cuts in its six months in power to secure vital international cash for Greece, where unemployment has reached about 27 percent and living standards have plunged.

The government says Syriza, the radical leftist main opposition party, tacitly backs anti-establishment groups and their attacks. Party spokesman Panos Skourletis denied that.

“This is certainly a dangerous escalation of terrorist attacks of blind violence, which are completely condemned by Syriza,” Skourletis said of Monday’s attack. (Additional reporting by Lila Chotzoglou; Writing by Dina Kyriakidou; Editing by Jon Boyle)

“We need a national collective effort: all of us have to carry the burden together,” announced Evangelos Venizelos, who has since become leader of the socialist party PASOK. “We need something that will be fair and socially acceptable.”

It was meant to be a call to arms; it ended up highlighting a key weakness in Greece’s attempts to reform.

Venizelos’ idea was a new tax on property, levied via electricity bills to make it hard to dodge. The public were furious and the press echoed the outrage, labelling the tax ‘haratsi’ after a hated levy the Ottomans once imposed on Greeks. The name stuck and George Papandreou, then prime minister, felt compelled to plead with voters: “Let’s all lose something so that we don’t lose everything.”

But not everyone would lose under the tax. Two months ago an electricity industry insider revealed that some of the biggest businesses in the land, including media groups, were paying less than half the full rate, or not paying the tax at all. Nikos Fotopoulos, a union leader at power company PPC, claimed they had been given exemptions.

“It was a gift to the real bosses, the real owners of the country,” he said. “The rich don’t pay, even at this time.”

This time the media made little fuss. “The news was not covered by the media … because media owners were among those favoured,” Fotopoulos said later. Leading daily newspapers in Athens either did not mention or downplayed his claims, a review by Reuters found.

To many observers the episode illustrates the interplay between politics, big business and powerful media owners. The interwoven interests of these sectors, though not necessarily illegal or improper, are seen as an obstacle to Greece’s attempts to rescue its economy. They are, say critics, partly to blame for the current crisis and for hindering reform.

Leading media owners contacted by Reuters denied exerting any improper influence or seeking favours, or did not respond to questions.

But given the international impact of Greece’s crisis, concerns now extend beyond the country. A source in the troika of lenders keeping Greece afloat – the European Union, International Money Fund and European Central Bank – said: “The system is extremely incestuous. The vested interests are resisting reforms needed to make the economy competitive.”

Opposite sides of the Greek political spectrum speak about the subject in colourful terms. “In Greece the real power is with the owners of banks, the members of the corrupt political system and the corrupt mass media. This is the triangle of sin,” said Alexis Tsipras, leader of Syriza, the main opposition.

Panos Kamenos, leader of the right-wing Independent Greeks party, said: “The Greek media is under the control of people who depend on the state. The media control the state and the state controls the media. It’s a picture of mutual blackmail.”

Others are more measured. Asked about the haratsi tax, Venizelos acknowledged there were some “blatant cases of paying less tax or none at all”, but blamed this on poor records held by the state-run electricity company. “In no way was there any discrimination in favour of specific property owners,” he said.

Simos Kedikoglou, a government spokesman, said officials were monitoring the property tax and any errors would be rectified.

Previous efforts to curb potential conflicts of interest – in particular relating to the media – have had little effect, according to a European Commission report on media freedom and independence, published in December 2011. It said Greek media policy “has remained highly centralised in the hands of the government of the day,” and that it “has been thoroughly influenced, albeit in opaque and informal ways, by powerful economic and business interests who have sought to gain power, profit, or both.”

RISE OF PRIVATE MEDIA

Interplay between politicians and the media is common in many European countries, notably in Italy where Silvio Berlusconi was both prime minister and head of a media group, and in the UK, where media owners such as Rupert Murdoch, chairman of News Corp, have had contacts with successive prime ministers.

But critics say such connections are particularly significant in Greece because the state plays a large role in the economy, and because of the way media has developed there.

Private radio stations and TV channels emerged only in the 1980s, after decades of state media control. As businessmen hurried into the fray, regulation was haphazard. Successive governments let broadcasters operate without proper licences, according to the 2011 EU report on Greek media. This semi-regulated approach led to Greece having a large number of media outlets for its population of 11 million.

In 2009 the country had 39 national daily newspapers, 23 national Sunday papers and 14 national weekly papers, according to an earlier EU study of media. Per capita, Greece has far more national newspaper titles than, say, Germany or the UK. The country also has nine national TV stations, six of them privately owned, and numerous private radio stations.

A 2006 cable from the U.S. Embassy in Athens, obtained by Wikileaks, noted: “How can all these media outlets operate profitably? They don’t. They are subsidised by their owners who, while they would welcome any income from media sales, use the media primarily to exercise political and economic influence.”

At the same time, much of the economy outside the shipping industry depends on state contracts or licences.

“Most companies in Greece are essentially waiting to get money from the state,” said Theodoros Roussopoulos, a former government press minister. “Greece is officially capitalist, but in effect socialist.”

Media owner Ioannis Alafouzos told Reuters that some of the media “are in effect press offices for business groups.” Alafouzos, whose family owns SKAI TV, Greece’s fifth largest station, and Kathimerini, a leading newspaper, added: “It’s developed into a completely unhealthy situation. The purpose of media has been largely to execute specific tasks for their owners.”

Alafouzos, whose wealth comes from shipping, said his family had been careful not to depend on government dealings. His critics say that SKAI was among the companies found to be paying no haratsi tax – an omission SKAI says was caused by local bureaucracy – and that his media interests benefit from state advertising. Alafouzos described the latter as a minimal proportion of his media interests’ revenue.

FAMILY CONNECTIONS

One nexus of interwoven interests is MEGA Channel, Greece’s biggest TV station, which is co-owned by businessmen who are leaders in, or have strong connections to, other sectors of the economy.

The biggest collective stake in the TV station is owned by members of the family of George Bobolas. One of his sons, Fotios, is a director of Teletypos, the channel’s holding company. Another son, Leonidas, is chief executive and a major shareholder of Ellaktor, a construction giant founded by his father that has participated in multi-billion euro contracts with the state. Leonidas has no stake in Teletypos.

The Bobolas family also controls Ethnos, a popular daily and Sunday newspaper, other print media and websites. From the large, grey headquarters of their publishing company in Halandri, a northern suburb of Athens, the extent of the family interests is evident. Nearby is the Athens ring-road, built by an international consortium that included Ellaktor. Alongside the road is a new railway line to the airport, also built with Bobolas involvement.

George Bobolas did not initially respond to questions about his family’s various interests. Instead, his newspaper Ethnos published several articles in the days after Reuters submitted questions to him. One alleged that Reuters “continues, it seems, to target our country, the Greek economy and entrepreneurship.” Another described Reuters as a “fifth column” for the troika and alleged that Athens was being flooded by foreigners out to “undertake the demolition of public figures according to Anglo-Saxon practices.”

After a further request from Reuters, Bobolas said in a letter: “I have never used the media owned by companies in which I participate, for the promotion of interests of the holding company Ellaktor S.A. … Newspaper Ethnos has never used influence or asked any favours from rulers, for the benefit of Ellaktor.”

Bobolas said former prime ministers could verify he had never asked for any favours and added: “One could say that Ethnos’ severe judgment on governmental actions and politicians in general, could be considered as obstacle and not help to Ellaktor’s corporate interests”.

In a written statement, construction firm Ellaktor said its subsidiaries engage in both private and public contracts, and that it pursues public contracts “by participating exclusively in open international tenders, in accordance with Greek and European legislation.”

Other figures involved in MEGA Channel include the family of Vardis Vardinoyannis, who is prominent in oil and shipping, and Stavros Psycharis, who controls the DOL media company.

George Vardinoyannis, son of Vardis, serves on MEGA Channel’s board, and the family also owns a smaller station called Star Channel. The family is also the major shareholder in Motor Oil Hellas, one of two Greek refinery operators.

In an email, a spokeswoman for the family said: “Most of our companies are based abroad or have an international exposure. The production and sales of Motor Oil Hellas refinery, our biggest investment in Greece, are consistently 70 percent export oriented … None of our companies rely in any way on government contracts or business.”

Psycharis, whose company DOL publishes leading newspapers and has won state contracts in education, culture, travel, and printing, is MEGA Channel’s chairman.

In 2006, he sued two investigative journalists who alleged on a radio programme that he lobbied for the sale of Eurofighters to Greece and had used his newspapers to promote the merits of a deal. Psycharis denied the allegations. Three years later, after a court hearing, his case was dismissed.

The court rejected one claim by the journalists, but accepted that Psycharis’ newspaper had campaigned for the Eurofighter deal. An appeal is pending. Psycharis did not respond to questions about the case.

In late November one of his newspapers chastised Apostolos Kaklamanis, a former speaker of the Greek parliament, who had told PASOK lawmakers that the era when oligarchs “appointed the party leader” had passed. Days after Kaklamanis spoke out, To Vima, a leading newspaper controlled by Psycharis, ran an article referring to his comments and promising to make allegedly embarrassing revelations about Kaklamanis.

Psycharis did not respond to questions about his media holdings or his wider interests.

Critics of links between media and business also cite the case of a gold mine project in Halkidiki, northern Greece. The mines were sold by the Greek government in 2003 to a newly-formed Greek mining company. Soon afterwards the construction firm in which the Bobolas family has an interest acquired a stake in it.

Local opponents campaigned vigorously against a licence for the mining project being granted, claiming it would harm the environment. Tolis Papageorgiou, a leading figure in the protest group Hellenic Mining Watch, alleged that newspapers controlled by the Bobolas family failed to report large demonstrations opposing the mine and vilified an environment minister, Tina Birbili, who blocked a licence for it.

“Just days into her new job in 2009 she became the target of media controlled by Bobolas because she refused to issue a licence to the mining company,” Papageorgiou alleged.

Soon after Birbili’s appointment in 2009, newspapers owned by the Bobolas family christened her “Green Tina” and criticised her performance. Reports said she was blocking many kinds of development. The articles did not mention that the newspapers’ owners had a family interest in the mine or the construction trade.

In his letter to Reuters, Bobolas said that Ethnos strongly supports large-scale projects that create employment and help the country recover from its economic crisis.

Birbili, who declined to comment for this article, was sacked in June 2011; a licence to operate the mine was subsequently granted. After it was issued, construction firm Ellaktor, according to its annual accounts, booked a profit of 261 million euros from partly selling off and partly revaluing its stake in a Canadian company that had by that time bought 95 percent of the mine.

A former aide to the Greek prime minister of the time said Birbili’s sacking was not related to the mine. The former environment minister who authorised the licence, George Papaconstantinou, said “the decision was made solely on the basis the environmental impact study”, which had been positive about the mine.

In his letter to Reuters, Bobolas said the only remaining connection his family has with the mine is his son’s indirect stake of less than one percent.

TWO HATS

In the media, potential conflicts of interest can arise even at low levels. Tucked away inside the headquarters of the Athens union of journalists, ESHEA, is a list of its members who work for the government, for example in press offices; dozens wear a second hat as newspaper journalists at the same time.

The union’s rules ban its members from working for bodies they cover as journalists. In an effort to unmask those breaching that rule, the union obtained a list of government-employed journalists in 2005. But it was never published.

Some of those named on the list complained; Greek officials judged that publishing the list would violate personal privacy. It was a decision that Dimitris Trimis, the union president, calls a serious defeat.

“There is a triangle of political powers, economic powers and media owners, and nobody can tell who has the upper hand,” he told Reuters, sitting under the dusty portraits of his predecessors. “It starts from the top, between the minister and the publisher, and it trickles down to the press office and the journalist. It’s a pyramid.”

One example, he said, was a TV studio set up in 2007 by the Agriculture Ministry to promote its activities. Although about 50 people, including political journalists, were hired, only a few had anything much to do, he said. “Many more than would be needed were hired and it was clear it was a perk,” Trimis said.

A spokesman for the ministry said the studio never employed full-time staff and that it closed in 2009.

Reuters has identified at least nine press officers for financial institutions who also write in the media, which has largely failed to report the need for the nation’s financial system to be reformed. The “double hatters” include Alexandros Kasimatis, a financial journalist at a Sunday newspaper, who also works as head of public relations for the Capital Markets Commission (CMC), a key financial regulator of listed companies. Reuters could find no articles by Kasimatis, who writes about companies but not the CMC, in which he declared his CMC role.

Kasimatis said: “It is not a conflict of interest. The Athens Journalists’ Union allows members to work at press offices provided they don’t cover who they work for. And I never write about the CMC.”

In an email to Reuters, Costas Botopoulos, chairman of the CMC, said Kasimatis’ two jobs were compatible.

Another journalist, who did not face direct conflicts of interest, was still nicknamed Ms Light-Water-Telephone by fellow journalists because she was said to work both for To Vima newspaper and three public utility companies. Ioanna Mandrou, who now works for Kathimerini and SKAI TV, confirmed she had worked in the press office of OTE, a state telecoms company, and briefly as a consultant to a state water company. She said she had not worked for an electricity company.

“In To Vima I was a reporter covering judicial affairs and that had nothing to do with my work in OTE. And when I say I ‘worked’ for OTE, I literally mean I worked,” she said. “I can tell you that around 95 percent of the people employed in similar jobs do nothing.”

She said it was common for politicians to arrange such jobs as favours.

Kedikoglou, the government spokesman, said members of the journalists’ union “have the right to work in state companies and as press officers under certain conditions and providing that they do not have conflicting interests.”

PROSPECTS FOR CHANGE

Over wine and kebabs on a cool October evening in 2004, then prime minister Costas Karamanlis declared war on powerful forces in Greek society.

“We will not let five pimps and five vested interests manipulate our political life,” he told conservative lawmakers invited for dinner at Bairaktaris taverna in Athens, according to people present at the meeting. He did not specify who he was referring to.

Karamanlis’ subsequent efforts to restrict access to state contracts by media owners were met with full-frontal attacks from the press. But in the end, defeat came from the European Commission: in 2005, it said Karamanlis’ plans violated EU competition rules, forcing him to scrap them.

Since then, no significant attempt has been made to tackle the interweaving of interests. Politicians who clash with media owners risk a bad press, according to one senior Greek politician who spoke to Reuters about his experiences when he was a minister in a former government. In one instance, he said, a media owner asked him to help stop a judicial investigation into the media owner’s affairs. And, in another, a newspaper publisher who owed a million euros to a state-owned company contacted him seeking a deal to escape the debt.

“He said ‘I will put an advert for the state-owned company every day in the paper to settle it.’ He expected me to call the company and make a deal. I refused to intervene,” said the ex-minister, who spoke on condition of anonymity. He said he was subsequently the subject of negative reports in the publisher’s paper.

The persistence of potential conflicts of interest is reflected in the latest Corruption Perceptions Index compiled by the campaign group Transparency International (TI). It ranked Greece 94th – 14 places lower than in 2011 and the lowest ranking of any euro zone country – and the group’s Greek branch concluded “there are significant structural issues with the executive, the media and the business sector.”

Kedikoglou, the government spokesman, said ministers now want to “normalise” broadcasting. The government intends to reform the regime of “provisional licences” and bring in “legislation that will permanently set the rules applying to the television market,” he said.

Even without legislation, the landscape is changing. By 2013 Greece’s economy will have dwindled by a quarter in five years. Financial pressures have intensified. Advertising has shrunk and a Reuters study of recently-published accounts shows the top 18 Athens-based media companies have declared debts totalling more than 2 billion euros.

At the same time the international lenders keeping Greece afloat want real reform in exchange for their billions. They are, for example, demanding that trustees appointed by the troika sit on bank boards and have the final say in approving major loans, including those to media organisations.

The newspapers Ethnos and To Vima reacted to that proposal with scathing editorials. “Greece is not a colony,” wrote Psycharis in a front page article in To Vima. “I address those who think that what the Third Reich failed to do will now be achieved by Europe’s money peddlers.” (Additional reporting by Nikolas Leontopoulos and Costas Pitas; Editing by Richard Woods and Simon Robinson)

“We need a national collective effort: all of us have to carry the burden together,” announced Evangelos Venizelos, who has since become leader of the socialist party PASOK. “We need something that will be fair and socially acceptable.”

It was meant to be a call to arms; it ended up highlighting a key weakness in Greece’s attempts to reform.

Venizelos’ idea was a new tax on property, levied via electricity bills to make it hard to dodge. The public were furious and the press echoed the outrage, labeling the tax ‘haratsi’ after a hated levy the Ottomans once imposed on Greeks. The name stuck and George Papandreou, then prime minister, felt compelled to plead with voters: “Let’s all lose something so that we don’t lose everything.”

But not everyone would lose under the tax. Two months ago an electricity industry insider revealed that some of the biggest businesses in the land, including media groups, were paying less than half the full rate, or not paying the tax at all. Nikos Fotopoulos, a union leader at power company PPC, claimed they had been given exemptions.

“It was a gift to the real bosses, the real owners of the country,” he said. “The rich don’t pay, even at this time.”

This time the media made little fuss. “The news was not covered by the media … because media owners were among those favored,” Fotopoulos said later. Leading daily newspapers in Athens either did not mention or downplayed his claims, a review by Reuters found.

To many observers the episode illustrates the interplay between politics, big business and powerful media owners. The interwoven interests of these sectors, though not necessarily illegal or improper, are seen as an obstacle to Greece’s attempts to rescue its economy. They are, say critics, partly to blame for the current crisis and for hindering reform.

Leading media owners contacted by Reuters denied exerting any improper influence or seeking favors, or did not respond to questions.

But given the international impact of Greece’s crisis, concerns now extend beyond the country. A source in the troika of lenders keeping Greece afloat – the European Union, International Money Fund and European Central Bank – said: “The system is extremely incestuous. The vested interests are resisting reforms needed to make the economy competitive.”

Opposite sides of the Greek political spectrum speak about the subject in colorful terms. “In Greece the real power is with the owners of banks, the members of the corrupt political system and the corrupt mass media. This is the triangle of sin,” said Alexis Tsipras, leader of Syriza, the main opposition.

Panos Kamenos, leader of the right-wing Independent Greeks party, said: “The Greek media is under the control of people who depend on the state. The media control the state and the state controls the media. It’s a picture of mutual blackmail.”

Others are more measured. Asked about the haratsi tax, Venizelos acknowledged there were some “blatant cases of paying less tax or none at all”, but blamed this on poor records held by the state-run electricity company. “In no way was there any discrimination in favor of specific property owners,” he said.

Simos Kedikoglou, a government spokesman, said officials were monitoring the property tax and any errors would be rectified.

Previous efforts to curb potential conflicts of interest – in particular relating to the media – have had little effect, according to a European Commission report on media freedom and independence, published in December 2011. It said Greek media policy “has remained highly centralized in the hands of the government of the day,” and that it “has been thoroughly influenced, albeit in opaque and informal ways, by powerful economic and business interests who have sought to gain power, profit, or both.”

RISE OF PRIVATE MEDIA

Interplay between politicians and the media is common in many European countries, notably in Italy where Silvio Berlusconi was both prime minister and head of a media group, and in the UK, where media owners such as Rupert Murdoch, chairman of News Corp, have had contacts with successive prime ministers.

But critics say such connections are particularly significant in Greece because the state plays a large role in the economy, and because of the way media has developed there.

Private radio stations and TV channels emerged only in the 1980s, after decades of state media control. As businessmen hurried into the fray, regulation was haphazard. Successive governments let broadcasters operate without proper licenses, according to the 2011 EU report on Greek media. This semi-regulated approach led to Greece having a large number of media outlets for its population of 11 million.

In 2009 the country had 39 national daily newspapers, 23 national Sunday papers and 14 national weekly papers, according to an earlier EU study of media. Per capita, Greece has far more national newspaper titles than, say, Germany or the UK. The country also has nine national TV stations, six of them privately owned, and numerous private radio stations.

A 2006 cable from the U.S. Embassy in Athens, obtained by Wikileaks, noted: “How can all these media outlets operate profitably? They don’t. They are subsidized by their owners who, while they would welcome any income from media sales, use the media primarily to exercise political and economic influence.”

At the same time, much of the economy outside the shipping industry depends on state contracts or licenses.

“Most companies in Greece are essentially waiting to get money from the state,” said Theodoros Roussopoulos, a former government press minister. “Greece is officially capitalist, but in effect socialist.”

Media owner Ioannis Alafouzos told Reuters that some of the media “are in effect press offices for business groups.” Alafouzos, whose family owns SKAI TV, Greece’s fifth largest station, and Kathimerini, a leading newspaper, added: “It’s developed into a completely unhealthy situation. The purpose of media has been largely to execute specific tasks for their owners.”

Alafouzos, whose wealth comes from shipping, said his family had been careful not to depend on government dealings. His critics say that SKAI was among the companies found to be paying no haratsi tax – an omission SKAI says was caused by local bureaucracy – and that his media interests benefit from state advertising. Alafouzos described the latter as a minimal proportion of his media interests’ revenue.

FAMILY CONNECTIONS

One nexus of interwoven interests is MEGA Channel, Greece’s biggest TV station, which is co-owned by businessmen who are leaders in, or have strong connections to, other sectors of the economy.

The biggest collective stake in the TV station is owned by members of the family of George Bobolas. One of his sons, Fotios, is a director of Teletypos, the channel’s holding company. Another son, Leonidas, is chief executive and a major shareholder of Ellaktor, a construction giant founded by his father that has participated in multi-billion euro contracts with the state. Leonidas has no stake in Teletypos.

The Bobolas family also controls Ethnos, a popular daily and Sunday newspaper, other print media and websites. From the large, grey headquarters of their publishing company in Halandri, a northern suburb of Athens, the extent of the family interests is evident. Nearby is the Athens ring-road, built by an international consortium that included Ellaktor. Alongside the road is a new railway line to the airport, also built with Bobolas involvement.

George Bobolas did not initially respond to questions about his family’s various interests. Instead, his newspaper Ethnos published several articles in the days after Reuters submitted questions to him. One alleged that Reuters “continues, it seems, to target our country, the Greek economy and entrepreneurship.” Another described Reuters as a “fifth column” for the troika and alleged that Athens was being flooded by foreigners out to “undertake the demolition of public figures according to Anglo-Saxon practices.”

After a further request from Reuters, Bobolas said in a letter: “I have never used the media owned by companies in which I participate, for the promotion of interests of the holding company Ellaktor S.A. … Newspaper Ethnos has never used influence or asked any favors from rulers, for the benefit of Ellaktor.”

Bobolas said former prime ministers could verify he had never asked for any favors and added: “One could say that Ethnos’ severe judgment on governmental actions and politicians in general, could be considered as obstacle and not help to Ellaktor’s corporate interests”.

In a written statement, construction firm Ellaktor said its subsidiaries engage in both private and public contracts, and that it pursues public contracts “by participating exclusively in open international tenders, in accordance with Greek and European legislation.”

Other figures involved in MEGA Channel include the family of Vardis Vardinoyannis, who is prominent in oil and shipping, and Stavros Psycharis, who controls the DOL media company.

George Vardinoyannis, son of Vardis, serves on MEGA Channel’s board, and the family also owns a smaller station called Star Channel. The family is also the major shareholder in Motor Oil Hellas, one of two Greek refinery operators.

In an email, a spokeswoman for the family said: “Most of our companies are based abroad or have an international exposure. The production and sales of Motor Oil Hellas refinery, our biggest investment in Greece, are consistently 70 percent export oriented … None of our companies rely in any way on government contracts or business.”

Psycharis, whose company DOL publishes leading newspapers and has won state contracts in education, culture, travel, and printing, is MEGA Channel’s chairman.

In 2006, he sued two investigative journalists who alleged on a radio program that he lobbied for the sale of Eurofighters to Greece and had used his newspapers to promote the merits of a deal. Psycharis denied the allegations. Three years later, after a court hearing, his case was dismissed.

The court rejected one claim by the journalists, but accepted that Psycharis’ newspaper had campaigned for the Eurofighter deal. An appeal is pending. Psycharis did not respond to questions about the case.

In late November one of his newspapers chastised Apostolos Kaklamanis, a former speaker of the Greek parliament, who had told PASOK lawmakers that the era when oligarchs “appointed the party leader” had passed. Days after Kaklamanis spoke out, To Vima, a leading newspaper controlled by Psycharis, ran an article referring to his comments and promising to make allegedly embarrassing revelations about Kaklamanis.

Psycharis did not respond to questions about his media holdings or his wider interests.

Critics of links between media and business also cite the case of a gold mine project in Halkidiki, northern Greece. The mines were sold by the Greek government in 2003 to a newly-formed Greek mining company. Soon afterwards the construction firm in which the Bobolas family has an interest acquired a stake in it.

Local opponents campaigned vigorously against a license for the mining project being granted, claiming it would harm the environment. Tolis Papageorgiou, a leading figure in the protest group Hellenic Mining Watch, alleged that newspapers controlled by the Bobolas family failed to report large demonstrations opposing the mine and vilified an environment minister, Tina Birbili, who blocked a license for it.

“Just days into her new job in 2009 she became the target of media controlled by Bobolas because she refused to issue a license to the mining company,” Papageorgiou alleged.

Soon after Birbili’s appointment in 2009, newspapers owned by the Bobolas family christened her “Green Tina” and criticized her performance. Reports said she was blocking many kinds of development. The articles did not mention that the newspapers’ owners had a family interest in the mine or the construction trade.

In his letter to Reuters, Bobolas said that Ethnos strongly supports large-scale projects that create employment and help the country recover from its economic crisis.

Birbili, who declined to comment for this article, was sacked in June 2011; a license to operate the mine was subsequently granted. After it was issued, construction firm Ellaktor, according to its annual accounts, booked a profit of 261 million euros from partly selling off and partly revaluing its stake in a Canadian company that had by that time bought 95 percent of the mine.

A former aide to the Greek prime minister of the time said Birbili’s sacking was not related to the mine. The former environment minister who authorized the license, George Papaconstantinou, said “the decision was made solely on the basis the environmental impact study”, which had been positive about the mine.

In his letter to Reuters, Bobolas said the only remaining connection his family has with the mine is his son’s indirect stake of less than one percent.

TWO HATS

In the media, potential conflicts of interest can arise even at low levels. Tucked away inside the headquarters of the Athens union of journalists, ESHEA, is a list of its members who work for the government, for example in press offices; dozens wear a second hat as newspaper journalists at the same time.

The union’s rules ban its members from working for bodies they cover as journalists. In an effort to unmask those breaching that rule, the union obtained a list of government-employed journalists in 2005. But it was never published.

Some of those named on the list complained; Greek officials judged that publishing the list would violate personal privacy. It was a decision that Dimitris Trimis, the union president, calls a serious defeat.

“There is a triangle of political powers, economic powers and media owners, and nobody can tell who has the upper hand,” he told Reuters, sitting under the dusty portraits of his predecessors. “It starts from the top, between the minister and the publisher, and it trickles down to the press office and the journalist. It’s a pyramid.”

One example, he said, was a TV studio set up in 2007 by the Agriculture Ministry to promote its activities. Although about 50 people, including political journalists, were hired, only a few had anything much to do, he said. “Many more than would be needed were hired and it was clear it was a perk,” Trimis said.

A spokesman for the ministry said the studio never employed full-time staff and that it closed in 2009.

Reuters has identified at least nine press officers for financial institutions who also write in the media, which has largely failed to report the need for the nation’s financial system to be reformed. The “double hatters” include Alexandros Kasimatis, a financial journalist at a Sunday newspaper, who also works as head of public relations for the Capital Markets Commission (CMC), a key financial regulator of listed companies. Reuters could find no articles by Kasimatis, who writes about companies but not the CMC, in which he declared his CMC role.

Kasimatis said: “It is not a conflict of interest. The Athens Journalists’ Union allows members to work at press offices provided they don’t cover who they work for. And I never write about the CMC.”

In an email to Reuters, Costas Botopoulos, chairman of the CMC, said Kasimatis’ two jobs were compatible.

Another journalist, who did not face direct conflicts of interest, was still nicknamed Ms Light-Water-Telephone by fellow journalists because she was said to work both for To Vima newspaper and three public utility companies. Ioanna Mandrou, who now works for Kathimerini and SKAI TV, confirmed she had worked in the press office of OTE, a state telecoms company, and briefly as a consultant to a state water company. She said she had not worked for an electricity company.

“In To Vima I was a reporter covering judicial affairs and that had nothing to do with my work in OTE. And when I say I ‘worked’ for OTE, I literally mean I worked,” she said. “I can tell you that around 95 percent of the people employed in similar jobs do nothing.”

She said it was common for politicians to arrange such jobs as favors.

Kedikoglou, the government spokesman, said members of the journalists’ union “have the right to work in state companies and as press officers under certain conditions and providing that they do not have conflicting interests.”

PROSPECTS FOR CHANGE

Over wine and kebabs on a cool October evening in 2004, then prime minister Costas Karamanlis declared war on powerful forces in Greek society.

“We will not let five pimps and five vested interests manipulate our political life,” he told conservative lawmakers invited for dinner at Bairaktaris taverna in Athens, according to people present at the meeting. He did not specify who he was referring to.

Karamanlis’ subsequent efforts to restrict access to state contracts by media owners were met with full-frontal attacks from the press. But in the end, defeat came from the European Commission: in 2005, it said Karamanlis’ plans violated EU competition rules, forcing him to scrap them.

Since then, no significant attempt has been made to tackle the interweaving of interests. Politicians who clash with media owners risk a bad press, according to one senior Greek politician who spoke to Reuters about his experiences when he was a minister in a former government. In one instance, he said, a media owner asked him to help stop a judicial investigation into the media owner’s affairs. And, in another, a newspaper publisher who owed a million euros to a state-owned company contacted him seeking a deal to escape the debt.

“He said ‘I will put an advert for the state-owned company every day in the paper to settle it.’ He expected me to call the company and make a deal. I refused to intervene,” said the ex-minister, who spoke on condition of anonymity. He said he was subsequently the subject of negative reports in the publisher’s paper.

The persistence of potential conflicts of interest is reflected in the latest Corruption Perceptions Index compiled by the campaign group Transparency International (TI). It ranked Greece 94th – 14 places lower than in 2011 and the lowest ranking of any euro zone country – and the group’s Greek branch concluded “there are significant structural issues with the executive, the media and the business sector.”

Kedikoglou, the government spokesman, said ministers now want to “normalize” broadcasting. The government intends to reform the regime of “provisional licenses” and bring in “legislation that will permanently set the rules applying to the television market,” he said.

Even without legislation, the landscape is changing. By 2013 Greece’s economy will have dwindled by a quarter in five years. Financial pressures have intensified. Advertising has shrunk and a Reuters study of recently-published accounts shows the top 18 Athens-based media companies have declared debts totaling more than 2 billion euros.

At the same time the international lenders keeping Greece afloat want real reform in exchange for their billions. They are, for example, demanding that trustees appointed by the troika sit on bank boards and have the final say in approving major loans, including those to media organizations.

The newspapers Ethnos and To Vima reacted to that proposal with scathing editorials. “Greece is not a colony,” wrote Psycharis in a front page article in To Vima. “I address those who think that what the Third Reich failed to do will now be achieved by Europe’s money peddlers.”

(Additional reporting by Nikolas Leontopoulos and Costas Pitas; Editing by Richard Woods and Simon Robinson)