x Abu Dhabi, UAEFriday 28 July 2017

Greece appoints terror prosecutor to pull back tax fraud

Struggling Greece has turned to a prominent former terrorism prosecutor to crackdown on tax evasion.

Greece will rely on a prominent former terrorism prosecutor to fulfil its promise of raising an additional €11.8 billion (Dh62.06bn) by the end of 2013 through a crackdown on tax evasion.

And the cash-strapped country has indicated it could seek a second extension of its bailout loan repayment.

George Papaconstantinou, the Greek finance minister, announced the tax crackdown last Monday, a year after his country was granted a bailout loan package worth €110bn from the EU and IMF to rescue it from the brink of default.

Mr Papaconstantinou also suggested Athens would welcome a second extension in the repayment schedule for the loan. "I expressed the hope that we could have an even better arrangement regarding the repayment of the €110bn," he said of comments he made to the French newspaper Liberation.

In the interview published last Monday, the minister said Athens wanted the repayment schedule to "be pushed back again and that the interest rate be lowered even more … that way, we could deal with our other deadlines".

Greece has already had the repayment time for the bailout loans extended to seven and a half from three years, and the average interest rate cut by one percentage point to about 4 per cent. But with the economy still contracting, the debt remains so hefty many observers think the country would be better off looking at ways of cutting the overall amount it owes.

In the meantime, Greece is trying to raise as much money as it can. Its new measures were announced in the week that EU and IMF debt inspectors were due in Athens.

The inspectors have warned Greece needs to improve its tax system to end a weak run in state revenues that is threatening the country's fiscal rescue programme.

Mr Papaconstantinou said Greece was in talks with Swiss authorities to monitor the country's deposits. The deal, he said, would resemble a recent agreement between the UK and Switzerland that allows Britons with Swiss bank accounts to send taxes home while keeping their privacy.

Other measures include creating a division of fraud inspectors and appointing a former senior prosecutor who handled terrorism cases to assist with tax collection. The retired prosecutor Yiannis Diotis led the case against Greece's deadly far-left terror group November 17, which resulted in the conviction of 15 suspected members in 2003.

"Tax evasion is a crime against the country," Mr Papaconstantinou said, noting the measures include tougher penalties for bribing tax officials, a radical reorganisation of the tax-office and increased use of online tax services. "This is the first time ever that such a systematic effort has been undertaken."

The country's black economy is worth about a third of its GDP, according to estimates by Greek financial research groups, the EU and the Organisation for Economic Co-operation and Development.

With the nation's debt running at 142.8 per cent of GDP last year, or €328bn, many analysts and politicians in Europe have said Greece will inevitably have to restructure its debt at some point.

A restructuring could involve cutting the total amount of money Greece owes or giving it a lot more time to repay, but the government and the EU are adamant that is not on the cards. Debt restructuring for Greece "is not part of our strategy and will not be", the EU's top economic affairs commissioner Olli Rehn said last Monday.

Mr Rehn said proponents of restructuring appear to be unaware of the risks to overall financial stability such a move would entail.

European officials have warned a restructuring of Greek debt could lead to panic on financial markets similar to that after the collapse of Lehman Brothers in 2008, dragging down banks and other struggling euro-zone countries.

Mr Papaconstantinou repeated one more time that the country was not seeking a restructure.

"We have said repeatedly, and we continue to say, there will be no restructuring of the Greek debt," he said.

* additional reporting by Elena Becatoros, Gabriele Steinhauser and Jamey Keaten

* Associated Press