Euro crisis feeds corruption as Greece slides in rankings

The European debt crisis has given way to a new wave of corruption as some of the most hard-hit countries in the turmoil have tumbled in an annual graft ranking, watchdog group Transparency International said.

Greece, in its fifth year of recession and crippled by rounds of austerity, fell to 94th place from 80th — ranking it below Colombia and Liberia, according to the group’s Corruption Perceptions Index. Ireland, Austria, Malta and Italy were also among member states in the single currency to slide.

“Transparency International has consistently warned Europe to address corruption risks in the public sector to tackle the financial crisis, calling for strengthened efforts to corruption-proof public institutions,” the Berlin-based group said in a statement accompanying its annual report.

A resolution to the crisis entering its fourth year continues to elude European leaders as a German-led strategy of scaling back public deficits has retreated amid recessions and economic hardship. The crisis has been accompanied by scandals such as tax-crime allegations in Greece and Italian corruption investigations that brought down two regional governments.

Austria slid nine levels in the ranking to 25th, tying with Ireland, which dropped from 19th place after slipping five rungs last year. Italy, the second-worst ranked among euro-area nations, fell another three to 72rd place.

Best, Worst

Denmark, Finland and New Zealand held on to their top slots in the ranking, while Afghanistan, North Korea and Somalia remained at the bottom, in 174th place. The index has become a benchmark gauge of perceptions of a country’s corruption, an assessment of risks used by analysts and investors.

In addition to its status as the birthplace of the euro- area debt crisis, Greece is ranked the most corrupt country in the 27-nation European Union. Policy makers trying to tackle the country’s mounting debt have also focused on its broken revenue system as the government attempts to track down tax evaders. Total unpaid taxes in the country amounted to 42 billion euros, the Finance Ministry said in September 2011.

Greece in September froze bank accounts, shares and properties in 121 tax evasion cases, with Finance Minister Yannis Stournaras saying that “tolerance of tax evaders, no matter how high up they are, is over.”

In Italy, probes this year toppled regional governments in Lombardy and Lazio, home to Milan and Rome, respectively. Former Prime Minister Silvio Berlusconi, whose party members ran the two defunct regional administrations, was convicted by a Milan court in October on unrelated tax fraud charges and sentenced to four years in prison. Berlusconi, a billionaire media magnate, remains free as his lawyers prepare an appeal.

Austrian Prosecutions

Austria has been gripped by a series of high-profile corruption cases, many linked to the previous government that ruled from 2000 to 2007 and backed by the late populist politician Joerg Haider. They were exposed by the financial crisis, investigative reporters and stepped-up prosecutions.

The U.S. jumped five points on the index, now ranking 19th, two points behind the U.K., which slid a slot. Russia, which has the worst score of any country in the Group of 20 most- industrialized countries, climbed 10 spots to 133.

Egypt, where President Mohamed Mursi adopted sweeping powers last month and faces protests over a draft constitution that he approved, dropped six levels to 118th after plummeting 14 places last year. China lost five points to 80th place.

“Governments need to integrate anti-corruption actions into all public decision-making,” Huguette Labelle, Transparency International’s chief, said in a statement. “Priorities include better rules on lobbying and political financing, making public spending and contracting more transparent and making public bodies more accountable.”

The index is an aggregate indicator that combines data from 13 different surveys assembled by independent institutions, including country experts and business leaders. Transparency International used a new methodology this year that changes the way data are handled and rates countries from zero to 100, the highest number being the least corrupt. Finland has a score of 90, while Somalia had eight.

[Bloomberg]