Greece is in deep trouble. The government is broke, the people are rioting in the streets, and the country’s days in the Eurozone are numbered. But Greece’s ruling political parties are now facing a financial crisis that really hits them where it hurts: they’re nearly bankrupt.In Greece, political parties receive state funding based on their performance in national elections and are often able to take out loans backed by the promise of future state funds. Now that their electoral fortunes are falling, so too is their funding, putting them in serious debt to the country’s banks.Not surprisingly, this has many worried about potential conflicts of interest, as the governing parties are looking to restructure a banking system to which they are heavily indebted. Reuters has the details:
The parties’ debts raise questions about potential conflicts of interest because the government is in hock to a financial system that it also needs to reform. . .Leandros Rakintzis, Greece’s independent inspector-general of public administration, believes the financial crunch the two big parties face is proof that Greece’s political funding system is flawed. “This is all about the exchange of favors,” he said. “These parties cannot pay the debt so it’s a vicious circle in which they come to depend on the banks. It creates an interdependence of politicians and banks.”
This state-funded system combines the worst of all worlds. In a society notorious for political corruption and sclerotic government, this system is wide open for abuse by unscrupulous politicians. If the parties’ finances get desperate enough that they are forced to choose between their finances and the good of the country, things could get ugly very quickly.