Greece "No Mud Touches Me"

By William R. Doerner

The corruption charges that have been scorching Greek politics engulfed Prime Minister Andreas Papandreou last week in the worst crisis of his tenure. Papandreou found himself compelled to rebut allegations by the central figure in the multimillion-dollar banking scandal that the Prime Minister personally received some of those millions as secret payments for political favor. The accusations, which ran in TIME and as a cover story in several of the magazine's foreign editions, inspired passionate outcry in Greece and provoked opposition leaders in Parliament to demand the Prime Minister's resignation.

The charges came from George Koskotas, 34, imprisoned owner of the Bank of Crete and onetime crony of the ruling elite of the Socialist Party (PASOK). Koskotas, now a fugitive from Greece, is accused of looting his bank of more than $210 million. In jail in Massachusetts and facing extradition, Koskotas told TIME that much of the missing money was used to make regular payoffs to PASOK officials.

In Athens the Prime Minister fought back by accusing his political and "foreign" opponents of conspiring to overthrow him. Looking drawn and nervous, Papandreou defended himself in a 15-minute televised address to the nation. He dismissed Koskotas' "despicable allegations" as part of an "unprecedented political conspiracy" aimed at destroying "Papandreou, the government, democracy and the independence of the country" to restore a "regime of dependence and subjugation." In fact, declared Papandreou, "not a trace of the mud flying from all sides touches me." He went on to claim that he had spared no effort in making the "truth shine." Finally, said the Prime Minister, as an "offended citizen," he had authorized his lawyers to file a suit against TIME in Greece and elsewhere.

Papandreou's staunch denial of wrongdoing did not prevent rival politicians from calling for his resignation. "He is becoming a laughingstock with his repeated theories about plots," said Constantine Mitsotakis, head of the conservative New Democracy Party. Two members of the Prime Minister's own PASOK party, both former ministers, also called on Papandreou to step aside -- so far the only signs of internal revolt.

Meanwhile, the spreading scandal continued to collect victims. Yannis Mantzouranis, former secretary to the Greek Cabinet and a Koskotas confidant, was arrested on allegations that he received $2 million from Koskotas in a Swiss bank account. Also jailed was Panayotis Vournas, general manager of the postal service. He was charged with depositing 7 billion drachmas (nearly $50 million) in the Bank of Crete in an attempt to shore it up shortly before the scandal broke last fall.

As opposition parties planned mass street rallies to force Papandreou's resignation, Parliament was debating a motion of no confidence that would bring about new elections. But most political observers predicted that Papandreou would weather the vote, set for early this week. His political fate is not likely to be settled until Greece holds scheduled elections in June, and the outlook for the beleaguered Prime Minister then is considerably more problematic.

With reporting by Mirka Gondicas/Athens