UK Markets close in 8 hrs 26 mins

Greece Tax Evasion Claims Debated By MPs

(c) Sky News 2013

Greece's parliament has become embroiled in a huge tax scandal, which risks implicating two former prime ministers and two ex-finance ministers.

Politicians are due to vote on whether the four should be investigated and possibly prosecuted for allegedly covering up tax cheats in the biggest tax evasion scandal in decades.

The vote spawns from allegations of fraud and breach of duty levelled against socialist politician George Papaconstantinou while at the helm of the country's finance ministry three years ago.

On December 28, Mr Papaconstantinou was accused of masking the names of three of his relatives from a list of wealthy Greeks with more than $2bn (£1.25bn) in savings deposited in an HSBC (LSE: HSBA.L - news) bank in Geneva, Switzerland.

Mr Papaconstantinou was the former finance minister who became the country's most unpopular politician after negotiating Greece's first international bailout and enforcing a first wave of brutal budget cuts and tax hikes.

The bank account holders include his cousin, blue chip corporate lawyer Eleni Papaconstantinou, whose joint account with her husband holds $1.2m (£750,000). Also implicated is Ms Papaconstantinou's sister's spouse, who is an arms dealer. All have denied wrongdoing.

Mr Papaconstantinou has also denied the charges, arguing that he never knew his relatives were among the list of contentious tax cheats and that he never deleted their names from a compact disc.

He received the CD in 2010 from his then French counterpart, Christine Lagarde, who is now head of the International Monetary Fund.

However Mr Papaconstantinou subsequently conceded that he lost the CD after making a copy he later provided to the head of the financial police to pursue.

The former finance minister, who was expelled from the socialist Pasok party last month, was due to testify before parliament on Thursday, together with his replacement Evangelos Venizelos, the then prime minister George Papandreou and his successor Lucas Papademos.

All are implicated for allegedly covering up the worst tax scandal in decades.

With Greece's financial crisis deepening nearly four years since it erupted and Greeks still reeling from continued austerity, the allegations have stoked further public distrust of elites and the political system.

Neither the two administrations that followed the Papandreou government, nor the brief government led by technocrat Lucas Papademos last year, failed to expose alleged billionaire tax cheats.

No one on the Lagarde list has been charged, let alone investigated.

Politicians looked poised to further probe allegations surrounding Mr Papaconstantinou. Whether they agree to push Mr Venizelos into a similar investigation could put the ruling coalition into serious jeopardy.

"The rest of the world has largely ignored this latest twist of the plot in Greece," Megan Greene, a leading economist at Roubini Global Economics, said.

"Not only does (the scandal) demonstrate the kind of institutional failure that has landed the country in so much trouble, but it could also mark the beginning of the end for the current coalition government - and possibly for Greece's euro-area membership, as well."

Politician Evangelos Venizelos, a canny constitutional lawyer, surged to the helm of the Pasok party in 2011, later latching on to the government as a partner to the conservative-led coalition that was stitched together last year - after two divisive elections in May and June.

"Let this debate begin," Mr Venizelos roared in parliament on Thursday.

"Let it become clear that this is an organised political plot bent on harming Pasok, the government and the stability of the country."