Greek political parties to testify over bank loans

Greek prosecutors have ordered the two main ruling parties to testify in an investigation into more than 200 million euros in loans they received from banks, officials said on Friday.

The investigation - which is examining whether the loans are legal and whether any wrongdoing was involved - could embarrass the fragile conservative-led government, which relies on aid from the European Union and the International Monetary Fund.

Last year a Reuters report revealed the conservative New Democracy and the Socialist PASOK parties were close to being overwhelmed by debts of more than 200 million euros as they face a slump in state funding because of falling public support.

Senior officials from the two parties will appear before financial crime prosecutors on February 18, court officials said.

"They will be investigated for suspected crimes against the state," said a court official who declined to be named. The prosecutors are also looking into the finances of the Communist KKE party, the court official said.

A PASOK official confirmed the party had been asked to testify, but declined to comment on the case.

Prime Minister Antonis Samaras' New Democracy party did not immediately respond to a call for comment. The party has previously said the bulk of its loans were being paid on time, and only a small part of the loans may have become late or non-performing.

Like other EU parties, Greek parties get state funding depending on their share of the vote. Relying on strong results in the past, New Democracy and the Socialist PASOK had pledged future state funding as collateral for bank loans.

Banking sources familiar with the issue told Reuters in September that the two parties combined owe 232 million euros to Greek banks and some of the loans are going unpaid.

In a June vote, support for the two parties which have dominated Greek politics for decades collapsed, leaving them with loans and facing much smaller incomes. PASOK saw its support plunge from 43 percent to 12 percent, while New Democracy's share fell from 33 percent to 29 percent.

Greece, which is implementing austerity measures demanded by its foreign lenders in return for aid to keep afloat, spent 65 million euros in 2010 and 54 million euros in 2011 to fund parties. In 2012, the two ruling parties received 11 million euros, based on the results of the 2009 election.

(Reporting by Renee Maltezou; Editing by Stephen Powell)