BUSINESS

Numbers have always told the story

NICK MALKOUTZIS

TAGS: Analysis, Economy

Before man ever wrote words to record his thoughts, he used symbols to register numbers. As cities were formed and the amount of people sharing the same space grew, it became of paramount importance to keep a record of supplies and anything else vital to human survival. The first known examples of such proto-writing – dating back to 3400-3000 BC – have come to us from the Sumerians in Mesopotamia, scratched onto clay tablets in the city of Uruk.

In his fascinating history of humankind, “Sapiens,” Yuval Noah Harari analyzes one of these clay tablets, which describes how much barley has been stored and is signed by a man named Kushim. “It is telling that the first recorded name in history belongs to an accountant, rather than a prophet, a poet or a great conqueror,” writes the academic.

Fast-forward several thousand years and it is telling of Greece’s plight, trying to stay on its feet while faced with many obstacles and held back by its own limitations, that keeping track of fiscal data has become almost a national obsession. You really know you are in a tight spot when the man or woman in the street is able to talk at length about public spending, tax revenues and primary surplus targets.

Of course, with numbers – and huge numbers at that – being thrown around, the danger is that people can be easily misled. Take, for instance, the ongoing dispute about the 2009 deficit. The Supreme Court decided last week that the former head of the Hellenic Statistical Authority (ELSTAT), Andreas Georgiou, should face felony charges over claims he falsely certified the 15.9 percent figure, meaning he was part of a conspiracy to make Greece’s public finances look worse than they were and justify the first of three bailouts.

Legal battle

A lower court had earlier ruled that Georgiou should not stand trial for this alleged offense. Georgiou, who was appointed in 2010 and stood down last year, has consistently denied claims, initiated by some of his former colleagues and then picked up on by politicians (including those currently serving in the government and main opposition), that he tampered with Greece’s fiscal data.

It seems that Georgiou’s legal battle is destined to continue. The fact that this is still even being discussed in Greece highlights the great confusion that has been caused by all the numbers that have been whirling around in people’s heads over the last year.

When one takes Georgiou, a former International Monetary Fund official, out of the equation, it is manifestly preposterous to argue that by 2009 Greek public finances were in a state that was anything other than parlous.

Greece did not need Georgiou, who, incidentally, took over at ELSTAT three months after the first bailout was agreed, to confirm that the country had suffered a dramatic fiscal derailment. The data available not just in the months, but years, before his arrival underlined that Greece had forgotten the first rule humans learned when they started writing: To keep track of the numbers.

The country’s public debt doubled between 2000 and 2009, when it reached 129 percent of gross domestic product. There was a similar increase in the public wage bill during the same period, pushing primary expenditure, which does not include interest payments, up from around 53 billion euros in 2000 to 113 billion euros in 2009.

Over this time, revenues remained mostly unchanged as a percentage of GDP.

The year 2009 proved to be the final straw, with a New Democracy government preparing for European Parliament and then general elections taking its eye off revenues and failing to rein in spending, leaving a deficit of almost 31 billion euros for the year.

It didn’t take someone with years of experience at the IMF to come along and point out that Greece was bankrupt in 2009; had he been around, Kushim from Uruk could have done it.

Since 2009, Greeks have paid heavily for failing to do the basics in previous years. The shock, and the pressure of the countries and organizations lending the country huge amounts of money, means that there is currently no danger of similar nonchalance over the course of public finances.

Other extreme

If anything, Greece has gone to other extreme and become obsessed by fiscal targets. Since 2010, Greeks have danced to the tune of the primary surplus targets set by the country’s lenders. Each month the budget execution figures are announced and interpretations abound about what these numbers mean for the government’s targets of hitting the figures for the year and avoiding having to take further measures, which invariably means higher taxes or spending cuts. This anxiety is likely to be exacerbated by the agreement earlier this year with the institutions for a contingent mechanism to be adopted so fiscal interventions are automatically triggered if fiscal targets are not met.

Budget data

No wonder then that the Finance Ministry reacted swiftly this week to reports that tax revenues for July fell short of their target by more than 500 million euros. The ministry claimed that these calculations were made using an older target and not the revised one, which showed that, in fact, revenues came in 105 million euros above the target.

We will only have a clear picture when the full data is published but the budget figures for the first half of the year show that net revenues were 777 million euros above the target. That’s not to say that there aren’t serious problems with revenue collection. The magnitude of the challenge was laid bare again this week when the General Secretariat of Public Revenue announced that another 1.2 billion euros in new unpaid taxes had been accumulated in June. This took the total of new arrears this year to 6.8 billion, which is almost 16 percent higher than during the first six months of last year.

If we compare Greece’s budget revenues in the first half of this year (22.3 billion euros), against the amount of arrears that have been created since January, we find that for roughly every 3 billion euros the government collects another 1 billion euros is added to the piles of arrears. Kushim would be very concerned.

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