The 2009 Greek fiscal figures


TAGS: Finance, Economy

The prosecution of the ex-statistics chief Andreas Georgiou for allegedly "inflating" the 2009 Greek fiscal deficit has reopened the discussion on the true fiscal situation of the country in 2009. This discussion has haunted Greek politics since the beginning of the crisis. The anti-memorandum populism of the last six years was built on questioning the – officially certified by the Greek and European statistical agencies – figures for the exceptionally high fiscal deficit for 2009, the year before the country was forced to seek a bailout from the EU and the IMF.

The undersigned assumed in October 2009 respectively the functions of Finance Minister and Deputy Finance Minister with responsibility for the General Accounting Office (GAO). On October 9, two days after the swearing-in of the new government, we were informed by the then Governor of the Bank of Greece (BoG) that according to the most recent cash data available in the BoG, the state budget deficit in the January-September period was already over 10 percent of GDP. Based on such a dynamic, according to the official statement by Giorgos Provopoulos, then Bank of Greece governor, "the deficit will reach, if not exceed, the level of 12 percent."

These figures were also confirmed by the GAO services of the Finance Ministry in the state budget execution bulletins for the months of June, July and August. These monthly budget execution bulletins had been duly prepared by the services; however, by decision of the then political leadership they had never been made public. The reason? In August, a full four months before year-end, the fiscal deficit was already 21 billion euro (about 9 percent of GDP) when the budget targeted a deficit of only 9 billion euro for the whole of 2009. However, despite these figures, on 2 October 2009, two days before the national election that brought PASOK to power, the New Democracy government formally notified to Eurostat data on a 6 percent of GDP annual deficit (14 billion euro) and cumulative debt of 257 billion euro – when in June it had already climbed to 267 billion euro!

The report prepared by an independent committee of experts which was set up a few months later to investigate explains clearly what happened: "The data contained in the notification dated October 2 did not correspond to the information sent to the national statistics agency by the various government services." In other words, the New Democracy government not only completely derailed the fiscal situation of the country, but also hid this situation from Greek citizens and knowingly sent false information to our European partners. It is therefore preposterous for some to continue to maintain even today that the annual deficit could be somehow kept to single digits by the new government which took over in October 2009 or that the PASOK government "inflated" the budget figures to make them appear higher than they truly were.

Already by the end of September 2009, before the national election, the budget deficit (according to GAO data prepared at the time under the New Democracy government) stood at 23 billion, reaching 10 percent of GDP, and growing at over 1 percent each month. Pension funds such as those of IKA and OAEE required, according to the request submitted by their governors (appointed during the New Democracy period) to the new government in October, more than 1.5 billion euro of additional appropriations in order to be able to pay for pensions until the end of the year. Meanwhile, the New Democracy government had completely "omitted" to record in the budget appropriations of 1.5 billion euro which were nevertheless disbursed for the pension funds of the Public Power Corporation (PPC) and of telecoms operator OTE, as well as about 3 billion euro of various other expenditure overruns. And to this should be added arrears of hospital debts going back 4-5 years, totalling 6 billion euros, which also went unrecorded in the respective budgets (instead, the statistics agency had falsely declared to Eurostat that these debts amounted to just 2.2 billion euro). And of course, there was a corresponding shortfall in revenues: While the target revenue figure for the entire year in the 2009 budget was 62 billion, by September only 35 billion euro had been collected.

Unfortunately, as we now know, the 2009 deficit was even higher than the 12.7 percent of GDP estimated in the 2010 budget which was presented to Parliament by the new PASOK government in November 2009. In April 2010, Eurostat and the – by now independent – statistics agency ELSTAT had revised it to 13.6 percent of GDP, while in October 2010, after an exhaustive audit of all fiscal accounts, to the final 15.4 percent of GDP (and correspondingly the 2008 deficit was revised up to 9.4 percent from just 5.6 percent of GDP which the New Democracy government had claimed).

It is in fact for this last revision from 13.6 percent to 15.4 percent which added 1.8 points of GDP to the deficit that Georgiou is being prosecuted. Half of that difference is accounted by including in overall deficit and debt figures the accounts of 17 loss-making public enterprises. (Here one might ask – apart from the obvious requirement to simply apply common European rules – what kind of logic suggests that the recurring deficit of a company such as OSE, the loss-making train operator, should not count towards the public deficit when it is in fact the taxpayer that funds it year after year?). But be that as it may, one thing is crystal clear: Even while prosecuting Georgiou, the justice system does not challenge the 13.6 percent of GDP deficit figure on the basis of which Greece applied for its first bailout in May 2010 (a full three months before Georgiou took over at ELSTAT!) Those on the political right and on the political left who are using the Georgiou case in order to support their lies and populism over the last six years pretend to ignore this simple but compelling truth.

In a nutshell: From a targeted deficit of 2 percent of GDP for 2009, as in the budget voted in December 2008, we ended up with a realised fiscal deficit above 15 percent of GDP, i.e. more than 13 percentage points of GDP higher in just one year. In absolute numbers, from a targeted deficit of about 5 billion euro, to a realised deficit of over 36 billion, an astonishing difference of 31 billion, equivalent to 12 times today’s unpopular ENFIA property tax in just one year! Similarly, public debt increased in 2009 by 36 billion euro, a fact confirmed (title by title) by all global electronic debt recording platforms. Thus, the total cumulative debt added by the New Democracy government and former Prime Minister Costas Karamanlis in the 2004-2009 period reached 120 billion euro, when in its entire modern history Greece had borrowed cumulatively from 1830 to 2004 a total of 180 billion euros.

Since 2010, the Greek parliament has voted six budgets based on these deficit and debt figures as they have been certified by ELSTAT and Eurostat. The country has entered into the second and more recently the third memorandum based precisely on these figures. And the European Parliament in 2014 concluded that "the problematic situation of Greece was also due to statistical fraud in the years preceding the setting-up of the program." It defies belief that rather than investigating this statistical fraud, the Greek justice system has instead chosen to prosecute those who stopped the lying, recorded the true deficit and simply applied European rules.

* Giorgos Papaconstantinou and Filippos Sachinidis are former ministers.