COMMENT

The tragedy of Greek statistics

VASILIS SARAFIDIS

Eurostat highlighted the deliberate submission of incorrect figures by Athens.

TAGS: Finance

The long-term lack of reliability in the fiscal statistics produced by the former National Statistical Service of Greece (NSSG) played a key role in the country’s bankruptcy in 2010 and has hampered its recovery from the crisis to date.

The reason is simple: With certain structural economic problems having led to chronic fiscal deficits and high public debt, the formulation of effective policies first requires a true and fair representation of the country’s fiscal position. This depends to a critical extent on the integrity, objectivity and impartiality of the national statistical office, which must be protected from political interference.

Unfortunately, securing the independent operation of NSSG hadn’t been a top priority for most Greek governments in recent decades. On the contrary, the manipulation of fiscal data became the norm so that high public spending could be maintained and governments could remain in power.

As Thomas Moutos and Christos Tsitsikas point out in their 2010 paper “Whither Public Interest: The Case of Greece’s Public Finances”: “The history of NSSG reveals that its chief officer (general secretary) was replaced whenever a new party was elected to power. The main objective behind this practice was to control the flow of information; in this respect, the personal or political allegiance of the chief officer was the most crucial factor for the appointment.”

This pattern represents a black page of Greece’s modern economic history, so much so that the term “Greek statistics” is often used pejoratively today. Moreover, it presents a deep democratic deficit because in a democratic society the independence of the national statistical office has the same status that freedom of speech and expression has for the citizenry.

In the absence of NSSG’s independence, the temptation for political interference and manipulation of fiscal data increased in accordance with what was at stake. The period during which Greece was preparing to join the Economic and Monetary Union or the later period when Greece had to achieve deficits below the limit of 3 percent of GDP were of course no exception.

Thus, it comes as no surprise that the fiscal figures produced by Greece underwent two major revisions within a five-year period, which both resulted in an increase in the reported budget deficit and debt. This development seriously damaged the country’s credibility and undermined its access to capital markets in 2010. In both cases, manipulation of fiscal data was revealed almost immediately following elections in 2004 and 2009 that led to a change of government.

A 2004 report by the European Union’s statistical office Eurostat on the “Revision of the Greek Government Deficit and Debt Figures” pointed to a widespread lack of compliance with the European ESA95 rules (European System of Accounts). This led to the submission of incorrect data in at least 11 public spending categories during 1997-2003, a period when PASOK was in power.

Naturally, revisions of such an extensive scale raised questions about whether Greece should remain a member of the eurozone.

When New Democracy came to power following the 2004 national elections, the new government appeared to be committed to implementing a thorough fiscal audit and modernizing NSSG’s governance. Unfortunately, as it turned out later, not only did the quality of the fiscal statistics produced by NSSG in 2005-2009 fail to improve, but Greece’s credibility fell to a nadir.

In its 2010 “Report on Greek Government Deficit and Debt Figures,” Eurostat highlighted the deliberate submission of incorrect figures in a large number of cases.

The report also observed a “lack of accountability in the individual provision of figures used in [Excessive Deficit Procedure] notifications (e.g. absence of written documentation or certification in some cases, exchange of data by phone)” and notes that “between 2005 and 2009, in over 10 EDP notifications, Eurostat introduced reservations on the quality of the data submitted by the Greek authorities no less than five times, far more than for any other member-state. In the specific case of Greece, Eurostat has had a quasi-permanent and extensive use of the existing powers to monitor Greek EDP data. Greece is the only member-state which has received methodological visits so far.”

Eurostat’s displeasure becomes apparent in a section describing the institutional framework of the European Statistical System, which states, “The partners in the ESS are supposed to cooperate in good faith. Deliberate misreporting or fraud is not foreseen in the regulation.”

The bleak reality of the 1997-2009 period did not allow for a clear picture of the country’s fiscal position to be obtained. The long-term lack of reliability of the fiscal data produced by NSSG was a major cause of Greece’s failure to react in time and reverse the path to its bankruptcy in 2010.

As far as I am aware, no previous government party has ever assumed any responsibility to date.

PASOK often responds to the criticism about Greek statistics during its time in office by exclusively blaming New Democracy for changing “the method of recording defense equipment expenditure, so as to lighten the budgetary burden during its term of office” (see Costas Simitis and Yannis Stournaras’s 2012 opinion article in the Guardian titled “Greece did not cause the euro crisis”).

On the other hand, while the then ultra-populist opposition – left-wing SYRIZA and right-wing Independent Greeks (ANEL) – was espousing the false narrative that George Papandreou’s government had deliberately inflated the deficit, New Democracy failed to correct the record, and indeed benefited from this narrative. ND’s lack of political courage to assume responsibility has fueled, among other things, the so-called “odious debt” theory. In this way, the conservative party has contributed decisively to the most important deficit that Greece faces, the lack of social consensus during a decade of economic downturn.

Linked to all of the above is the fact that Andreas Georgiou, general secretary of ELSTAT (former NSSG) during the period 2010-2015, is still facing legal proceedings. This is despite the fact that prosecutors and investigators have ruled that he is not guilty in five cases. Georgiou has been prosecuted for increasing the fiscal deficit figure for 2009 from 13.6 percent of GDP to 15.4 percent, a move which according to his detractors led to the imposition of austerity measures. In fact, Georgiou was only applying the ESA95 rules, something that previous administrations should have implemented as early as 2000 but failed in their duty. This is the tragedy of “Greek statistics.”


Dr Vasilis Sarafidis is an associate professor of econometrics, a member of the Dimokratiki Efthini political party and an executive board member of the Australian Institute of Macedonian Studies. The opinions expressed in this article do not necessarily reflect those of Kathimerini.

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