ECONOMY

Austria’s creative bookkeeping beats Greece on secret debts

Austria’s finance ministers have repeatedly scolded fellow euro-area nations for not doing their “homework.” Now the Alpine nation was embarrassingly chided itself for its habit of creative accounting.

The European Union’s chief statisticians made Austria add 29 billion euros ($36 billion) to its debt ledgers, making it the region’s biggest loser of tightened data rules, with an adjustment topping the one slapped on Greece’s wayward bookkeepers in 2010.

“Austria applied the rules in a pretty creative way,” said Stefan Bruckbauer, chief economist at UniCredit Bank Austria AG. “There was a line in the sand, and some countries stayed well clear, while others went as close as possible. Austria interpreted the rules very generously.”

Eurostat’s Austria calculations, published last week, now include state-owned companies that were designed to keep them off the government’s books. That move pushed the nation’s debt level up to 82.6 percent of gross domestic product as of the end of June, now exceeding fellow top-rated nations Germany, the Netherlands and Finland, which stay clearly below 80 percent.

The statisticians’ closer scrutiny of nations was triggered by a 2010 audit of Greece’s state accounts, which forced the country to revise its debt upwards by 24.6 billion euros mostly because it had to include state companies it had kept out of official statistics before.

‘More Realistic’

Austria was particularly inventive when setting up state- owned companies in a “Maastricht-friendly” way, Bruckbauer said, referring to the Dutch town where the EU signed a treaty on budget rules.

Even so, that creativity had less dire consequences than Greece’s action, which was “aimed at sneaking into the euro,” he said. Austria’s aim was “to make itself look better in the eyes of its own citizens,” according to Bruckbauer.

Liabilities now acknowledged include debts of KA Finanz AG, a bank winding down toxic assets, which kept its banking license even as it’s not conducting new business. Under a previous set of EU rules the license meant that it could be treated as an item off the balance sheet.

The railway system and the company managing the state’s real estate assets were also structured with Maastricht in mind and now have to be consolidated under under Eurostat’s new set of rules. Austria could avert the consolidation of its highway operator Asfinag, which could have added as much as 11.5 billion euros, said Bernhard Felderer, the president of Austria’s Fiscal Council, a government-sponsored advisory panel.

“The Eurostat experts know their stuff and they were unflinching in the talks,” Felderer said. “This is definitely a more realistic picture now. Those things have always been the state’s liability.”

[Bloomberg]