ECONOMY

Expenditure under scrutiny

A delegation from Eurostat, the European Commission’s statistics agency, will visit Greece in mid-September to take a look at the country’s defense spending and the way it is accounted for in the budget. Eurostat has already forced Greece to include financial transactions such as currency swaps and share-convertible bonds into its regular budget, thus augmenting Greece’s debt considerably in 2001 and 2002 and turning what was touted as a budget surplus back into a deficit. Since 1996, Greece has signed contracts worth over 20.5 billion euros to buy all sorts of military equipment. Just recently, Defense Minister Yiannos Papantoniou signed a contract worth 1.5 billion euros, declaring that «we buy only what’s necessary.» The current practice is to enter defense procurement expenditure in such a way that it affects the public debt with a great delay. From 1997 onward, Greece has been paying for armaments worth at least three billion euros annually, but only a third of this amount finds its way directly to the budget. The rest is amortized over a long period. This method also encourages corruption, because the value of contracts can be inflated with few discernible changes in the budget. It is expected that the Eurostat people will demand an end, or at least a modification, to amortization in order to make such spending more transparent. The immediate effect may not be as dramatic as in debt management transactions, but it will make Greece’s efforts to reduce its huge debt much more difficult. Eurostat is also interested in the surpluses created each year by social security funds. These surpluses, rising each year, from three billion euros in 2000 to 5.53 billion in 2003, have helped the government control the deficit level. Eurostat suspects these figures could be arbitrary.