Eurostat changes in debt definition will favor Greece

Eurostat, the European Union’s statistics agency, is about to announce changes in its computing of the public debt that will benefit Greece, among other countries. Specifically, according to well-informed sources, it will no longer include state payments to projects co-financed with the private sector (public-private partnerships) in its definition of debt or budget deficit. This measure will provide relief for many countries such as France, Germany, Greece and Italy that, like the first two, are struggling with an excessive budget deficit or, like the other two, with excessive public debt. The agency’s reasoning is that this change will provide a «more flexible and effective definition» of deficit and debt. In reality, this decision is a further step toward the unraveling of the Stability and Growth Pact, begun several months ago on the initiative of the Franco-German axis, given these two countries’ inability to control rising budget deficit and unwillingness to pay the fines mandated by the Pact. Approval, with reservations Today, Greece is expecting the council of EU Economic and Finance Ministers (Ecofin) to approve its updated Stability and Growth Program for 2004-2008, which it submitted in December. The approval appears certain but the comments accompanying it will be interesting. Recently, the European Commission expressed itself severely on the Greek program, voicing skepticism about the country’s ability to meet the targets it had set on a series of economic indicators, such as growth, budget deficit, public debt and inflation. Yesterday, it was the Eurogroup, comprising the ministers of the 12 EU member states that participate in the eurozone, which met. The discussion revolved around international economic and political developments, as well as developments in the eurozone’s fiscal policy. In today’s Ecofin, which will also include the three countries that remain outside the eurozone – Denmark, Sweden and the United Kingdom – the agenda will include preparations for the EU spring summit, including a review of the European Commission’s report on the Lisbon strategy, a discussion of main economic policy directions and a report on structural reforms, as well as the review of each country’s updated stability and growth programs.