ECONOMY

Banker: Greece met tests

BRUSSELS (Reuters) – European Central Bank Vice President Lucas Papademos yesterday defended Greece’s entry to the eurozone in a row over major revisions to its past budget deficits which cast doubt on whether it met the entry criteria. Papademos, who was Greek central bank governor when the country adopted the euro in 2001, said there was no doubt Greece had fully met the entry criteria under various accounting rules. The European Commission is studying the possibility of launching legal steps against Greece over its budget data after Athens revealed the massive revisions last month that pushed its deficit above the EU limit for every year since 2000. But Papademos defended Greece’s place in the 12-nation eurozone. «There is no doubt that the country fulfilled at the time the criteria on the basis of alternative measures of deficit,» he told a news conference after a meeting of the ECB’s Governing Council in Brussels. The revisions put the Greek budget deficit well over the qualifying limit for the euro, which is set at 3 percent of a country’s gross domestic product. ECB President Jean-Claude Trichet, who regularly reminds all eurozone governments to stick to the budget rules, gave qualified backing to the Greek position, but said he was awaiting a report from the Commission’s statistical agency Eurostat. «The (Greek) minister of finance, (who) has put into question a number of figures, has mentioned this did not put into question the entry of Greece when Greece entered the euro area. I refer to that particular point. The information we have today would confirm that sentiment but I remain cautious as we are expecting the full report of Eurostat to clarify the situation,» he said. Papademos said the budget differences were due to «more information about the surpluses of social security funds» plus a change in accounting methodology for recording government expenditure and military equipment. «According to the new methodology, these expenditures have been based on cash payments, while in the past they were based on deliveries (of equipment),» he said. The Bank of Greece had every year provided estimates of the budget deficit using different methodologies on a national accounting basis, on an accrual basis and on a cash basis, he said. Earlier European Monetary Affairs Commissioner Joaquin Almunia raised the possibility that Greece could lose EU aid if it didn’t bring its current budget deficit below the limit. «If they can’t maintain their public finances below 3 percent in terms of deficit criteria, it might in fact lead the Commission to conclude that it should suspend the cohesion funds,» Almunia said during a confirmation hearing before the European Parliament. After the hearing, Almunia told reporters the EU executive was still waiting to assess the Greek budget for 2005. «We will assess this budget and hopefully conclude Greece will be below 3 percent next year.» The Greek government plans to slash the deficit to 2.8 percent of GDP next year from a forecast 5.3 percent in 2004.