ECONOMY

EU skeptical over fiscal data

Economy and Finance Minister Giorgos Alogoskoufis yesterday tried valiantly to convince his Eurogroup colleagues that Greece will be transparent about its financial accounts in the future. His task was complicated by a declaration by Economic and Monetary Affairs Commissioner Joaquin Almunia that fiscal data prior to Greece’s eurozone entry were still incomplete and that Greece, in any case, could face legal action for under-reporting its deficits in the period 2000-2003, that is, after it was accepted into the eurozone. «The government has committed itself to fiscal transparency and a reduction in the deficit,» Alogoskoufis said yesterday in a written statement from Luxembourg, where the Eurogroup, the finance ministers of the 12 eurozone countries, met yesterday and where Ecofin, which includes the finance ministers of all 25 EU members, meets today. In comments to the press late last night, Alogoskoufis replied to Almunia’s assertion that only partial data on the fiscal years 1997-99 had been provided, saying that the government had provided answers to all Eurostat requests. He added, however, that he did not find it extraordinary that Eurostat would ask for clarifications. He added that he found the prospect of the Commission’s taking Greece to the European court unlikely. Alogoskoufis said he hoped the whole issue over Greece’s deficit would be settled before the next Eurogroup meeting, on November 14. The government seeks to reduce the budget deficit from a projected 5.3 percent of gross domestic product (GDP) in 2004 to 2.8 percent in 2005. Following is Commissioner Almunia’s statement on Greece’s deficit: «Let me now say a few words about statistics. I presented (yesterday) to the (Commission) two Information Notes; one on the Greek deficit and debt data and one on EU action in order to reinforce the governance of budgetary statistics. «First regarding Greece. On 23 September, following the Greek government notification, Eurostat released strongly revised data on the deficit and debt for the period 2000-2003, which show sizable variations and a continued breach of the 3 percent deficit reference value. The deviations relative to the previous notifications result both from understatements by the Greek authorities and from estimation errors. As I have already explained to the European Parliament and to you, the media, the revisions in the deficit figures concern primarily, but not [exclusively], two issues: military expenditure and the social security [funds]. «Given the sizable revisions for the data concerning the period 2000-2003, I instructed Eurostat to analyze also the fiscal data for the period prior to 2000. Last week, Eurostat undertook a mission to Athens in order to re-examine the data for this period. However, the mission could not yet reach a conclusion, and it requested the Greek authorities to provide additional information. Until now, this information has only been provided in part. I cannot exclude that another mission to Athens will be necessary so as to enable Eurostat to complete the information it needs to finalize its analysis. It is therefore much too early for me to present you with any conclusions in this regard. «The Greek case raises justified concerns about the quality of the functioning of national statistical offices, the surveillance mechanism and the Commission’s validation tasks. «How do I intend to take this matter forward? First, I have asked the Commission’s Legal Service to advise me on whether the continued understatements by the Greek authorities of data on deficit and debt – as much as their estimation errors – constitute a breach of the obligations of Greece under the Treaties and, consequently, on whether the Commission should initiate urgent infringement procedures. «Second, and this fits in as well with the call made by the Council for an improvement in the quality of the fiscal statistics, I have instructed the Commission services to prepare proposals to reinforce the monitoring of public finance data, along the following lines: «First, to develop the relevant legal provisions… The existing set of rules needs to be extended to ensure that Eurostat, as the statistical authority, can carry out effective checks on the data notified by member states. «Second, I want to increase the operational capacity of Eurostat and the Directorate-General for Economic and Monetary Affairs in this area… «Third, there is a need to establish Europe-wide standards as regards the independence of the national statistical institutes. The Commission will respond to the Council’s request that it propose institutional standards that will ensure that the national statistical institutes can operate in line with the principles of integrity, independence and responsibility… «All in all, I would hope that the seriousness of the current problems encountered with the Greek public finance data would help us in building a more reliable framework for the analysis and monitoring of fiscal statistics.»