The legal action launched by the European Commission against Greece yesterday for submitting flawed budget data for years aims at obliging the country to fix persistent shortcomings in its reporting and is not necessarily the first step toward a referral to the European Court. «The purpose of the infringement procedure is to ensure that Greece puts its house in order… There are some systemic shortcomings which have to be rectified,» Commission spokeswoman Amelia Torres said yesterday. Greece’s response to the infringement procedure, and the adjustments it will make to its reporting methods, will determine whether the infringement procedure will move forward or will be settled in a relatively benign way, with the Commission approving Greece’s move toward greater transparency. However, with Greece already facing disciplinary action for its excessive deficit in 2003 (4.7 percent of GDP) and 2004 (at least 5.3 percent of GDP), it is certain that the government will find itself under increased scrutiny. Its goals as stated in the 2005 budget, to cut the deficit to 2.8 percent of GDP, will be closely monitored and any failure to achieve them could lead to binding targets imposed, including deep spending cuts, plus fines. In its report released yesterday, the Commission also pointed the finger at itself and its statistics agency, Eurostat, for failing to spot Greece’s problems as early as 2000. It is likely that Greece’s case will bring on a reform of both Eurostat and national statistics agencies. The issue of Greece’s deficits has ignited a fierce war of words between the current government, which insists it merely wanted to find the truth about state finances, and the Socialist opposition, which claims that the government merely shifted expenditure items using a different methodology in order to tarnish Socialist policies but which ended up damaging Greece’s image abroad instead. There has been criticism from within government ranks, notably by veteran Euro MP Giorgos Dimitrakopoulos, who claimed that the auditing was done in a clumsy manner which allowed the EU to cast doubt on Greece’s entry into the eurozone, in 2001. The Economy and Finance Ministry yesterday defended the auditing and attacked the opposition. «The European Commission report submitted to the European Parliament and the Council of Ministers, underlines that the new Greek government is in constant and close cooperation with Eurostat in order to restore transparency in fiscal data. The government will persist in its policy of transparency and credibility of fiscal data… (This is what) the government’s reply (to the Commission will contain) and, consequently, there is no danger of Greece being taken to the European Court. Once again, the scaremongering of PASOK has collapsed. The responsibility of the PASOK governments can neither be hidden nor transferred to others. The present government restores the country’s credibility,» the statement said. «The magnitude (of hidden expenses and inflated revenue) was such that we could not hide it. If we didn’t do it, the Europeans would have found out of their own accord,» Deputy Finance Minister Petros Doukas said yesterday in a speech at an Economist conference on retail banking. Doukas claimed that the issue of military expenditure entries was only a very small part of the whole auditing of finances – a claim patently untrue, as Eurostat itself has argued – and added that the previous government had infringed its own procedures and had not recorded expenditures for weapons systems that had been delivered, a point proven by Eurostat’s investigation. «Anyway, it is time to turn the page on this issue,» Doukas said.