Eurostat dilutes Greek GDP revision

Eurostat rejected most of Greece’s proposed 25 percent upward revision of its growth figures aimed at including parts of the large black economy in the eurozone’s second-poorest member. Greece, which was still on the EU’s list of budgetary offenders when it decided last year to revise its GDP figures for 2002-2006, it’s first revision in 12 years, said the European Union’s statistics agency approved about a third of the review. This will mean some of Greece’s key economic ratios, such as the budget deficit and debt-to-GDP, which are under EU scrutiny, would not automatically improve as dramatically. «The rise in the GDP with 2000 as a base year amounted to 9.6 percent,» the National Statistics Service (NSS) said yesterday. A Finance Ministry official said Eurostat rejected part of the methodology used and felt the construction sector should have a smaller effect. The NSS said there was also an issue over the depreciation of public infrastructure. Analysts said there was a silver lining, as Athens would not be burdened with huge financial obligations to the EU as a richer member. «It’s a mixed blessing,» said EFG Eurobank economist Platon Monokroussos. «This is not likely to affect Greece’s credit rating outlook in any meaningful way since rating agencies are primarily concerned with the dynamics of such ratios as public debt to GDP.» Greece, rated A1 by Moody’s and A by both Fitch and Standard & Poor’s, had sought to restate its gross domestic product (GDP) from 2002-06 to include parts of the black economy, estimated by economists at around 30 percent of the country’s -210 billion output. The restatement was mostly the result of incorporating tax evasion in the national accounts. About 1 percent of the revision came from proceeds from illegal activities, such as narcotics, prostitution and money laundering. The 25.7 percent revision would have shaved off half a percentage point from Greece’s 2.5 percent of GDP budget deficit in 2007, while debt would have come down to about 80 percent from about 100 this year. Economists estimate the approved review will mean the debt mountain, the eurozone’s second-biggest after Italy’s, would now stand at about 90 percent of GDP while it may shrink the budget deficit by 10-20 basis points. But it was also good news for the Greek budget, which will have a much smaller EU payment burden to carry. «Greece will now have to pay retroactively a third of the -2 billion it would have paid had the entire revision been approved,» the government official, who requested anonymity, told Reuters. «The target to balance the budget by 2010 remains.» After repeatedly under-reporting its budget deficit to the EU for years, including 2001 when it joined the eurozone, Greece has managed to bring the figure firmly under the 3 percent EU ceiling. It was taken off the list of budgetary offenders this summer and has vowed to balance the books by 2010. Suspect credibility Although Finance Ministry officials insist that the NSS revision had been technically correct, Greece’s application to Eurostat had been viewed with suspicion from the start, as an attempt to get the Greek economy out of the regime of fiscal supervision via the back door. (Reuters, Kathimerini)