As the government launched a charm offensive yesterday to defend its policies, auditors presented a report on last year’s budget which is said to identify a multibillion-euro black hole in state finances that could push Greece’s deficit up even further. The State Audit Council submitted its annual report on 2003 public sector finances to Parliament yesterday and the speaker of the house, Anna Psarouda-Benaki, said that it would be studied with great interest, especially ahead of the parliamentary debate on next year’s budget which is due to take place between December 17 and 22. However, the parliamentary speaker was probably not aware of just how much interest, if not conjecture, this report is likely to create. The council found that some 4.46 billion euros of public funds were unaccounted for, sources told Kathimerini. The major expenses not recorded are some 3 billion euros’ worth of VAT returns to Greek exporters, 1.4 billion euros in other types of returns and 105 million euros in pensions and wages. If this is the case, then some experts believe that once all the figures have been adjusted, the public deficit for 2003 could end up being higher than the revised figure (4.6 percent of GDP) produced by the self-imposed audit recently conducted by the government. Meanwhile, the government seems to be embarking on a public relations exercise after criticism of its handling of the public finance review and the parliamentary probe into arms procurements. However, the campaign almost backfired immediately. Finance and Economy Minister Giorgos Alogoskoufis met with New Democracy MPs yesterday to discuss the government’s policies as far as the budget, development and taxation are concerned. The move came only days after the party’s own MEP Giorgos Dimitrakopoulos called the handling of the audit «unfortunate and ignorant,» while at least 15 conservative MPs are due to set off to various parts of Greece on a government charm offensive. Alogoskoufis told the group that if Greece reduces its deficit to below the EU ceiling of 3 percent of GDP by next year, it will have «joined the euro on its own merit.» He later had to clarify that he was not bringing into question the fact that Greece deserved to enter the euro in 2000.