Creative accounting

Soon after the televised debate between Greece’s party leaders, Kathimerini said that the idyllic picture painted during the electoral campaign was a far cry from the situation that the incoming administration would have to tackle. Topping the list of problems was the sorry state of public finances and the talks with Eurostat about the size of public debt, which had been postponed to the post-election period. The release earlier this month of the Commission’s spring report on European economies showed that Brussels would not forever stay relaxed about Greece’s extensive use of «creative accounting.» It portends painful revelations about Greece’s fiscal state following the talks with Eurostat. According to sources, the Luxemburg-based statistics office, which is expected to send a committee to Athens next week, places much emphasis on the contents of the various special accounts – particularly revenues from privatizations. The previous administration of Costas Simitis is said to have used part of that money to meet spending needs, ensuring that this was not reflected in the budget or the debt. It appears that the PASOK government was keen to use extra funds to cover expenditure, without feeding the debt. The trick, however, has no real effect on the country’s indebtedness. And if the European Union – which wants member states to keep an authentic record of their economic figures in order to be able to enforce the Stability Pact – insists on launching a thorough investigation into Greek finances, the new administration may well remove the veil drawn over the real economic indicators by its Socialist predecessors. Doing so would in fact reveal a debt that exceeds the 3 percent ceiling set by the Maastricht criteria. A revision of Greece’s economic figures would be very bad news, for the country would thereby be breaking the rules of the Stability Pact. At the same time, however, it would give Greece an opportunity to abandon «creative accounting» and reveal the true state of our economy. This would lead to a healthier economic policy, a policy that will not try to deal with problems by fudging the books but by taking systematic and long-term measures that will help tilt the country onto a course of genuine development. What matters most is not that Greece will be chided by the Commission but that the problems that have prompted Brussels’ warnings are real and they must be tackled without rose-tinted glasses or blinkers.

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