Creative accounting

It was bound to happen. Experts from Eurostat, the European statistics office, are on a visit to Athens after having discovered a number of misstatements in Greece’s financial accounts. Most importantly, they have threatened the government of Prime Minister Costas Simitis that they will straighten out the state budget figures. Should this happen, budget surpluses will, as if by magic, give way to deficits, casting serious doubts on Simitis’s past claims of a «powerful Greece.» It’s time we faced reality. There seems to be justified reason to believe that the budgetary surpluses are fabricated. It’s common knowledge that the practice of creative accounting involving the falsification of official documents has flourished across Europe since 1998. In their attempts to make the political decision of joining the eurozone materialize, almost all European Union states did not hesitate to cook the books in order to meet the famous Maastricht criteria. We have repeatedly stressed that this period is gone for good. After meeting the EU’s political objectives, European states have rudely awoken into a harsher economic reality. Bragging of a «powerful Greece» may serve government propaganda but the political elite must have a sense of moderation too. When Germany and France, the EU’s powerhouses, announce deficits of about 3 percent and seek to soften the Union’s Stability Pact, it is absurd to hear objections coming from Greece’s economy minister. A better grasp of reality and a more reserved display of hubris would be advisable – especially since the country’s big idea of itself seems to be totally unfounded. Still, the biggest problem seems to be the government’s failure to map out and implement a more realistic fiscal policy. As misrepresentation of economic indicators has taken place over the previous six years, successive accounting frauds to compensate for the deficits of the previous periods have resulted in widening the gap between fabricated and genuine indicators. Creative accounting has created an illusionary world of economic prosperity which is bound to cause insurmountable problems in the future. Enough. It’s time to make a radical break with the past. The government must summon the requisite political courage to burst the bubble of virtual surpluses and focus on paying off the real deficits. It cannot possibly turn the distortion of economic policy into the essence of economic policy. It must, at last, break this vicious circle.