Rose-tinted lenses

The revised fiscal figures presented by the government after intervention by Eurostat, the EU’s statistical service, confirm European warnings. The revision of the Greek numbers indeed turns surpluses into deficits, revealing that Greece’s apparent success in containing the deficit and public debt was, to a considerable degree, the product of creative accounting rather than genuine reductions. The review of the of two most crucial indicators, the deficit and public debt, is a painful one. A budget deficit of 0.8 percent in 2000 and budget surpluses after that turn out to be a deficit that will continue to 2004. In 2000, the deficit was double the original forecast (1.8 percent instead of 0.8 percent), while in 2001 it reaches 1.2 percent (instead of the 0.1 percent surplus) and is expected to reach 1.1 percent in 2002, instead of a projected 0.4 percent. The revision of public debt as a percentage of GDP is even more discouraging, as the 102.8 percent that Greece had reportedly accomplished two years ago was, in fact, 106.2 percent. The divergence was even greater for 2001. Greece had announced that its public debt was 100 percent of GDP and it has now acknowledged that it actually was 107.3 percent – a percentage which is actually worse than that of 1998 (105.8 percent) and closer to the problematic 108.2 percent of 1997. The fact that the chasm between original and the reviewed figures has been the result of accounting tricks can be deduced from the fact that in 1997 and 1998 Eurostat only made few revisions to the Greek numbers – if any. Its reviews, however, became harsher after that, during the crucial years for the fulfillment of EMU criteria. The Eurostat review goes so far as to examine 2003, as the original forecast that the debt would be a 95.1 percent debt of GDP has been revised to 100.2 percent – that is, 5 percentage points higher. Debt reduction proves to have come mainly from interest rate cuts which contributed the most to Greece’s EMU accession. Greece is not the only state to have resorted to creative accounting, many of our EU peers have used similar tricks to which the EU has turned a blind eye. Greece, however, seems to have made excessive use of these tricks, presenting a debt 7 percentage points lower than the true one. It painted an idealized picture, which seems to have nourished an illusionary sense of success. EU intervention should shake the government into making genuine reforms to rehabilitate the economy, but in a pre-election period it is even more inclined to such tactics.