Luxembourg, 20/10/2009 (Agence Europe) - After the meeting of Eurogroup (finance ministers from the eurozone) on Monday 19 October 2009, EU Financial and Monetary Affairs Commissioner Joaquín Almunia and the chair of Eurogroup, Jean-Claude Juncker, confirmed their concerns about the credibility of Greece's budget statistics. Last week, Greece announced that its budget deficit may rise to more than 10% of GDP this year, despite official government forecasts of 6% and an initial of 3.7%. The arrival of a new Greek government, headed by the Socialists, has coincided with a serious review of the previous statistics.
“The budget deficit this year will be much higher than the target to which the previous government had committed itself (3.7%), an evolution that can only partly be attributed to a worse than expected evolution of the economy,” explained Almunia in a press release following his meeting with the new Greek finance minister, George Papaconstantinou. A short time afterwards, Almunia was telling reporters: “I am also seriously concerned about significant, new statistical discrepancies.” He explained that variations in the statistics had been reported to his department during a recent mission to Athens and to Eurostat, adding that the differences between the old and new statistics would require detailed investigation. Wanting to know where the differences came from, the commissioner expressed astonishment that such discrepancies had re-occurred in a country whose statistical reliability was queried both before and after it joined the eurozone. Almunia said that he had experienced episodes in the past and had changed the rules, and Eurostat clearly did not have mechanisms for fully avoiding such situations, but the Commission wanted to know exactly what had happened and why this had occurred before looking at how to improve the situation. Equally perplexed, Juncker was more critical of Greece, expressing astonishment at the discrepancies between the old and new figures. He fumed that this had already happened several times in the past and if it were to happen again in the future, then it would really undermine eurozone credibility. “Enough is enough! We must have proper statistics.”
Determined to change, the Greek minister said that his administration was determined work transparently. The budgetary situation was “very difficult” and the deficit was expected to be 12.5% of GDP by the end of the year, Papaconstantinou told press on Tuesday. There were three equally strong reasons behind this significant rise: - the current economic climate (with “a more severe than expected recession”); - under-estimation of the full in revenue combined with an over-optimistic forecast of the level of spending; - failure to include certain essential points in budgetary statistics, which could not have been simply an error or oversight on the part of the previous government, he suggested.
To restore credibility affected by these fresh statistical hiccups, the minister wanted to act quickly, taking specific legislative steps in the coming months, particularly (even though this should have been done a long time ago) making Greek statistical services independent from the political power. With regard to the aim of getting the deficit back below 3% of GDP in 2010, this was “completely out of the question, of course”. One thing seemed sure: not having taken effective measures, in line with the Council recommendations of six months ago, Greece, if it is ultimately to correct its deficit, will face a further stage in the excessive deficit procedure. The Commission is expected to report on 11 November a lack of steps with satisfactory outcome in Greece (Article 1048). A decision on a formal notice (Article 1049 is then possible.
Greece will also be one of those asked to begin consolidation of public finances before 2011. Anticipating the expectations of the Commission, Papaconstantinou himself announced that the government would shortly adopt budgetary adjustment measures for 2010. Without giving a precise date, the minister acknowledged that a timescale of three to four years at least would be needed to hope to bring the deficit back below the 3% ceiling set in the Stability and Growth Pact (A.B./transl.fl/rt)