According to Eurostat-verified data released on 23 September, the deficit to GDP ratio for Greece has been revised upwards from 1.7% to 4.6%, well above the Maastricht criteria ceiling of 3%. Greece joined the euro with the second wave of EU countries in 2001 after two years of stringent economic reforms. Prime Minister Kostas Karamanlis has accused the Socialist government of understating military and Olympics spending. The Socialists claim the conservative government fudged the figures to discredit the Socialists, who led Greece into the eurozone in 2001.
In a press release, Joaquin Almunia, the Commissioner for Economic and Monetary Affairs, said Eurostat would be looking into the possibility of starting an infringement procedure against Greece for non-compliance of Regulation 3605/93 and ESA95. These relate to the compilation of budget figures.
Reacting to the news relating to the new figures for Greece, Katinka Barysch, the chief economist at the Centre for European Reform, said: "The announcement is a big embarrassment for both the Greeks and the EU. Here we are, squabbling over Germany's and others' marginal overruns and it turns out that we have countries in the eurozone that shouldn't be there in the first place. Legally, there is a strict difference between the Stability and Growth Pact and the Maastricht criteria but most people will see the Greek announcement as just another indication that eurozone fiscal rules are ineffective."
The spotlight may well now fall on other countries that are known to have been indulging in 'creative fiscal accounting' such as Italy with its series of one-off measures.
Barysch thinks the EU will now pay even closer attention to budget figures in the new Member States that hope to join the eurozone by the end of the decade. Referring to the recent re-intepretation of the Stability and Growth Pact, she said that we now work with cyclically adjusted data and pay more attention to investment spending. She pointed out that this means "we cannot even be sure about headline numbers" and predicted more arguments between the Commission and Member States about whether a deficit was 'excessive'.
According to the International Herald Tribune, European Central Bank President Jean-Claude Trichet called for "an independent institution, body, entity" to "guarantee that we can rely on the figures which are presented".
