EU accused of ‘fiddling’ with Greek deficit figures ahead of election
The Ifo Institute, one of Germany’s most influential economic think tanks, has accused the EU institutions of “fiddling the figures” on Greece’s public deficit figures in order to “embellish” the country’s situation ahead of the May European elections.
In a strongly-worded statement, the Munich-based research institute said Eurostat had removed key data from its website in order to show a primary surplus of 0.8% for Greece in its 2013 budget figures.
Instead of a surplus, the actual figure should show an 8.7% deficit, the Ifo said on Wednesday (7 May).
“The European statistical office removed from its database the usual data on Greece’s public deficit excluding interest payments (primary balance) a couple of days ago,” Ifo President Hans-Werner Sinn said in the statement, accusing the EU statistical body of “window-dressing” ahead of the EU election.
“This way, the European institutions are following the strategy of embellishing the financial situation of the crisis countries prior to the European Parliament elections,” Sinn said.
The Ifo is highly regarded in Germany for its monthly Business Climate Index, which gauges German company’s confidence in the economy. Although the Ifo is a reputable institute, its President Hans-Werner Sinn, is also known for his frequent criticism of Greece’s bailout operation and its cost for the German taxpayer.
“In truth, Greece is still far from regaining financial health,” Sinn said, adding the data was withdrawn after Ifo had accused the European Commission of “misleading the public” on Greece’s real financial situation.
Simon O’Connor, the Commission’s spokesperson on economic and financial matters, admitted that “there is indeed a primary deficit of -8.7%” for Greece in 2013 according to Eurostat’s European System of Accounts (ESA).
But he said the accounting system was changed in the midst of the financial crisis in order to isolate the massive injection of public money that was needed to prop-up the collapsing banking sector. Between 2008 and 2013, €4.9 trillion of public money (39% of EU GDP) was committed to support ailing banks, according to the IMF. Of that amount, €1.7 trillion of taxpayer money was effectively used, representing 13% of EU GDP.
However, these massive cash injections are regarded as “one-off temporary measures” under the revised Stability and Growth Pact, which limits public deficits to 3% of GDP in the euro zone. This means banking sector injections “do not count against the member state in the context of the excessive deficit procedure," said Olli Rehn in a letter to EU finance ministers dated 9 October 2013.
“You have to remove these costs because they can give a completely distorted picture,” Connor told EurActiv in emailed comments. “For instance, Ireland had a deficit of 32% of GDP in 2010 because of its banking support measures. But that of course is not the same as pretending they are not there, as some people imply we are doing,” he said.
“We therefore fundamentally reject the suggestions that have been made in some quarters that the figures were fiddled with in order to give a more favourable view of the Greek public finances.”
Eurogroup praise for Greece
On Monday (5 May), the Eurogroup of 18 euro zone finance ministers hailed “the recent positive macroeconomic developments in the Greek economy,” saying the country’s harsh economic adjustment programme was “starting to pay off”.
“Fiscal performance continues to be strong, as reflected in the primary surplus for 2013,” the ministers said in a statement, calling on the Greek authorities to continue implementing the reforms agreed in return for EU/IMF bailout money.
The latest opinion polls in Greece put the centre-right New Democracy party of Antonis Samaras neck-and-neck with the leftist Syriza party of Alexis Tsipras for the European elections.
Syriza, which advocates erasing the debt of struggling euro zone countries, became Greece’s main opposition party after national elections in 2012.
Since the beginning of 2010, the EU and the IMF have agreed two successive aid programmes for Greece, totalling €240 billion (see full figures).
As a result, euro zone governments now hold more than 80% of Greece’s €319 billion public debt.
Signs of economic recovery are strengthening in Greece, which is expected to return to growth in 2014.
- 25 May: European elections held in Greece