Greece could face EU legal action

14/01/2010

The EU is mulling infringement proceedings against Greece for providing unreliable statistics on its budget deficit and debt.

(Dow Jones, European Voice - 14/01/10; Reuters, AFP, BBC, FT, Europolitics, EurActiv, Euobserver, Kathimerini, Balkans.com - 13/01/10; AFP - 12/01/10)

The EU's statistical office, Eurostat, criticised the fact that Greece revised its budget deficit last year from 3.7% of GDP to 12.5%. [AFP]

The European Commission (EC) is likely to take legal measures against Greece for submitting unreliable information about its public debt and budget deficit, media reports quoted an EU source as saying Wednesday (January 13th).

"There will probably be another infringement procedure ... because providing timely and reliable statistics is an obligation under EU law and they have failed in their obligation," the unnamed official said.

The statement was an apparent reference to proceedings the EC launched against Greece in 2004 over the authorities' widespread misreporting of deficit and debt data in previous reports. The information was used by Greece in 2001 to gain admission into the eurozone.

An EU report also noted repeated complaints last year to the EU from the head of the National Statistical Service of Greece (NSSG) saying there had been political interference over the submitted figures.

The threat of new legal steps against Athens followed a damning EC report on Greek government deficit and debt statistics, released on Monday. That document accused the country of "severe irregularities" in its national accounting procedures.

According to the report, on October 2nd and 21st of 2009, Greece's previous conservative government and its Socialist successor sent the EU widely differing notifications on the country's excessive deficit for the years 2005 through 2008, as well as contradictory forecasts for 2009.

In the report submitted by the current PASOK government on October 21st of last year, the government's deficit for 2008 was revised to 7.7% of GDP, up from from the 5% reported in April and validated by the EU office, Eurostat.

The 3.7% of GDP deficit for 2009, also forecast in April, was revised to 12.5% of GDP, well above the 3% ceiling permitted to countries in the eurozone. "Revisions of this magnitude in the estimated past government deficit ratios have been extremely rare in other EU member states, but have taken place for Greece on several occasions," the report noted.

"These most recent revisions are an illustration of the lack of quality of the Greek fiscal statistics … and show that the progress in the compilation of fiscal statistics in Greece, and the intense scrutiny of the Greek fiscal data by Eurostat since 2004 ... have not sufficed to bring the quality of Greek fiscal data to the level reached by other EU member states." The EC also warned of potential further problems, as Eurostat had not yet validated the figures provided in October.

"A substantial number of unanswered questions and pending issues still remain in some key areas, such as social security funds, hospital arrears, and transactions between government and public enterprises," it said. "These questions will need to be resolved, and it cannot be excluded that this will lead to further revisions of Greek government deficit and debt data, particularly for 2008, but possibly also for previous years."

Greece's debt, currently standing at 113% of GDP and expected to grow, is already nearly double the 60% limit set for the members of the 16-nation eurozone.

Some analysts are concerned that Greece's fiscal problems could threaten the stability of the 16-nation group the shares the euro currency.

Olli Rehn, the EU's economic and monetary affairs commissioner-designate said during his confirmation hearing in the European Parliament on Monday that he doubts Greece would either try to leave the eurozone or be forced to do so.

Greek Prime Minister George Papandreou's government has vowed to bring its deficit in line with 3% of GDP ceiling for the eurozone countries by the end of 2012.

"It is our commitment to leave behind the giant deficits of the past," he said on Wednesday, adding that an exit from the eurozone is not an option. "We will do whatever we need to to achieve our targets within three years."

During a visit to Athens on Tuesday, new EU Permanent President Herman Van Rompuy said Greece is taking steps to meet the "substantial" challenge posed by its fiscal woes.