World News /27 Apr 2014

Athens Confesses: The 2013 Primary Surplus was a Mirage

It’s official! The Greek government now confirms that the much lauded Greek government primary surplus for 2013 was a mirage created by the return of Greek Statistics (see this recent post). And also that the statistical trickery involved had the full approval of Eurostat, of the troika, of Berlin etc.

The ‘confession’ has come in the form of the deafening silence in response to the revelation that approximately €5 .4 billion was taken off government expenditure through the discovery of a non-existent ‘white hole’ in the government’s revenues. Yesterday, a tweet from a spoof account in the name of a Finance Ministry official reminded me that the New Greek Statistics are highly reminiscent of the Old Greek Statistics. When Greece imploded, back in 2010, we all thought that, at the very least, the time for truth had come. The bubble had burst, people were to suffer immensely, but at least we could envisage the start of a new era during which Greeks, Germans, the Irish, the Spanish, Europeans in general, would try to re-build on solid ground, would avoid erecting pyramids on a foundation of lies, would tell citizens the truth on our macroeconomic fundamentals.

In a tweet addressed to me, a spoof account in the name of Mr. Staikouras, the Alternate Finance Minister of Greece, had this to say:

Even if this tweeter account is not genuine, it captures brilliantly the government’s position on the matter and reminds me of how Greek Statistics was a source of pride for Greek Finance Ministry officials back in the late 1990s, when they succeeded in ‘repressing’ the Greek government budget numbers, prior to Greece’s entry into the Eurozone. It is clear now that the New Greek Statistics are also a source of pride in Greek government circles. But let’s begin at the beginning.

It now seems that even that modest aspiration was to be shattered by a European leadership which is trying to deal with the Euro Crisis, and its inane handling, simply by inflating some new bubbles in order to replace the old ones and thus to fashion a false sense of recovery – and all that while real economies and real people continue to struggle in an irretrievably broken social economy.

But let me return to the type of response that we are getting from Greek government circles to the recent unveiling of the New Greek Statistics. The gist of it is simple:

  1. Yes, we struggled to find statistical tricks that would disguise our 2013 primary deficit and present it as a surplus. “It was a bitch” to get Eurostat, the troika and Berlin to accept our trickery, but we made it! Aren’t we clever?
  2. If Eurostat accepts our New Greek Statistics, and our primary surplus as bona fide, it is all that matters.
  3. Instead of criticising us, you should be thanking us for having turned international opinion on Greece by means of these good news – even if they have been ‘manufactured’ through our New Greek Statistics.
  4. The acceptance by Europe and the troika of our ‘primary surplus,’ that we so valiantly achieved, will open the door to debt relief for Greece. Bingo!

Let us examine this argument point-by-point.

Regarding (1): “It was a bitch to pull it off!”

I have no doubt that it must have been ‘a bitch’ to convince Eurostat to accept the return of Greek statistics. Eurostat was burnt once, in 2010, when it emerged that, for years, it had been giving its stamp of approval to dodgy Greek Statistics on our government’s budget numbers. When Greek Statistics became a worldwide joke, Eurostat’s reputation suffered massively too, as it was clear that every single Greek ‘number’ had previously received Eurostat’s seal. So, I would be ready to believe Greek Finance Ministry officials that it was not easy to convince Eurostat to accept the New Greek Statistics.

Having said that, the Greek Finance Ministry did not have to invent its new trickery from scratch. The idea of ‘discovering white holes’ in the pension funds was first used in the late 1990s in order to ‘show’ that the Greek government’s budget deficit was closer to the Maastricht criterion (of -3% of GDP) than it really was. How do I know that? Because I was told in person by the official responsible at the time for coming up with that ‘trick.’ Who was that official? Yannis Stournaras, the current Finance Minister who, back in the 1990s, was Greece’s Chair of the Council of Economic Advisers, responsible for negotiating Greece’s entrance into the Eurozone. From the horse’s mouth, so to speak…

Regarding (2): If Eurostat condones the New Greek Statistics, should we fret?

When Yannis Stournaras was telling me, just after Greece’s entry into the eurozone, of his ‘white hole in the pension funds’ trick, he was (I recall) brimming with pride. (Just like the current government is, without a care in the world that the primary surplus reported is a mirage caused by creative New Greek Statistics.) For my part, I admit I congratulated him – back then. My thinking then was that the Maastricht criteria (in my estimation) lacked any serious macroeconomic rationale and, therefore, if Eurostat, and the rest of Europe, were happy to turn a blind eye to Greek Statistics (as they were doing not only vis-à-vis Greece but also vis-à-vis Italy, even Germany), so be it.

Since then, the Eurozone has fallen prey to its own design faults, with Greece having turned into a failed social economy. Today, a majority of Greeks are fighting for their lives under a cloud of immense private and public indebtedness, a much reduced GDP, a broken labour market, negative investment levels, and a zombie banking system. The governments in Athens and Berlin are, this time around (in contrast to the late 1990s), using Greek statistics not in order to bypass the Maastricht criteria but in order to fool their electorates that the crisis is over. Their only aim is to score an electoral victory in the forthcoming European Parliament Elections.

There are two issues here regarding the return of Greek statistics: First, is it a good idea intentionally to lie again to the people of Europe at a time when public trust in Europe’s institutions is at an all time low? Secondly, is this lie going to be pressed into the service of making life more bearable for the multitude of suffering Greeks? I submit that both questions ought to be answered in the negative.

Regarding (3) and (4): Will something good come out of the New Greek Statistics?

Greece’s Finance Ministry officials have undoubtedly convinced themselves that massaging the primary budget numbers, until they yield a ‘surplus,’ was in Greece’s national interest; to the extent that, as long as Eurostat condones them, the road opens toward the debt relief that Berlin has promised Mr. Samaras (the Greek PM) two years ago.

Setting aside any Kantian objections to the idea of ‘useful lies,’ it is absurd to believe that Berlin will proceed with a meaningful Greek debt restructure, using a primary surplus (occasioned by the New Greek Statistics) as a pretext. All Mrs. Merkel and Mr. Schauble will do after the summer is to effect a new phase in the ‘extend and pretend’ game vis-à-vis Greece’s public debt; i.e. they will be extending the repayment schedule till after 2050 and slightly reducing interest rates on a part of that debt. Essentially, Greece’s debt mountain will continue to weigh like an elephant on the weakened chest of Greece’s economy, only the Greek government’s annual installments will be less unmanageable. Overall, however, Greece will remain insolvent ad infinitum. What investor will, in her right mind, seriously commit to such an economy?


So, the question becomes: Was it worth reviving Greek Statistics, and lying about our budget numbers to the people of Greece, of Germany, to the world at large, so as to keep Greece, for decades to come, in perpetual debt bondage? Very much so, from our leaders’ perspective, given that their objective is simply to pull the wool over Europeans’ eyes with a view to winning the European Parliament elections on the basis of the lie that, if the Greek debt crisis is over, so is the Euro Crisis.

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