April 02, 2020 / By mobanmarket
Finance ministers call for reforms to allow Greek government to regain confidence of financial markets. EU chides Greece for dodgy economic data
The European Union’s finance ministers today urged Greece to reform its procedures for drawing up economic statistics.
Ministers said that the reforms were necessary if the government was to restore the confidence of financial markets in Greece’s economic data. That confidence was shattered in October when Greece revised sharply upwards its published deficit for 2008, and its projected deficit for 2009.
It raised its projected figure for 2009 by more than four percentage points to 12.5% of gross domestic product (GDP), more than four times the 3% limit allowed under the EU’s stability and growth pact. This was increased again to 12.7% in November.
The hike in Greece’s deficit projection influenced Fitch, Moody’s and Standard & Poor’s to cut Greece’s credit rating in December. The credit rating agencies’ decisions to downgrade Greece prompted market panic as investors considered the possibility of a Greek default, or even the country’s exit from the eurozone.
The European Commission last week published a scathing report into Greece’s manipulating and massaging of economic data submitted to the EU’s statistical office, Eurostat, over the last five years.
The finance ministers issued a statement today calling on the Greek government to “decisively address the shortcomings in administrative and operational capacity involved in the production of…statistics”. They said Greece should put in place “transparent working practices between the various institutions…granting them full accountability”.
The Commission said that it would, in the coming weeks, publish an action plan of measures that Greece should take to improve the quality of its statistics. It said that this action plan would be drawn up in co-operation with the Greek government and would be submitted to finance ministers for approval.
The Commission said it would, in tandem with the action plan, present a legal proposal to ministers to grant Eurostat auditing powers. Joaquín Almunia, the European commissioner for economic and monetary affairs, said these powers would have helped to prevent the situation that has unfolded in Greece.
Almunia said that the audit powers would allow Eurostat officials to carry out visits and investigations in a member state if it had “reasonable doubts about the accuracy of the figures received”. He said that the powers would not be used every day.
The Commission made a similar request for auditing powers in 2005, but it was rejected by member states. Jean-Claude Juncker, the president of the Eurogroup, said yesterday that this rejection had been a “major mistake”.
Giorgos Papaconstantinou, the Greek finance minister, said that Greece would take all the necessary measures to restore faith in its finances.
“I want to make it absolutely clear that the Greek government will do everything possible to provide a free and full flow of information to Eurostat,” Papaconstantinou said.
He said that the Greek government had already drawn up draft legislation to make the Greek national statistics office independent from government, and submitted it for comments to the Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF). He said the bill would be turned into law within a month of the ECB, IMF and Commission giving their feedback.
Papaconstantinou said that he would next week send to the Commission a draft action plan of other measures to improve the quality of statistics. He said the draft plan would include “certification of procedures” and a “clear memorandum of understanding on who does what [in Greek statistics collection]”.
He said he presented details to ministers of a three-year deficit reduction plan that the Greek government submitted to the Commission on Friday. The plan, which includes cutting the number of municipal authorities from more than 1,000 to 370, a freeze on recruiting civil servants, and tax reform, aims to cut Greece’s deficit to below 3% of GDP by 2012.
The Commission will, either later this month or in early February, adopt an opinion on the plan, and a proposal for how long Greece should have to bring its deficit within 3%.
Finance ministers are expected to adopt a decision on Greece’s deficit-reduction plan, and the timetable for deficit reduction, at a meeting on 16 February
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