Greek deficit mounts after EU checks data

Greece's financial credibility was dealt another knock on Thursday, DPA reports. This came the European Union's statistical arm, Eurostat, said the country's deficit figures for 2009 were worse than expected. Greek deficit mounts after EU checks data The news came as European Union, European Central Bank (ECB) and International Monetary Fund (IMF) officials were engaged in talks in Athens on the terms of a possible 45 billion euro (60 billion dollars) bail-out loan for the debt-stricken country. Greece's budget gap reached at least 13.6 per cent of gross domestic product (GDP) last year, Eurostat said after verifying data submitted by all EU member states. Previous estimates had put the Greek budget gap at 12.7 per cent. The figure may rise further as Eurostat still has "reservations," with questions marks hanging, among other things, on the currency swaps that Greece signed with US investment banks such as Goldman Sachs to take items of spending off its public accounts. "Following completion of the investigations that Eurostat is undertaking on these issues in cooperation with Greek statistical authorities, this could lead to a revision for the year 2009 of the order of 0.3 to 0.5 percentage points of GDP," it said. Eurostat aims to complete the probe in June or July, an EU official told DPA. The EU statistical office said Greek public debt figures, currently standing at 115.1 per cent of GDP in 2009, could also be affected, rising by 5 to 7 percentage points. However, the commission insisted that the higher deficit and debt figures did not mean that deeper cuts were necessary to lower them, at least for this year. Athens is following a strict belt-tightening program under strict surveillance from Brussels, which mandates a 4 percentage point reduction in the deficit/gross domestic product ratio (GDP) in 2010. "The adjustment path for 2010 remains valid," Amadeu Altafaj, spokesman for economy commissioner Olli Rehn, told reporters in Brussels. However, the statistical revision underlined "the urgency to intensify the preparations of structural reforms and additional measures for the coming years," Rehn stressed in a statement. The commissioner also called for "an effective and full implementation" of the budget cuts already agreed by the Greek government for the current year. Altafaj did not answer directly whether the target to lower the Greek deficit to 3 per cent of GDP by 2013, bringing it to the maximum level allowed by the EU's budgetary rules, was still realistic. "It has to be assessed regularly," he said, adding that the euro area ministers will next review the situation in June. The unreliability of Greek statistics has been a recurrent theme since it joined the eurozone in 2001. The current socialist government in Athens said on taking office last October that its conservative predecessor had massively underestimated deficit and debt levels when reporting to the EU. But the conservatives leveled exactly the same accusations against the socialists when they took over from them in 2004. Ireland's and Bulgaria's data for 2009 were also found wanting by Eurostat, with budget deficits for the two estimated respectively at 14.3 per cent and 3.9 per cent of GDP. Dublin had previously forecast a shortfall of 11.8 per cent of GDP, but the data was corrected after accounting for money spent on the bailing-out of the Anglo-Irish bank. In Sofia, the sitting conservative government corrected the 1.9 per cent figure submitted by a previous socialist administration in early April, but only up to 3.7 per cent of GDP. According to Rehn, events show the need to give Eurostat audit-type powers, so that problematic data can be spotted earlier. The proposal, which the commission pushed unsuccessfully in 2005, last time Greece was caught cooking its books, was retabled in March. "I call on the Council and Parliament to adopt the relevant legislation to this end without delay," Rehn said.

Greek deficit mounts after EU checks data

The news came as European Union, European Central Bank (ECB) and International Monetary Fund (IMF) officials were engaged in talks in Athens on the terms of a possible 45 billion euro (60 billion dollars) bail-out loan for the debt-stricken country.

Greece's budget gap reached at least 13.6 per cent of gross domestic product (GDP) last year, Eurostat said after verifying data submitted by all EU member states. Previous estimates had put the Greek budget gap at 12.7 per cent.

The figure may rise further as Eurostat still has "reservations," with questions marks hanging, among other things, on the currency swaps that Greece signed with US investment banks such as Goldman Sachs to take items of spending off its public accounts.

"Following completion of the investigations that Eurostat is undertaking on these issues in cooperation with Greek statistical authorities, this could lead to a revision for the year 2009 of the order of 0.3 to 0.5 percentage points of GDP," it said.

Eurostat aims to complete the probe in June or July, an EU official told DPA.

The EU statistical office said Greek public debt figures, currently standing at 115.1 per cent of GDP in 2009, could also be affected, rising by 5 to 7 percentage points.

However, the commission insisted that the higher deficit and debt figures did not mean that deeper cuts were necessary to lower them, at least for this year.

Athens is following a strict belt-tightening program under strict surveillance from Brussels, which mandates a 4 percentage point reduction in the deficit/gross domestic product ratio (GDP) in 2010.

"The adjustment path for 2010 remains valid," Amadeu Altafaj, spokesman for economy commissioner Olli Rehn, told reporters in Brussels.

However, the statistical revision underlined "the urgency to intensify the preparations of structural reforms and additional measures for the coming years," Rehn stressed in a statement.

The commissioner also called for "an effective and full implementation" of the budget cuts already agreed by the Greek government for the current year.

Altafaj did not answer directly whether the target to lower the Greek deficit to 3 per cent of GDP by 2013, bringing it to the maximum level allowed by the EU's budgetary rules, was still realistic.

"It has to be assessed regularly," he said, adding that the euro area ministers will next review the situation in June.

The unreliability of Greek statistics has been a recurrent theme since it joined the eurozone in 2001. The current socialist government in Athens said on taking office last October that its conservative predecessor had massively underestimated deficit and debt levels when reporting to the EU.

But the conservatives leveled exactly the same accusations against the socialists when they took over from them in 2004.

Ireland's and Bulgaria's data for 2009 were also found wanting by Eurostat, with budget deficits for the two estimated respectively at 14.3 per cent and 3.9 per cent of GDP.

Dublin had previously forecast a shortfall of 11.8 per cent of GDP, but the data was corrected after accounting for money spent on the bailing-out of the Anglo-Irish bank.

In Sofia, the sitting conservative government corrected the 1.9 per cent figure submitted by a previous socialist administration in early April, but only up to 3.7 per cent of GDP.

According to Rehn, events show the need to give Eurostat audit-type powers, so that problematic data can be spotted earlier.

The proposal, which the commission pushed unsuccessfully in 2005, last time Greece was caught cooking its books, was retabled in March.

"I call on the Council and Parliament to adopt the relevant legislation to this end without delay," Rehn said.