Greece admitted yesterday that the budget figures it used to gain entry to the euro three years ago were fudged. The Finance Minister, George Alogoskoufis, said the true scale of Greece's budget deficit was massively understated enabling Athens to dip below the qualification bar and into the EU's single currency.
Greece admitted yesterday that the budget figures it used to gain entry to the euro three years ago were fudged. The Finance Minister, George Alogoskoufis, said the true scale of Greece's budget deficit was massively understated enabling Athens to dip below the qualification bar and into the EU's single currency.
"It has been proven that the deficit had not fallen below 3 per cent in every year since 1999," Mr Alogoskoufis told reporters.
The European Commission said there was no question of revisiting Greece's eurozone membership, but the row over budget figures has dealt another severe blow to the credibility of the single currency's battered rulebook, the Stability and Growth Pact.
A Commission spokesman, Gerassimos Thomas, said there could be no going back. "Greece's admission to the eurozone was done on the basis of the convergence report which was established at the time and on the basis of figures and the statistical methodology applied at that time. It wasn't in question at that time."
The Greek financial daily Naftemboriki said the corrected deficits for the crucial period from 1997 to 1999, when the country's economic data was scrutinised to decide on its eligibility for the eurozone, were 6.44 per cent, 4.13 per cent and 3.38 per cent respectively. The conservative government in Athens has placed the blame on its Socialist predecessors.
The confusion centres on what Mr Alogoskoufis alleges was the systematic misreporting of defence spending. Athens spread the financial burden of a multibillion-euro jet fighter contract across separate budgets but these accounting problems may not explain the size of the discrepancy.
The Pasok party, now the official opposition, has strenuously denied fiddling its way into the euro and accused the conservatives of playing politics with Greece's fiscal reputation.
Athens is already in the dock for breaking the central rule for eurozone nations: that their budget deficits should be below 3 per cent of GDP. Greece's current deficit is running at more than 5 per cent and with updated costs from the orgy of spending on this summer's Olympics still filtering through that figure seems set to rise. The total cost for the August Olympiad has been put at €9bn, (£6.3bn) nine times the amount spent by previous hosts Sydney.
Greece is expected to lodge revised budget data with Brussels showing it had broken the EU budget deficit limit every year since 2000. Athens is not alone in breaking the 3 per cent rule and persistent offenders France and Germany have escaped without suffering penalties.
EU finance ministers will discuss reforms to the pact at a meeting in Brussels today at which they will try to agree on the amount by which the Greek figures were inaccurate - a sum thought to be equivalent to about two percentage points of GDP per annum for four or five years. A decision on what to do about the Greek case is not due to be taken until the next meeting in December.
Greece's faulty figures have provoked a debate in Brussels over the power that should be given to the EU's statistical agency, Eurostat, to check financial data declared by governments. Big countries, including the UK, are resisting efforts to give the agency new, supervisory, powers over national statistical bodies.
They claim that problems have only been unearthed in smaller states, such as Greece and Portugal. "Just because there are one or two examples does not mean you have to up-end the entire statistical framework of member states," said one British official. "However the answer is to make the existing system work better not to give Eurostat control over national statistical agencies".
