Revised Greek deficit figures cause outrage
Senior EU financial personalities expressed deep concern, bordering on amazement, on Monday night (19 October) over recently revised Greek deficit forecasts.
At a Luxembourg meeting of the euro area's 16 finance ministers, Greek minister George Papaconstantinou from the newly elected Socialist government gave a presentation on his country's shaky situation.
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Forecasts released earlier this year by the former centre-right government predicted a deficit of 3.7 percent of GDP for 2009. But new figures released by the country's central bank now say it is more likely to exceed 10 percent of GDP, and could hit 12 percent.
"I have to say that I am very impressed by the difference between the old and the new figures," said the meeting's chairman, Jean-Claude Juncker, with characteristically dry sense of humour.
"It happens occasionally but if it happens again we risk putting all Eurostat data at risk of credibility," he added more seriously.
Greek deficit forecasts made by Eurostat – the EU's statistic's office – have also been off the mark due to the poor quality of information provided to them by the southeastern European country.
The EU's economy commissioner, Joaquin Almunia, was straight to the point in the news conference after the meeting.
"We want to know what has happened and why it has happened," he said, indicating that the commission, Eurostat and the Greek statistics office would be getting together shortly to discuss the issue.
"Serious discrepancies will require an open and deep investigation," he added.
Large states told to respect budget pact
While one of Europe's big spenders was given a thorough chastising, France and Germany were also told to get their finances in order.
EU economies are bound by the Stability and Growth Pact which limits budget deficits to three percent of GDP. However a 2005 revision of the pact allows government's to exceed this level under exceptional circumstances, an alteration they have taken full advantage of in the current climate.
Twenty of the EU's 27 members have now been the subject of some form of deficit action from the European Commission, meaning a report with a timetable to bring deficits down.
France expects its overall public deficit to reach 8.2 percent of GDP in 2009, rising to 8.5 percent in 2010. Germany - the euro area's biggest economy - expects its deficit to swell from 3.7 percent of GDP this year to 6 percent in 2010.
Mr Juncker said smaller member states would have great difficulty in explaining to their citizens why spending cuts and tax rises were needed to bring deficits down, if their bigger neighbours did not take similar action.
Jean-Claude Trichet, president of the European Central Bank, agreed. "France and Germany have to be treated in the same fashion," he said.
Euro area finance ministers now agree that exit strategies to end the current stimulus measures should commence in 2011, assuming commission figures out next month point to economic recovery in 2010.
The precondition is that any forecast euro area growth is based on normal economic drivers and not the current stimulus spending which is inflating demand.
Once that condition is met, budget consolidation through spending cuts and tax rises will need to exceed the normal 0.5 percent of GDP warned Mr Juncker, while Mr Almunia indicated that for several member states the process will need to start before 2011.