Greek Statistics are Back: Primary Deficit Presented as Surplus


Greek Statistics are Back: Primary Deficit Presented as Surplus

Simon Dawson/BloombergSimon Dawson/Bloomberg

Have you heard the one about Greece’s Eurostat-approved 2013 primary surplus? Well, you should not believe it. Here is why. Eurostat has just approved the Greek statistical service’s (ELSTAT) figures on the general government’s primary surplus of around 0.8% of GDP. Were that true, it would have been of great significance. Not because Greek debt would have, magically, become sustainable but, rather, because it would have meant that the Greek government would have acquired great leverage in its negotiations on the impending restructuring of Greece’s public debt.

Put simply, it would mean that the government could, at least in theory, suspend debt repayments to the troika while the negotiations are continuing, without having to renege on its payments of salaries, pensions, and suppliers. Alas, the Greek government’s 2013 primary surplus is a statistical mirage. Moreover, it is a mirage purposely concocted by Eurostat and ELSTAT under the watchful, and conniving, eyes of Berlin, Frankfurt and Brussels. Mindful of how weighty these charges are, I list my evidence immediately below.

According to the official figures that Eurostat just released, Greece’s general government had, in 2013, a deficit of 2.1% of GDP, which skyrockets to 12.7% if we add to it the cost of recapitalising the banks (again during 2013). Let’s accept that this cost should not count as part of the government’s outlays (even though it is not clear why it should not). Let’s accept also that the government’s arrears to the private sector for 2013, of about €4 billion, which the government has a contractual obligation to pay within 2013 (but didn’t) should, again, be kept out of the government’s 2013 outlays. Still, as mentioned above, we are left with a primary deficit of 2.1% of GDP. So, how come the world’s media are celebrating the great news that Greece achieved its first primary surplus in years? The answer is wholly unappetizing.

Buried inside the official national statistics, the keen observer will notice something rather strange. To be precise, she will notice two unexpected ‘windfalls’ that have turned the Greek government’s primary deficit into a primary surplus. Was it manna from heaven? Some boost in the tax take? No, none of that. It was two so-called ‘white holes’: €700 million was ‘discovered’ inside the local authorities’ accounts and another €4.7 billion inside the accounts of the state pension funds. Last year, in 2012, these ‘holes’ were distinctly ‘black.’

So, how did they turn ‘white’ in 2013? Did local authorities and pension funds experience a stunning revival? No, dear reader. Rather, monies borrowed by the Greek state, from Europe, were parked into these accounts during 2013, did not count as part of the state’s new liabilities, but were counted as part of its…assets. Of course, anyone who knows anything about Greek public finances knows that local authorities and, especially, pension funds are bankrupt – profoundly so the pension funds after the 2012 PSI destroyed much of their capitalisation. The notion that, during 2013, they held more that €5 billion worth of real, home-grown liquid assets on behalf of the government is utterly laughable.

The question is: Why has Eurostat condoned the return of Greek statistics? This is a moot question since, let me remind you dear reader, Eurostat has always given its seal of approval to all sorts of ‘Greek statistics’ in the past. Simply put, there is nothing new there. Then the question becomes: Why on earth did Berlin, the ECB and the troika not kick and scream at the sight of the resurgent Greek statistics? Of course, this is a naive question. Berlin, Frankfurt and Brussels are only interested in one thing these days, regarding Greece: To declare victory against the Greek crisis prior to the May European Parliament Elections. Eurostat was just doing as it was told.

Only one question remains: Why has the world’s financial press accepted this subterfuge as fact? The only answer I can offer is that: (a) they are lazy (and thus uninterested in looking closer at the facts) and/or (b) bad news from Greece is a highly devalued commodity, these days, in the international media market. “And what about the truth?,” I hear you ask? That is certainly an unattractive commodity.

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