10 Greek financial statistics
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5175/10
+ ADDs 1-6
COM(10) 1
| Commission Report on Greek Government deficit and debt statistics
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| Legal base | — |
| Document originated | 8 January 2010
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| Deposited in Parliament | 15 January 2010
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| Department | HM Treasury |
| Basis of consideration | EM of 4 February 2010
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| Previous Committee Report | None
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| To be discussed in Council | 16 February 2010
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
10.1 The Stability and Growth Pact adopted by the Amsterdam European
Council in June 1997 emphasised the obligation of Member States
to avoid excessive government deficits, defined as the ratio of
a planned or actual deficit to gross domestic product (GDP) at
market prices in excess of a "reference value" of 3%.[38]
Each year the Council of Economic and Finance Ministers (ECOFIN)
issues an Opinion on the updated stability or convergence programme
of each Member State.[39]
These Opinions, which are not binding on Member States, are based
on a recommendation from the Commission. The economic content
of the programmes is assessed with reference to the Commission's
current economic forecasts. If a Member State's programme is found
wanting, it may be invited by ECOFIN, in a Recommendation, to
make adjustments to its economic policies, though such Recommendations
are likewise not binding on Member States. This whole procedure
is essentially the Pact's preventative arm.
10.2 On the other hand, the Pact also endorsed a
dissuasive or corrective arm involving action in cases of an excessive
government deficit — the excessive deficit procedure provided
for in Article 126 TFEU and the relevant Protocol. This procedure
consists of Commission reports followed by a stepped series of
Council Recommendations (the final two steps do not apply to non-members
of the eurozone). Failure to comply with the final stage of Recommendations
allows ECOFIN to require publication of additional information
by the Member State concerned before issuing bonds and securities,
to invite the European Investment Bank to reconsider its lending
policy for the Member State concerned, to require a non-interest-bearing
deposit from the Member State concerned whilst its deficit remains
uncorrected, or to impose appropriate fines on the Member State
concerned.
10.3 The Commission's economic forecasts and recommendations,
and therefore the Council's subsequent decisions, related to the
Pact depend on economic and financial statistics from the Member
States.
The document
10.4 This Commission Report is about Greek Government
deficit and debt statistics. It is accompanied by six annexes
on:
- methodological issues;
- quarterly non-financial and financial government
statistics;
- reservations on the quality of the Greek data
expressed by Eurostat between 2005 and 2009;
- action plan and list of recommendations as implemented
by December 2009;
- debt of public hospitals of the Greek national
healthcare system; and
- infringement procedure.
10.5 The report is broadly factual but delivers highly
critical assessments of the Greek statistical system. It identifies
two main problems which have had effects on debt and deficit reporting
over the past few years, most notably in the context of the excessive
deficit procedure:
- statistical weaknesses and
unsatisfactory technical procedures in the Greek statistical institute,
the NSSG, and in the several other services that provide data
and information to the NSSG, including the General Accounting
Office and the Ministry of Finance; and
- inappropriate governance — poor cooperation
and lack of clear responsibilities between institutions, diffuse
personal responsibilities and ambiguous empowerment of officials
and absence of written instruction and documentation.
This poor practice has led to severe irregularities
in the reporting of debt and deficit statistics under the excessive
deficit procedure, including:
- instances of "deliberate
misreporting";
- a lack of respect for accounting rules and of
the timing of the notification required under procedure; and
- the susceptibility of the Greek statistical system
to political pressures and electoral cycles.
10.6 The Commission's overall assessment is that
the current setup of the Greek statistical system "does not
guarantee the independence, integrity and accountability of the
national statistical authorities" and it outlines a list
of broad goals which Greece should aim to achieve:
- clarifying and "personalising"
the responsibilities of the different statistical entities involved;
- respecting the European Statistics Code of Practice;[40]
and
- making the NSSG independent, through the revision
of the current law on statistics.
However, it does not outline any explicit next steps.
10.7 The report, in various places, notes limits
on Eurostat's authority to carry out audit and controls in Member
States. Highlighting the shortcomings of monitoring instruments
available to Eurostat with respect to the problems faced in Greece,
the Commission concludes that in spite of the concerted and consistent
efforts carried out by Eurostat services since 2004 to ensure
Greece's respect of the applicable rules and methods, the situation
can only be corrected by decisive action of the Greek government.
The Government's view
10.8 The Economic Secretary to the Treasury (Ian
Pearson) says that:
- the report does not have
any direct policy implications for the UK;
- the Government will, however, be monitoring the
situation closely as this issue is of importance to all Member
States; and
- although the Commission does not present any
explicit next steps, the issue of Greece is likely be dealt with
at the forthcoming ECOFIN Council meeting, on 16 February 2010.
Conclusion
10.9 Although the continued inadequacy of these
statistics is a matter of concern, there are no questions arising
from the document which we wish to raise. But, whilst we are content
to clear the document, we draw it to the attention of the House.
38 This obligation does not apply to Member States,
including the UK, whilst they remain outside the eurozone, but
they are required to endeavour to avoid excessive deficits. Back
39
The 16 Member States (Austria, Belgium, Cyprus, Germany, Greece,
Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands,
Portugal, Slovakia, Slovenia and Spain) that have adopted the
euro have Stability Programmes, whereas the other 11 Member States
(including the UK) produce Convergence Programmes. Back
40
(26595) 9461/05: see HC 34-ii (2005-06), chapter 5 (13 July 2005),
HC 34-viii (2005-06), chapter 18 (2 November 2005) and HC 34-xiv
(2005-06), chapter 20 (11 January 2006). Back
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