[MGSA-L] Greek Statistician Under Scrutiny for Budget Estimates Before Euro Crisis

June Samaras june.samaras at gmail.com
Sun Apr 8 20:15:24 PDT 2012


Greek Statistician Under Scrutiny for Budget Estimates Before Euro Crisis

By RACHEL DONADIO
Published: April 6, 2012

http://www.nytimes.com/2012/04/07/world/europe/greek-official-under-scrutiny-for-pre-crash-budget-figures.html?src=recg

ATHENS — Andreas Georgiou was not particularly alarmed when he was
asked to testify in a judicial investigation into one of the most
contentious issues in Greece today: whether the 2009 budget deficit —
which precipitated not only Greece’s crash but the broader euro zone
crisis — had been badly overstated.

As the director of Greece’s newly founded statistical authority, he
was prepared to be summoned for questioning, but not for what actually
awaited him. “To my surprise, we were called not as witnesses but as
suspects,” he said.

Recruited in 2010 to help get Greece’s famously unreliable public
accounting in order, Mr. Georgiou quickly found himself the target of
a criminal investigation, parrying accusations of disloyalty — hiring
consultants to write Greek law and of working more for his previous
employer, the International Monetary Fund, than the Greek government.
He, in turn, has accused his opponents of hacking into his e-mail.
Prosecutors have not yet brought charges, Mr. Georgiou said, but they
are still investigating him for “breach of faith against the state”
for his role in calculating Greece’s deficit and debt.

While Greece’s insolvency was inevitable, its loan agreements are
based solely on such numbers and every extra percentage point in the
deficit — especially the ones calculated on Mr. Georgiou’s watch — has
translated into spending reductions that have affected millions of
lives, from salary and pension cuts to hospitals that can no longer
afford to buy medicines. The connection was underscored this week with
the public suicide of a 77-year-old pensioner in downtown Athens, an
act that set off an outpouring of grief and anger.

The issue also has broad implications for Europe, where auditing
standards have been a problem ever since the Stability and Growth Pact
set a 3 percent limit on budget deficits but failed to establish
strong monitoring and enforcement mechanisms — a virtual invitation to
financial shenanigans. The euro crisis may be in abeyance for now. But
with the finances of deeply indebted nations like Greece, Portugal and
Spain continuing to deteriorate, the question of how deficits are
calculated is emerging as a battleground across Europe.

Few people know that better than Mr. Georgiou, who has vowed to retain
his post in the face of the judicial investigation and a separate
parliamentary investigation that was wrapped up recently with no
finding of wrongdoing — largely because the Socialists leading the
inquiry exonerated themselves.

The latest chapter in the complex saga begins in June 2010, a month
after Greece signed its first loan agreement with the so-called troika
— the European Union, the European Central Bank and the International
Monetary Fund — when the former finance minister, George
Papaconstantinou, appointed Mr. Georgiou to run the Hellenic
Statistical Authority, known as Elstat.

A year earlier, Greece had been plunged into crisis when the newly
elected Socialists announced that the 2009 budget deficit would be
12.4 percent of gross domestic product, twice the previous estimate.
In April 2010, the European Union’s statistics agency, Eurostat,
revised Greece’s deficit upward again, to 13.6 percent, which forced
Greece to seek a bailout. And in November 2010 Eurostat, working with
Elstat and Mr. Georgiou, revised the deficit for 2009 upward a final
time to 15.4 percent, leading the troika to demand additional budget
cuts of $7.65 billion.

How that final calculation was conducted is now the subject of intense
debate. Mr. Georgiou has said that it reflects Greece’s first-ever
adherence to accepted European procedures. Yet some critics, including
some who were on Elstat’s since-disbanded six-person board, said that
Mr. Georgiou had actually applied standards that were stiffer than
European norms, then tried to thwart them when they raised questions
about the process.

Zoe Georganta, a professor of applied econometrics and productivity at
Macedonia University of Economic and Social Sciences and Mr.
Georgiou’s fiercest critic, said that the statistics czar, guided by
two foreign experts hired by Eurostat, added the country’s
money-losing public utilities to the government’s accounts, raising
the budget deficits by three-quarters of a percentage point. This had
been done before in other European countries, financial experts said,
but usually to bring the deficit down, not pump it up.

“He wanted us to be a rubber stamp,” said Ms. Georganta, an expert in
public accounting. Four out of six members of the former board
interviewed for this article said Mr. Georgiou never adequately
explained how the final 2009 deficit was calculated.

For his part, Mr. Georgiou said that members of the board had the
incorrect assumption that they could “vote” on methodology and
statistics, and that some represented vested interests that did not
want Greece’s dire finances to come to light. “We were faced with
significant pressures through the board not to revise the deficit
upwards on account of fully applying European Union rules, but to
minimize it,” he said.

In the past, countries in a stronger position than Greece have
traditionally negotiated with Eurostat over how to classify items in
the government debt. In testimony before the parliamentary committee,
other Greek officials said the country had lost that ability once it
accepted foreign aid.

In a telephone interview, Walter Radermacher, the director of
Eurostat, acknowledged that it was not always clear how to classify
public utilities, but said the larger issue was that Greece did not
have accurate records. “The borderline of this general government is
not something which is fixed forever, it changes more or less each
year,” he said. “Our request is that all these companies are
maintained in a statistics register. This register simply did not
exist in Greece.”

Some see Mr. Georgiou as a crucial figure in Greece’s transition from
a sovereign country to a de facto European protectorate. In a private
letter Mr. Georgiou sent on Oct. 16, 2010, he consulted with Poul M.
Thomsen, the I.M.F.’s representative in Greece, about changing Greek
law to limit the power of Elstat’s board. Mr. Georgiou acknowledged to
Parliament that the I.M.F. had not accepted his resignation until four
months after he became director of Elstat so that he could qualify for
an I.M.F. pension when he turned 50, raising questions about his
independence.

Mr. Georgiou, who remains the head of Elstat, said it was “only
natural” that as head of the statistics office he would communicate
“with various stakeholders in the reliability of Greek statistics.” He
added that the use of the letter in the parliamentary investigation
was illegal since it had been “subjected to theft.” (A former member
of the Elstat board has been charged with hacking into his e-mail.)

Ms. Georganta and other critics also objected that outside consultants
hired by Eurostat were instrumental in how the government revised the
law — something they say would probably never be acceptable in larger
European countries. The original members of the board were dismissed
in September 2010 and Parliament later passed a law to limit the
board’s power.

As part of the loan agreement that Greece reached with its foreign
lenders in February, it pledged to pass a measure to further expand
the powers of the Elstat director and to give the board a purely
advisory capacity. Greece pledged to pass the bill by March 31; it is
still pending in Parliament.

Mr. Georgiou says the law change will allow Greece to continue
modernizing its statistics methodology. But his critics say the new
law gives Mr. Georgiou too much power, making him more easily beholden
to Greece’s lenders in what his critics see as a crucial loss of
sovereignty.

The Greek crisis has also led to changes in Europe. Eurostat has
tripled its staff for investigating member countries’ deficits to 45
people from 15, Mr. Radermacher said.

“We didn’t have the powers to put pressure on member states to be
compliant; now we have a lot of powers, and we will have more after
the change in legislation,” he said, referring to new norms expected
to be approved by the European Commission this year. He added that
under Mr. Georgiou, Greece’s credibility on statistics has improved
markedly.

But experts say that the information still varies widely across
Europe. Asked if the countries in the euro zone could agree on a
shared statistical reality, on a truth about the numbers, Mr.
Radermacher was direct.

“The truth is not my business,” he said. “I am a statistician. I don’t
like words like ‘correct’ and ‘truth.’ Statistics is about measuring
against convention.”



-- 
June Samaras
2020 Old Station Rd
Streetsville,Ontario
Canada L5M 2V1
Tel : 905-542-1877
E-mail : june.samaras at gmail.com



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