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 primary deficit of 12.7% of GDP 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). According to the official announcement, a 2013 primary surplus thus emerges to the tune of €1.5 billion (note that ELSTAT had announced, under the ESA95 rule, a primary surplus of €3.39 billion which was then ‘downgraded’ to €1.5 billion). From this €1.5 billion we ought to subtract the government’s arrears to the private sector for 2013, of about €4 billion, since the government had a contractual obligation to pay these monies within 2013 (but didn’t). But, for the sake of argument, let us, again, be ‘generous’ to the Greek government, ELSTAT and Eurostat and accept their shaky argument that these arrears ought to be kept out of the government’s 2013 outlays. The fact is that, even then, a primary deficit of €3.9 billion is the true, final, number. How come? The answer is wholly unappetising.
Buried inside the official national statistics (see the comments below for the sources, as posted kindly by a reader), 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 which, following the 2012 PSI, saw much of their capitalisation disappear into thin air. The notion that, during 2013, local authorities and pension funds 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 a sterling track record in this regard! After all, every single piece of ‘Greek statistics’ in the past (1998-2008) was accepted as fully legitimate by Eurostat. Simply put, there is nothing new here. 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 says, 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 stock of recent.