Greek statistics are back: Primary deficit presented as surplus, with Eurostat’s seal of approval

truthHave 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.


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    • Question: where can an outsider like myself see the two ‘white holes’?

      If you read Greek, here and here. If not, here and here. Check the 770 and 4701 million surplus in table 1 of the first link and then trace them through sheets 2C and 3D of the second link for the municipalities and sheets 2D and 3E of the second link for the social insurance funds.

  • Statistics: An ever improving member of the Greek Arts. Thank you for spelling out the trickery. At least the magicians will know that we know.

    By the way a truly happy day for Greece today. Double the pleasure. We also received 100 million euro peanuts. We pay 8 billion in interest annually and we receive 100 million pitifull peanuts in support of our cash starving SMEs.

    What is 100 million out of 310 billion in percentage terms over 20 years ? equivalent to less than 0.0016 % reduction of the annual interest rate maybe? But that does not sound sexy.

    Let us all just rejoice and enjoy the peanuts.

    • The 100 mil peanuts for 42 young entrepreneurs does zero for our asphyxiated SMEs, and worse it comes via the dreaded KfW! (see Ireland)

  • There are retirees that are waiting 2+ years for their pensions to come out. Interesting way for the government to borrow from its people and announce primary surpluses before election day.

    • same game with suppliers… and not only in Greece. Italy, Spain and Portugal play the same game…

    • The timeframe for pensions is 1-5 years. Just heard this on the radio from the representative of the IKA employees.

      And there are about of unpaid one-off bonuses that come with the pension, although we don’t know which chunk of it corresponds to the year 2013.

      It is a joke.

    • I thought most People here like big government. Now you get what you wished for.

  • The troika takes into consideration the Greek statistics, only when they are looking for a reason to apply more austerity. Now, as far as the world’s financial press is concerned, they are only interested in “exits”. Anything else just doesn’t sell.

    • The troika takes into consideration the Greek statistics, only when they are looking for a reason to apply more austerity.

      Austerity is not their goal. It is the means. Privatisation is the goal.

  • I think it is safe to say that this is a shock. Surely I, along with many people, expected this: a small primary deficit transformed logistically into surplus that is. The budget of 2013 was a unique case that had many one-off income sources for the government. A good case in point is the little known fact outside of Greece that taxpayers had to pay three extra property taxes (2011-12-13) in one year, a total of 1,1 billion I think. The fact though that the true size of the primary deficit is close to 5 billion is simply staggering. After 6 years of recession and another wave of harsh austerity measures coming these are default numbers. It is clear that the Greek state will never be able to reach surplus territory with wave after wave of cutbacks and in deflation territory. So any guesses about what’s next?

  • This is just another piece of proof that the EU authorities, in collusion with the Greek kleptocracrats and their analogues in other EU countries, are completely corroded by the EZ bankruptocracy. Their goal is to aprpropriate, through orchestrated deflation, the real assets (including labour and real estate) of European middle-class citizens in order to cover the losses of banks and funds (like the ESF), to the benefit of the owners of financial assets (deposits and bonds) who are, predominantly, the rich.

    If the current “Euro uber alles” gestalt does not shift, then either the plan will succeed or the EU will disintegrate–those worrying about the euro-skepticism in the upcoming EP election should just imagine what the 2018 EP election will be like.

    • IF – a big “if” – we are allowed to hold a 2018 election….!

      Considering how far & fast “Europe” has moved against its people in 4 years – the State both national and EU becoming predators – I dread to think of what it will be like 4 years from now.

  • I cannot follow the calculation that there is a deficit of 4.9 billion euro. Rest of the numbers in the article do not work. Could anybody help?

    • The official bottom line is a primary surplus of €1.5 billion. But the government, ELSTAT and EUROSTAT all confirm that they added to government revenues a sum of €4.7 billion that they ‘discovered’ as ‘white holes’ in the accounts of pension funds and another €700 million in the accounts of local government – when those monies were NOT state revenues but rather monies borrowed from the troika (and, crucially, never available to the government as both the pension funds and the local authorities are deeply insolvent).

    • If a make the maths and take out the “white holes” of (4.7bl+0.7bl=) 5.4 billion the deficit goes up to (1.5 billion surplus-5.4 bilion white holes=) -3.9 billion. I still have a gap of 1 billion deficit until the 4.9 billion mentioned in the article. Where this is coming from?

    • You are right. It should read -3.9 billion. I will make amends, even though I have no doubt that if I search more closely I shall discover even more ‘white holes’.

    • First of all I would like to thank you for your time and your kindness to enlighten my queries. The quantitate part of the article is clear now. I will review it again and may come with more questions, if any.

  • My own view is closer to Ambrose Evans-Pritchard. I think he’s got it right. And I quote:

    “Greece was sacrificed for the cause of the euro, like the 300 Spartans, Thebans and Thespians cut to pieces at Thermopylae to save the alliance.

    They were denied debt restructuring at the start – which is what much of the IMF board wanted, according to leaked IMF minutes – because this would have violated the sanctity of monetary union.

    A set of policies was imposed upon them (with the collusion of their own leaders) that violated the IMF’s own lending rules and made no economic sense. It was chiefly intended to buy time for the eurozone to shore up defences elsewhere and avert contagion. (This too has been admitted by the IMF). Cynics would say it also bought time for northern banks to extricate themselves deftly and dump their toxic load on EMU taxpayers.”

    Bottom line: Greece is/was an expandable sacrificial offering to the elites of the EU, a non-democratic minority of un-elected bureaucrats leading the continent into disaster.

    Alternative for Greece: Follow the UK’s leadership. They are the only European country that they have framed/pegged the EU correctly by referring to it as the EUSSR. Time to join the new Europe(lead by the UK and France) and leave the old malexperiment behind.

    • That is exactly what happened. Germany blackmailed the Greeks to accept the haircut and austerity or else lose the euro. The Germans knew very well that this would result in 27% unemployment and a zombie economy in permanent recession. They couldn’t care less and the Greek politicians obliged as they couldn’t care less either as all they want is to be in power. Corrupt Germany + corrupt Greek politicians = permanent economic disaster.

  • Dear Mr. Varoufakis,

    on the economics blog of DIE ZEIT, which is a leading German newspaper, the validity of the primary deficit is discussed too. One of the bloggers discovered your assessment above and put up the link here:

    Claiming careful reading a well-trained, very knowledgeable economist questions your evaluation which in my interpretation amounts to “not a conclusive proof that Greek statistics are false”.

    Speaking just for myself, I would very much appreciate, if you could substantiate your claims in a rigorous manner such as “ pension fund accounting, position x in the year 2012 negative, in 2013 positive in an amount of …, money input from …, not allowed to include in the calculation of a primary surplus because of accounting principles y, … and so on”. In other words, I would very much welcome to our blog something like a line-for-line deduction, which EXACTLY points to where the calculation is not allowed or wrong.

    Please be sure, asking for this is not to put you in a defensive position. Far from this, I just believe that this approach is necessary to achieve CLARIFICATION which I am quite sure is also your intention.

    Yours sincerely

    Dietmar Tischer

    • As you will see in my new post (27th April 2014), the Greek government has essentially confessed to the sin. But, in any case, here is the data you asked for:

      In Table 2d of the relevant ELSTAT-EUROSTAT table, we read regarding the surplus/deficit of social security funds (S.1314):2011: -1,588 2012: -2,250 2013: +4,701

      When I asked official sources as to how this huge surplus obtained, they admitted that it was money placed in that account that the Greek state had borrowed from the ESM.

      Similarly for the local authorities account.

  • Not clear to me where and why Varouflakis sees a scandal. If the balance of local goverments and public pension funds – both part of general government – is more positive than expected, this should reflect lower-than-projected expenditures or higher revenues. Both are clearly deficit reducing. Hence Eurostat’s recording seems perfectly correct.

    That the money was originally borrowed from the Troika is irrelevant. The central government borrowed from the Troika and incurred a liability (which is surely recorded as such), then transfered the money to the pension fund. As long as no government institution spends the money, the general government maintains an asset that offsets the liability.

    That the pension is de facto bankrupt may be true, but also irrelevant for the subject matter. It’s a red herring.

    My suspicion is that the one who does not know how to properly read statistics is the blog’s author. Good that he does not work for Eurostat.

    • Dear Mr Kaspar,

      You did not read my post carefully enough. You are, of course, right that if pension funds and local authorities had economised monies, thus creating an unspent surplus in their accounts, it would have been perfectly acceptable to take these sums out of the government’s primary deficit. Only this is not what happened. What happened was that monies borrowed from the ESM were parked into those accounts, did not count as part of the government’s liabilities and were counted as liquid savings. This is, I think you will agree, a scandal.

    • Dear Mr. Varouflakis:

      thank you for your response. If I understand you correctly you claim that Greek debt with the EFSF (I guess this is what you mean, as Greece never borrowed from the ESM) has gone unrecorded.

      I don’t read enough Greek to verify the claim from the original source, but I find this near-impossible to believe. Not recording debt borrowed from the international community in the context of Greece’s adjustment program would be a most elementary blunder that would long have gone noticed.

      Now I suspect you take issue with the fact that the debt is not recorded with the pension fund . But it shouldn’t be! Pension funds cannot borrow from the EFSF, only the central government can.

      Here is what I think is most likely the case: the central government borrowed from the EFSF, transfered the money to the pension fund (as a recap operation, or as a simple current transfer), and the pension fund did not spend all the money. In this case the liability is with the central government, and the asset is with the pension fund – a this is also how it should be recorded. To get to the general government’s balance – which is what Eurostat reports – one needs to net these two positions.

      Best regards,

    • Your interpretation is quote close to what happened – and what I actually say in my earlier post. The monies borrowed counted against Greek public debt, were not written into the government budget liabilities, but were counted as a liquid asset – when it was simply hoarded in that account in anticipation of pension liabilities that the government will not be able to be able to meet in 2014. (As for the my mentioning the ESM, I have ceased to refer to the EFSF since the ESM has superseded it.)

    • Thanks, Yanis, for your reply. Another question: Tab. 3D and 3E of the posted excel-sheet shows that the mentioned revenues go along with net-incurrence of liabilities. If the monies were not borrowed from the central government (since there is obviously no equivalent payment entry in the cg’s acount), who else could have been the lender?

      (By the way, the -23.1bn deficit includes cg’s arrears of -5.5bn (tab. 2A))

  • The critical part of your statement is that EFSF paid directly to the pension funds. This shouldn’t be possible, because the EFSF pays to the government, only. It’s a real hard blame to Gr-Gov and Troika.
    So, what you insists stands and falls with a proof that it is not listed in the balance sheet. Is this correct? Do you have this proof?

    • I never said that the EFSF paid the monies into the pension funds. As you correctly say, the EFSF funds were transferred to the Greek state’s coffers, at which point they were added to the public debt. From there the 4.7 billion were moved to the pension’s account and another 700 million to the local government account. These transfers were never counted as liabilities in the budget calculation for 2013 but were counted as ‘white holes’, i.e. available liquid capital, and were thus deducted from the government’s 2013 outlays.

    • Thank you for your prompt answer. That makes it clearer. However, I’m afraid without a proof, it’s still speculation. So, who can prove this? Or the other way around, who can force Greek’s government to prove the opposite?
      With a look into greek government’s “statistic history” it’s well possible that you are right. Nevertheless, a strong blame needs a strong proof.

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