New Greek Statistics: Athens, again, ready to confess to the sin to claim the glory

sinIt is official! The Greek government now confirms that the much lauded Greek government primary surplus for 2013 was a mirage created by the return of Greek Statistics (see this recent post). And also that the statistical trickery involved had the full approval of Eurostat, of the troika, of Berlin etc. The ‘confession’ has come in the form of the deafening silence in response to the revelation that approximately €5 .4 billion was taken off government expenditure through the discovery of a non-existent ‘white hole’ in the government’s revenues. Yesterday, a tweet from a spoof account in the name of a Finance Ministry official reminded me that the New Greek Statistics are highly reminiscent of the Old Greek Statistics…

In a tweet addressed to me, a spoof account in the name of Mr Staikouras, the Alternate Finance Minister of Greece, had this to say:

@yanisvaroufakis It was a bitch to get it technically right so they couldn’t object, but we did. A huge achievement, if I may say so myself.”

Even if this twitter account is not genuine, it captures brilliantly the government’s position on the matter and reminds me of how Greek Statistics was a source of pride for Greek Finance Ministry officials back in the late 1990s, when they succeeded in ‘repressing’ the Greek government budget numbers, prior to Greece’s entry into the Eurozone. It is clear now that the New Greek Statistics are also a source of pride in Greek government circles. But let’s begin at the beginning.

When Greece imploded, back in 2010, we all thought that, at the very least, the time for truth had come. The bubble had burst, people were to suffer immensely, but at least we could envisage the start of a new era during which Greeks, Germans, the Irish, the Spanish, Europeans in general, would try to re-build on solid ground, would avoid erecting pyramids on a foundation of lies, would tell citizens the truth on our macroeconomic fundamentals.

It now seems that even that modest aspiration was to be shattered by a European leadership which is trying to deal with the Euro Crisis, and its inane handling, simply by inflating some new bubbles in order to replace the old ones and thus to fashion a false sense of recovery – and all that while real economies and real people continue to struggle in an irretrievably broken social economy.

But let me return to the type of response that we are getting from Greek government circles to the recent unveiling of the New Greek Statistics. The gist of it is simple:

  1. Yes, we struggled to find statistical tricks that would disguise our 2013 primary deficit and present it as a surplus. “It was a bitch” to get Eurostat, the troika and Berlin to accept our trickery, but we made it! Aren’t we clever?
  2. If Eurostat accepts our New Greek Statistics, and our primary surplus as bona fide, it is all that matters.
  3. Instead of criticising us, you should be thanking us for having turned international opinion on Greece by means of these good news – even if they have been ‘manufactured’ through our New Greek Statistics.
  4. The acceptance by Europe and the troika of our ‘primary surplus’, that we so valiantly achieved, will open the door to debt relief for Greece. Bingo!

Let us examine this argument point-by-point: 

Regarding (1): “It was a bitch to pull it off!” 

I have no doubt that it must have been ‘a bitch’ to convince Eurostat to accept the return of Greek statistics. Eurostat was burnt once, in 2010, when it emerged that, for years, it had been giving its stamp of approval to dodgy Greek Statistics on our government’s  budget numbers. When Greek Statistics became a worldwide joke, Eurostat’s reputation suffered massively too, as it was clear that every single Greek ‘number’ had previously received Eurostat’s seal. So, I would be ready to believe Greek Finance Ministry officials that it was not easy to convince Eurostat to accept the New Greek Statistics. 

Having said that, the Greek Finance Ministry did not have to invent its new trickery from scratch. The idea of ‘discovering white holes’ in the pension funds was first used in the late 1990s in order to ‘show’ that the Greek government’s budget deficit was closer to the Maastricht criterion (of -3% of GDP) than it really was. How do I know that? Because I was told in person by the official responsible at the time for coming up with that ‘trick’. Who was that official? Yannis Stournaras, the current Finance Minister who, back in the 1990s, was Greece’s Chair of the Council of Economic Advisers, responsible for negotiating Greece’s entrance into the Eurozone. From the horse’s mouth, so to speak… 

Regarding (2): If Eurostat condones the New Greek Statistics, should we fret?

When Yannis Stournaras was telling me, just after Greece’s entry into the eurozone, of his ‘white hole in the pension funds’ trick, he was (I recall) brimming with pride. (Just like the current government is, without a care in the world that the primary surplus reported is a mirage caused by creative New Greek Statistics.) For my part, I admit I congratulated him – back then. My thinking then was that the Maastricht criteria (in my estimation) lacked any serious macroeconomic rationale and, therefore, if Eurostat, and the rest of Europe, were happy to turn a blind eye to Greek Statistics (as they were doing not only vis-à-vis Greece but also vis-à-vis Italy, even Germany), so be it.

Since then, the Eurozone has fallen prey to its own design faults, with Greece having turned into a failed social economy. Today, a majority of Greeks are fighting for their lives under a cloud of immense private and public indebtedness, a much reduced GDP, a broken labour market, negative investment levels, and a zombie banking system. The governments in Athens and Berlin are, this time around (in contrast to the late 1990s), using Greek statistics not in order to bypass the Maastricht criteria but in order to fool their electorates that the crisis is over. Their only aim is to score an electoral victory in the forthcoming European Parliament Elections.

There are two issues here regarding the return of Greek statistics: First, is it a good idea intentionally to lie again to the people of Europe at a time when public trust in Europe’s institutions is at an all time low? Secondly, is this lie going to be pressed into the service of making life more bearable for the multitude of suffering Greeks? I submit that both questions ought to be answered in the negative.

Regarding (3) and (4): Will something good come out of the New Greek Statistics?

Greece’s Finance Ministry officials have undoubtedly convinced themselves that massaging the primary budget numbers, until they yield a ‘surplus’, was in Greece’s national interest; to the extent that, as long as Eurostat condones them, the road opens toward the debt relief that Berlin has promised Mr Samaras (the Greek PM) two years ago.

Setting aside any Kantian objections to the idea of ‘useful lies’, it is absurd to believe that Berlin will proceed with a meaningful Greek debt restructure, using a primary surplus (occasioned by the New Greek Statistics) as a pretext. All Mrs Merkel and Mr Schauble will do after the summer is to effect a new phase in the ‘extend and pretend’ game vis-à-vis Greece’s public debt; i.e. they will be extending the repayment schedule till after 2050 and slightly reducing interest rates on a part of that debt. Essentially, Greece’s debt mountain will continue to weigh like an elephant on the weakened chest of Greece’s economy, only the Greek government’s annual installments will be less unmanageable. Overall, however, Greece will remain insolvent ad infinitum. What investor will, in her right mind, seriously commit to such an economy?


So, the question becomes: Was it worth reviving Greek Statistics, and lying about our budget numbers to the people of Greece, of Germany, to the world at large, so as to keep Greece, for decades to come, in perpetual debt bondage? Very much so, from our leaders’ perspective, given that their objective is simply to pull the wool over Europeans’ eyes with a view to winning the European Parliament elections on the basis of the lie that, if the Greek debt crisis is over, so is the Euro Crisis. 

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  • This seems to be a fake account of Staikouras however.
    Not doubting the fact of Greek Statistics returning again ofcourse, but it seems to be a troll account never the less.

    • We do have a problem: the government has used the same trick that Mr Yannis Stournaras had proudly employed in the late 1990s to massage Greek budget data. To be allowed to get away with this again, after Greece was drugged through the mud of Greek Statistics in recent years, is a major, major problem.

    • Good job on editing above to clarify that it was a spoof.
      You are right on the fake statistics. Greece has unemployment of 27% and
      countries like Romania only 5%. Lot’s of problems down the road for Greece, most with the stamp of Angela Merkel.

  • it would really help explaining the source and magnitude of the “Greek” statistics (and white holes) in some detail in the specific case

  • The question is, how should we handle the present situation? Fabricated budget data, fabricated judicial evidence (Baltakos gate), the obfuscation of the so-called Lagarde-list etc. Fabrications, manipulations, distortions, lies. Just look at Georgios Kyrtsos’ article in his own paper Free Sunday about the “non-existing” budget surplus followed by his total denial of the same statements in his answer to Syriza through the New Democracy homepage. Despite the one scandalous revelation after the other, the government is still in power, supported in their crime by the EU. Are we going to let them get away with it?

  • “So, the question becomes: Was it worth reviving Greek Statistics, and lying about our budget numbers to the people of Greece, of Germany, to the world at large, so as to keep Greece, for decades to come, in perpetual debt bondage?”

    I don’t know about the people of Greece, but the people of Germany obviously seem to like being lied to (They have proven so by faithfully reelecting the people lying to them). Especially if it serves the purpose of diverting their attention from this inconvenient business in the european south.
    And I am quite sure that they will reward those who frequently deceive them so skillfully with a number of seats for the conservatives in the european parliament. Or – even better – by not giving a damn and staying away from the coming european elections.

    After all, Greece has now officially ceased to serve her purpose as a common enemy of the german taxpayers and is being replaced by either ukrainian “fascists” or russian “empirialists”. Whichever fits their personal preference, the germans are now looking to the east for their daily dosis of propaganda and deception and Greece is just another one of those failed “balkan” states they faintly remember from the days when it was still a popular holiday resort.

    It’s a shame.

  • How nice, you’re deleting plain, non-insulting comments now. Meanwhile, there is no indication of your multiple edits of the article. Is this a form of “Greek blogging”? I would hope not.

    • Do you object to a blogger editing, and improving, his own posts? As for your previous post, which I did delete, it contained nothing in it worth reading – except an insult and a pedantic comment on a typo. Comment as critically as you wish, and I shall post it.

    • First of all, there was no insult in my original (now deleted) comment.

      Second, you based your entire article on a spoof account’s message to you. Your original title (as evidenced from the URL address if the article) was “greek finmin confesses to having dressed up a primary deficit as a surplus…”. When your error was noted to you, you rewrote the article without any indication of what was the original content. This is not the way to properly report on the truth (which you claim to protect), if you have any respect of your readers.

    • Let us assume that you are right. Is this what matters to you vis-a-vis the contents of this post? Whether I was or was not conned by a spoof twitter account (or whether I misspelt Twitter)? Are you not interested in my first hand account of how our current Finance Minister had used the ‘white hole’ Greek Statistics trick involving pension funds back in the 1990s? The very trick used again most recently to disguise a deficit as a surplus? As you said, I labour to bring important truths out of that sort. What are you labouring in aid of?

    • Hi Marko Is there really a need to be a sinister ? A blogger unconditionally and unequivocally should have the right to edit. In fact she or he has the obligation to do.

      Let us all focus on the issue at hand. Does this trickery serve our national interest or not ?

    • Panos, this isn’t about the right to edit an article. There is a certain etiquette to be followed when you edit an article. Especially when a very crucial fact of your subject is changed (so much that you need to change the title of the article). Surely we can agree on such basic issues.

  • Interesting how you congratulated Stournaras for his “cunning trick” while at the same time you had reservations about the EZ’s structure (or do I have the timing wrong?)

    I mean, another comment you could have is that Stournaras was committing–to use the legal term–felony (falsifying of public records, similar to what the former MoF, Papaconstantinou, is going to be put on trial for soon, re the Langard List). Of course, in a country like ours, where the Machiavellian doctrine is practised by the elites and tolerated/rewarded by the citizens and the courts, such behaviour is admired and rewarded. So Stournaras’ skills were highly appreciated and he was placed at the helm of a bank, now as the MoF and possibly will be our next central banker…

    But of course, this Machiavellian mentality is still strong; joining the EZ was a “vision for the nation” and justifies “any means/sacrifice”. This is how Stournaras (and Samaras, Venizelos, Greek bankers, many of your colleagues, even a large pc. of the electorate) sees himself even today, except that now it is not “joining” but “staying in”. And the sacrifices are far greater than pristine national statistics…

    • At the time, my view was that the Maastricht rules were nonsensical (which, of course, they are) and that a trick (that Eurostat accepts) which ‘bends’ them is fine by me, as long as we are working toward reconfiguring Maastricht and the Eurozone. Of course, the latter never happened and so we ended up in a mire. Now, the mire continues and the rule bending is back…

  • Yanni, since most of the media worldwide is basically supporting Athens with these new Greek statistics, don’t you think that there is more to it when we consider whether something good will come out of all this? I mean to say, what is the point of supporting the current Greek government if they know that Greece is more bankrupt than ever? Surely it is not only a part of a European election campaign? What happens the day after?

    • What happens the day after is another government like the current one – or at least that is their hope. They supported Papandreou fully. Then Papademos. Now Samaras. It is all part of the extend and pretend plan. Which remains in place.

  • Yani:

    For your own reputation, I suggest you drop this subject ASAP and with no further delay. It has morphed into beyond ridiculous mainly on your insistence to continue to pursue it. I tried to divert the discussion in your initial entry by ignoring the false claims and focusing on the sad reality that Greece’s ordeal had nothing to do with Greece and everything to do with saving the euro (or allowing time to build defenses to save the euro).

    Staikouras or Staikouras type finance ministry officials never use such language. “Bitch” is replaced with “enormously complex undertakings” or similar phrases.

    I am not sure why you have fallen victim of such allegations but the statistics approved at Eurostat level are valid and sound beyond reasonable doubt.

    What has not been valid and sound is the despicable ordeal Greece has been unnecessarily forced to go through in order to produce a bunch of meaningless numbers. If you want to talk about this cruelty I am all ears but you need to let go of the Eurostat and Greek Statistics theme.

  • Yani, you should correct your entry of April 28, 2014 at 08:40; instead of “drugged through the mud” is should read “dragged through the mud”.

  • Dear Yanis, how can this wondrous creation of ‘white holes’ in the 2013 local government’s and pension funds’ accounts be proven? I disbelieve that it is possible to get that ‘technically right’. Just as I can’t imagine that it is possible to receive money from the EU or the IMF without recording the credit as a liability and to transfer it from one budget to an other without recording expenditure and revenue. Therefore, if those ‘white holes’ exist, their creation must be traceable. So, if you discovered them, which numbers or records in which balances or accounts can prove that you are right? It will be necessary to do it explicitely like this, if the truth really shall come through.

    • Believe in miracles, especially when they have the seal of approval of those who trade in large lies. In brief, and more technically, they did included these sums in both the public debt and in the broad deficit calculations but conveniently left them out of the primary surplus/deficit calculations.

    • More broadly, let me remind you that every piece of Greek statistics prior to 2008 had the Eurostat’s seal of approval. Make no mistake: Eurostat was not fooled back then and it is not being fooled now. They were always in the business of legitimising whatever numbers their political masters wanted to produce.

  • Hm, it would be fully correct to let payments related to credit/amortisation of credit out of the deficit/surplus-calculations, as well as to add credit/subtract amortisation to/from the public debt. You said that monies from credit to the central government were transfered to the local government’s and social security funds’ acoounts, thus generating surplusses in their balances and turning the general government’s primary deficit to a black null. This would be (see above) definitely far from correct, but a sham. I would appreciate very much, if you could prove it without a doubt. Otherwise, I fear, your discovery will remain without any consequences, and the evil game will proceed evermore.

    • Let me put it simply: I took all the assets and liabilities of the general government for 2013, subtracted one from the other and, indeed, found the same number (i.e. a large deficit) as ELSTAT/EUROSTAT report. Then I took out of it the bank recapitalisation costs for 2013 (as ELSTAT/EUROSTAT said they did). Next, I detracted the monies returned to the government from the European System of Central Banks (as ELSTAT/EUROSTAT said they did). Then I corrected the resulting sum in the manner that ELSTAT/EUROSTAT said they did. After doing all that, I was left with a primary deficit of -3.9 billion. The only way that this could be turned to a surplus of +1.5 billion (that ELSTAT/EUROSTAT) report is if we count as ‘white holes’, or liquid assets, the 4.7 billion of borrowed monies parked at the pension funds account and an additional 0.7 billion parked at the local authorities’ account. Bingo!

    • Yani:

      It’s quite simple really. The assets and liabilities of the Greek government carry obligations of prior years (an example would be the 4 Bil. euro payments in arrears which used to be 8 Bil but it all relates to prior years other than 2013).

      The issue of the primary surplus validation for 2013 has to do with this specific year alone and only for 2013. Therefore you can’t mix apples and oranges.

      There is absolutely no doubt that Greece in 2013 achieved (through great sacrifices elsewhere) a primary surplus (per the classic definition of such term).

      The other issue that you seem to be off the mark is that there will ever be a classic debt haircut. This will never happen for two main reasons:

      1. The nominal debt will be kept at current high levels as a painful reminder of something which should be never be repeated. The amount of debt is irrelevant because it only matters what you pay for it. Greece went from 23-25 Bil. annual debt service in 2010 to 7 Bil. annual debt service in 2013. The existence of high levels of debt in the books also functions as a break towards additional borrowing(a key European objective for Greece).

      2. Germany does not wish Greece to have excess borrowing capacity because it fears that all fiscal gains would evaporate (whether such is fair and just assessment is another matter altogether).

      What will end up happening is that the real debt of Greece (time value of money, Net Present Value) would shrink given a 50 year elongation and a lower rate to something equivalent to 50 Bil. euros of today’s value. Ask any of your finance students at Austin to run you this simple exercise: What is the Net Present Value of 370 Bil. euro debt payable in 50 years and at an average cost of capital equal 1%. Then you will have you answer that the debt haircut has already occurred to a large extent and it is going to get an additional boost in the future (via term elongation and rate ceiling).

      Sorry to put in raw political terms but there is no way that Merkel will ever give Greece a haircut today so that Syriza could acquire a brand new platform for increased public and social spending. This is what the fight of the last 4 years was all about and I don’t see how the current government of Germany (which happens to be an ideological opponent to yours and Syriza theories) would ever yield on such score.

    • Your certainty is based on error. While they accounted properly for this ‘adjustment’ of 5.4 billion in the overall deficit figure, in the calculation of the primary figure they counted the 5.4 only as an asset and not as a liability. If you want to delude yourself, feel free.

    • Yani:

      I am losing you. The definition of primary surplus has to do with revenue minus expense for a given year.

      Simply put you sum up all revenue sources and deduct expenses (related to such fiscal year only) and it has to be a positive number to declare a primary surplus. Debt expense is counted separately and does not enter into the definition of primary surplus.

      Germany’s concern all along has been that Greece had to achieve a point of fiscal performance whereby what it gets in(revenue) covers what goes out (again with the exception of debt; since debt service is something that could be adjusted via debt substitution (substituting high interest debt with lower interest debt)).

      Assets and liabilities is not a topic that should enter in primary surplus definitions. Primary surplus is a purely driven “revenue-expense” concept.

      There is no certainty in error issue as far as I can see. This is a purely definitional which we ought to quickly settle provided we are well meaning about it.

      In accounting language the primary surplus is an Income Statement product. Assets and Liabilities relate to a Balance Sheet issues which is not what primary surplus is.

  • Η στρατηγική της κυβέρνησης, με δεδομένο το «βέτο» του Βερολίνου στο σενάριο «κουρέματος» των επισήμων δανείων εστιάζεται σε δύο άξονες:

    -Πρώτον στην επιμήκυνση του χρόνου αποπληρωμής των δανείων στα 50 έτη.

    Τα διμερή δάνεια του πρώτου μνημονίου (GLF) φτάνουν τα 52,9 δισ. ευρώ και προγραμματίζεται να αποπληρωθούν από το 2020 ως το 2041 (μέση διάρκεια 17 έτη).

    Τα δάνεια του δεύτερου μνημονίου από τον Ευρωπαϊκό Μηχανισμό Στήριξης (EFSF/ESM) φτάνουν τα 139,9 δισ. ευρώ και έχουν μέση διάρκεια τα 30 έτη. Η επιμήκυνση της αποπληρωμής του συνολικού πακέτου των 192,8 δισ. ευρώ στα 50 χρόνια εκτιμάται ότι θα αποφέρει μείωση των ετήσιων αναγκών αποπληρωμής χρεών κατά 6 με 7 δισ ευρώ.

    -Δεύτερον, η πλευρά Στουρνάρα θα ζητήσει τη μετατροπή του σημερινού χαμηλού κυμαινόμενου επιτοκίου των διμερών δανείων του πρώτου μνημονίου από τα κράτη-μέλη της ευρωζώνης σε σταθερό.

    Το κυμαινόμενο επιτόκιο, περίπου 0,82% (Euribor 3μηνου + 0,50%) που πληρώνει σήμερα η Ελλάδα αναμένεται ότι θα αυξηθεί ακόμη και κατά 2 μονάδες μέσα στην επόμενη πενταετία, αυξάνοντας σημαντικά το κόστος αποπληρωμής των 52,9 δισ. ευρώ του πρώτου προγράμματος στήριξης.

    Στόχος της ελληνικής πλευράς είναι μια συμφωνία που θα «κλειδώσει» το επιτόκιο στο 1% σταθερό για τουλάχιστον 15 από τα 50 χρόνια, εφόσον επιτευχθεί και η επιμήκυνση.

    The government’s strategy , given the ” veto ” of Berlin over the ‘ haircut ‘scenario of official loans focuses on two axes :

    First – in extension of the repayment of loans within 50 years .

    Bilateral loans first Memorandum (GLF) reach 52.9 billion and is scheduled to be repaid from 2020 until 2041 (mean 17 years) .

    The loans of the second memorandum by the European Support Mechanism (EFSF / ESM) reach 139.9 billion and a median duration of 30 years . The lengthening of the repayment of the total package of 192.8 billion euros in 50 years is expected to bring a reduction in annual debt repayment needs at 6-7 billion euros.

    – Secondly , the side Stournara will request the conversion of current low floating rate bilateral loan of the first Memorandum of member states in the eurozone stable.

    The floating rate of about 0,82% (Euribor 3 months + 0.50 % ) paid today Greece is expected to increase even by 2 points over the next five years , significantly increasing the cost of repayment of 52.9 billion euro first support program.

    The aim of the Greek side is an agreement that would ” lock ” the interest rate to 1 % fixed for at least 15 of the 50 years , if achieved and elongation .

  • Thanks for the insight into your recalculation. You reproduced the consolidation of the central government’s -28.58bn deficit, the local government’s +0.77bn surplus and the social security funds’ +4.7bn surplus to the general government’s -23.1bn deficit. This fits -12.7% of GDP, and is not the primary deficit. To get the primary deficit of -8.7% you have to add +4,0% EDP interest expense. Additional programe adjusters of, in total, +9.5% finally turn it into a programme primary surplus of 0.8%. There ist nothing to complain about this procedure (but for the acceptability of the programme adjusters).

    The crucial point is, from where the monies came that generated the surplusses of, in total, +5.47bn (3.0% of GDP) in the municipality’s and social funds’ accounts. Your recalculation, unfortunately, can’t explain it. It would be a sham and a scandal if they are based on borowed money. And this is, what has to be proven.

    • Forgive me but you are both egging on each other down the wrong path.

      Primary surplus is an Income Statement issue. Revenue-expense excluding debt service.

      The reason Europe has decided to reward a Primary Surplus for Greece is because it’s a turning point signaling no need for additional borrowing. Such condition Greece achieved in 2013 and has been ratified at all levels.

      The Asset and Liabilities issues you are discussing is an entirely different subject which has absolutely nothing to do with Primary Surplus (i.e. Income Statement) issues. Assets and Liabilities are a Balance Sheet issue which gives you a snapshot at a given time of all the assets and liabilities without telling you anything about the revenue producing capabilities of such assets nor the expenses involved.

      Therefore, I am not sure why you two are pursuing a conversation and a topic that has nothing to do with the validity of Primary Surplus and the Statistical Authorities involved.

    • Sorry, Dean, I can’t forgive you, because I refer to income and expenses leading to surplus or deficit. So does Yanis, if I understood him well.

      Income from loans and expenses for amortisation have to be taken out of the surplus-/deficit-calculation, as it aims to show, wether resp. how far the government’s expenses are financed by owned money. To come to the primary balance, paid interest for loans has to be subtracted as well.

      The general government’s 2013 primary balance amounts to -8.7% of GDP. Additional programme adjusters turn it into +0.8% of GDP.

      Yanis said that this surplus it due to a transfer of 5.471bn (3.0% of GDP) borrowed money from the central government to the local government and the social security funds, all of which are subsectors of the general government. If this is right, it would be a sham.

      The transfered money generates income for the receivers and expenses for the payer by increasing/decreasing liquid financial assets (cash, securities). Assumed the central government had recorded both, income from loans and (neutralising) expenses from transferring the borrowed money to other sectors in the same amount, this would have no effect on its own balance, okay so far. But it would have decreased the consolidated deficit of the general government in an ineligible way by generating an extra income from borrowed money for the local government and the social security funds.

    • The ELSTAT explanation points to a very clear offsetting effect. So where is the issue Another one?

      ““In 2013 there were transfers of 4.2 billion euro and 0.7 billion euro from the subsector of Central Government to the subsector of Social Security Funds and to the subsector of Local Government, respectively, so that these two subsectors could clear arrears they had built up in previous years,” the statement read. “The transfers between the government subsectors increased the expenditures and thus the deficit of Central Government. By the same token, there was an increase in the revenues of the Social Security Funds and Local Government subsectors, and a reduction of their deficits (generation of surpluses). There was no effect on the overall deficit of the General Government. The incurring of the relevant arrears had affected the overall deficit in previous years (mostly 2011 and 2012), given that accrual accounting is applied according to European and international national accounts rules.”

      The overall effect of this transfer was zero (No effect on the overall deficit of the General Government). It sounds like the transfers had to happen to address arrears issues and any effects did not belong to year 2013 anyway. They were mostly for years 2011 and 2012. So where is the issue??????

    • Hi Dean, a payment obligation becomes an expense just when it occurs and has to be financed by owned or borrowed money within the period in which it occurs. Arrears are payment obligations left from previous periods due to missing money, which means that the deficit then was actually higher as declared. Alternatively, borrowed money could have been ‘saved’ (not used to fulfil payment obligations) for sinking it into a black hole or creating a white one.

      It seems quite strange to me that the money transferred from the central government to the local government and the social security funds in order to fulfill these obligations was not used to this end, but generated a surplus in the receiver’s accounts in order to compensate for the deficit of the payer.

      Additionaly, as mentioned before, it could be possible that, again, borrowed money was saved by the central government and then used to generate the surplusses (to fill white holes) in the local government’s and social security funds’ accounts. A surplus financed by borrowed money is not a surplus, but a deficit. The public balance complies with the government’s net borrowing/lending and is therefore fully incommensurate with the inclusion of borrowed money.

    • Alterego:

      This might be. But the arrears coverage is for years 2011 and 2012. Which means NOT for 2013. And the whole Yanis attack was based on the claim that the 2013 primary surplus was not valid.

      You can’t mix apples and oranges. If you want to make a claim for years 2012 and 2011 go ahead. But you have no right to claim that because of a balance sheet transfer in 2013 which has zero primary surplus impact anyway that the 2013 figure must be questioned. You just can’t do that. Greece could have a number of unmet claims for 2010, 2011 and 2012. None of such claims affect the 2013 calculation of surplus or deficit. Any adjustments belong to the years where the arrears occurred and not to subsequent years. These are the rules.

      If Yanis claims that there is roughly 5 Bil. of unmet claims then he must petition the government to amend the budgets for years 2010, 2011 and 2012 and thus fix the problem. Amending the budgets of prior years has no impact for Greece whatsoever. However, under no circumstances one could claim these to be 2013 shortfalls.

    • Dean et al,

      Balance sheet adjustments for prior years may be, strictly speaking, irrelevant for 2013 income statement and the calculation of so-called ‘primary surplus’, but the question arises as to the veracity/accuracy of the income statements of those prior years. Were the liabilities accrued as they were incurred?

    • Nice try Yani but not enough. Whereas the Miranda Xafa analysis is specific your reply is an amorphous and mostly general” political statement. She uses numbers and you use intuition coupled with a rock hard belief that the numbers are “cooked” because they can’t be anything but “cooked”. These are political statements you are making that have nothing to do with accounting principles or finance.

      Miranda further describes rather convincingly why Greece “killed itself” in achieving 1.5 Bil. surplus whereas the obligation was only for zero surplus (per the Troika budget). Because then Greece (upon confirmation of such surplus) would have the right to distribute back 70% of such surplus.

      You can very well make the statement that the redistribution of the 70% surplus is politically motivated (and in a sense classic) but you can’t deny the validity of the surplus which for some unknown reason you continue to insist on as an absolute given which is not subject to debate. You remind me of the early German moralizing that once a thief always a thief and similar nonsense and in that sense I wish to gently remind that you are becoming the same or worse than your enemy whether you realize it or not.

    • I used more than numbers (which, even on their own, ought to suffice: since the pension and local authority ‘surpluses’ are still there – when they, now, claim were utilised to pay off arrears within 2013; if they did, why are they still appearing as assets?). To be precise, I used specific charges involving dates (2005 and 2006), when the same tricks were used, I mentioned the letter to me by Eurostat (2006), I mentioned the fact that in 2010/1 they quietly revised those figures, and I used the names (of the current finance minister) involved in challenging those identical shenanigans. Did you notice any denials? Was I sued? No. The type of denial they chose is the best confirmation of my charges.

      As far as you are concerned, you are facing a moral dilemma: Side with them or side with the truth. Your call!

    • Yani:

      You are transforming in unpredictable ways. Do you realize what you just said? That I have the moral dilemma of either siding with you (the truth) or the lies? This is a derivative of “the either you are with us or against us” doctrine.

      How about if I choose neither. Neither your position nor the position of those who you wish to discredit.

      You can’t invoke 2006-2007 practices in this conversation. Following the euro crisis Elstat underwent a change under Georgiou a person Syriza does not like at all because of some labor issues and a highly publicized discourse that ensued.

      Your attack on Elstat aka Georgiou is highly suspect and politically motivated given the history between Syriza and Georgiou.

      There are many ways to launch a challenge against the present government practices but choosing the validity of the primary surplus is not the way to do it. You come across as petty and highly partisan in debating such issue. Choose another one please for our collective sake.

    • Dean,

      There is nothing new here. All public companies in the stock market dress up their earnings releases, governments do the same especially before elections. Why do you keep looking at numbers? Both you and Yani need to stop looking at these numbers over and over. The fact is that Samaras is playing all his cards before the election. Troika did not allow him to give bonuses so he had to sell Ellinikon (7,000 acres) in a hurry to the one and only insider. He had to go out and borrow 3 Billion Euros at 5% when supposedly the EU will provide Greece with a 1% interest. Both of you should stop looking at the numbers and look and debate the facts.

      Is the sale of Ellinikon to the one and only bidder good for Greece?
      Is the 3 billion bond offering at 3% good for Greece?
      Are the bonuses before elections good for Greece?
      Doesn’t Greece need tax relief and a stable system that is not under constant tinkering to milk more and more out of taxpayers?

    • Κωνσταντίνος:

      1. Is the sale of Ellinikon to the one and only bidder good for Greece?

      No. But the other 2 bidders one an Israeli firm (Elbit) and the other a British co. dropped out or were unwilling to offer improved terms. The condition of the real estate market in Greece in a direct Troika mistake so no need to discuss further who screwed this one up. Greece was obligated by the MOU to go through with the process because it kept coming up on all Troika reports constantly (Greece is dragging its feet on real estate sales). Now when you have an idiot forcing you to sell at the absolutely worst timing I guess you can openly call them an idiot and an amateur (if you want to pin this on Troika’s forehead I would gladly drive the nails with a a sledgehammer as forcefully as I can. Let me know if you need the help).

      Is the 3 billion bond offering at 3% good for Greece?

      The 3 Bil, bond offering at roughly 5% (4.7%) was a benchmark deal. Greece as a country benefited much less from it but several other refinancing deals of private Greek companies(indexed into the sovereign offering) got an unexpected boost from such early and thus unexpected sovereign financing. The Greek sovereign financing set the level for many private deals (if Greece borrowed at 4.7% then private Greek companies got something close to a 5.5%-6%) and in one case resulted in a lower rate ( a big surprise because in theory the country has the lowest risk and therefore gets a lower rate than the private groups). This was done at the advice of Blackrock and has very little to do with Samaras. The US advising firm saw an appetite in the market for periphery sovereigns and they took it. A tactical move. So don’t overread it and keep in mind that Greece has at least 10 Bil. euros floating in 3-mo and 6-mo paper costing Greece around 4% and are a bear to keep constantly refinancing . So, this 5 year offering probably retired some of this excess short term floater which Greece had to address regardless. In any event this is not a government accomplishment. It’s a product of financial engineering and some shrewd advising by Blackrock Financial. And it also shows that Greece would not be hel hostage to the next Troika meeting demanding to close imaginary budget holes when all Troika has to do is extend the maturity and lower the interest thus causing deficits to disappear. This must have been the most idiotic part of the Troika negotiations. Watching them argue about holes which were in their direct power to remedy (which of course they refused to do because at the time the primary surplus was not confirmed); talking about madness of the accountants).

      Are the bonuses before elections good for Greece?

      I am assuming you are talking about the 500 Mil. of excess primary surplus which was made available for distribution to the lowest income and most afflicted societal segments (upon filing an application) plus the armed forces. Yes, the timing is suspect but so is the Troika decision to affirm the surplus in late April because without the affirmation one couldn’t distribute. So I will give you points on this one because it looks like shameless electioneering.

      Doesn’t Greece need tax relief and a stable system that is not under constant tinkering to milk more and more out of taxpayers?

      Yes. Greece is beyond overtaxed but these are the Troika geniuses who came up with such disgusting alternatives very well knowing that innocents will get hurt. Do you want the government as an accomplish on this one? Very well, you can put their names in your list of failures.

    • Dean,

      As always fantastic analysis. Thank you for your thoughts. However you proved all my points.

      1. You proved that Samaras should not have sold Ellinikon and should have waited. The fact that it kept coming up in Troika reports is ridiculous. No reason to sell pieces of your country because it comes up in a Troika report. Absolutely shameless act to sell this huge piece of land without even taking any pieces for vital infrastructure and to relieve the congestion in other parts of Athens. If you described this to an urban planner in the US they would tell you this would not even happen in Africa – 7,000 acres in the middle of the city walled off and sold to the only bidder. After all the planners Greece has educated.

      2. You say that a major US financial firm influenced Greece to go to the market to borrow at 5%. Excuse me since when does the #1 bond firm in the world tells sovereigns when to issue debt? Amazing what Samaras and Stournaras are doing.
      The short term paper you mention is now at 3% rates – not at 5%. And Troika needs to be pressured for the deal that you mentioned – the 1% 50 year deal. Or is that a pipe dream? You have to decide Dean, is it going to be 1% or is it going to be 5% bonds with US financial firms obliging at the expense of the Greek taxpayer. Time to put your Greek hat on. Greece has been down the path let’s borrow now and hope for expansion later. This was what the last decade was all about – clueless politicians colluding with the likes of Goldman and issuing debt based on the most optimistic scenarios.

      3. Electioneering. At least you agree on this. The shame here is that the money for this electioneering is from points 1 and 2.

      Again thanks for your points but it is not just Europe that is at fault here. There is a lot of incompetence at the Greek government level. The only thing that saves them is the gross incompetence of Tsipras manifested on issues like immigration.

    • Κωνσταντίνος:

      On the Hellenikon sale. Yes, it’s the best real estate piece in Europe and a few years back the Qataris were reportedly paying 5 Bil. euros for it but they didn’t want to go through an open bidding process. Which meant that a sale to Qatar would have rendered it illegal under European law.

      The final deal for Hellenikon is even more profitable to Latsis/Lamda development than you think. Latsis/Lamda don’t have to pay the price(slightly less than 1 Bil. euros) until 2 years from now (due to some offsite work the Greek state must complete) and of course they can leverage their 100% project control to bring in private capital which will make their returns extraordinary. At least the deal ended up in Greek hands (Lamda Development) and with a firm that is competent. Imagine the same deal falling into the hands of a German company for example financed by DB. Most of the financing here would be serviced by Greek banks and it would be good for the Greek economy. And I don’t think you could blame Lamda for taking advantage of an open bidding process and capitalizing on the fact that they sized up their competition correctly. Nor could you blame Lamda for a decision by TAIPED to sell the entire parcel all at once vs. breaking it up to several parcels and selling it piecemeal over time benefiting from a price recovery and the value created by the prior parcels under development. This was clearly a mistake by TAIPED which was heavily influenced by Troika politics. In my book Lamda won it fair and let this be a lesson for next time (for example the Anavyssos large real estate piece that is next slated for public sale). From my point of view I am relieved that Hellenikon is controlled by one of the best Greek real estate companies. I am sure that if any interested parties wanted to approach Lamda for a joint venture, Lamda would be very receptive.

      Bottom line: very lousy deal for TAIPED and the state in terms of maximizing asset value; good deal for the Greek economy due to the master developer involved.

      Moving on to the cost of debt issue you raised. It’s not an either or. As you correctly said as soon as the 5-year pilot bond deal went through rates for the 3-month and 6-month T-bills dropped to about 2.5% vs. 4% (prior). I don’t think it’s an issue of accepting all of your debt at 1% because if you do that you are subject to constant manipulation by Troika. In other words in order to get the 1% you (as Greece) have to jump through endless hoops and in order to get the money you need to do exactly as you told. Not a winning negotiating position. I think Greece is perfectly fine to have 95% of its total debt at below 1% financing (already obtained) and say 2.5% of its debt at 2% and the balance at 4-5%. No big deal because the weighted average still produces an overall debt interest of close to 1%. Therefore think of it as a diversification issue that greatly increases Greece negotiating leverage against the profound and clockwork repeating Troika nonsense.

    • Dean,

      Thank you. We are in agreement about Ellinikon. Also think that the Greek government did not even take the time to carve out public parking or bus station areas in the whole property near the new metro stations or by the water. By the way as you describe it, it sounds like the scandal of the century !!! What are the parliamentarians doing in Greece about it? Nothing …. After 4 years of crisis ….

      On new debt, by nature I don’t like it. You mentioned the number 1 bond company in the world advising Greece to issue bonds so that it can buy them for its clients. Now pause for a second and think of what you said – with your Greek hat on like you did on the Ellinikon sale. It sound absurd. The first thought that comes to mind is that the interest rate was too high and that is why the issue was 6 times oversubscribed.

      Now with your Greek hat on continue and contemplate one more decision. To sell Eurobank to Fairfax, Fidelity and the likes. After bailing it out with taxpayers money to sell it at a price of 0.31 or at 20% of book value. Stefanos Manos wrote an article about it. Nobody paid attention. They are too busy making deals.

      There is more. How about the deal that saw Mr. Latsis (the same one who bought the Ellinikon 7,000 acres and the Greek Petroleum company from the same TAIPED) end up with shares in the Ethniki bank (principal investor) while he had shares in Eurobank. This is magic that only happens in one place in the world. In Greece. One day you have shares in Eurobank, it is bankrupt, the other day you wake up with shares in Ethniki. Magical. Warren Buffet would not believe it.

      If Greece was not a country that has fought so hard through history for where it is today, I would say OK, these things happen with corrupt and incompetent politicians. But for a country that has had such a history of constant fights and struggle to continue to accept this type of behavior is just ridiculous.

  • This is a reply to Dean Plassaras’ post from May 1, 2014 at 20:34
    Hi Dean, please have look on the ESA95 accounting standard. The calculation of the surplus/deficit of EU member‘s public sectors (including Greece‘s) has to be done according to ESA95. Purely financial operations like e.g. borrowing and lending, amortisation of loans, paying into an account, withdrawls from savings or reserves do not count to revenues or expenses according to ESA95 and therefore remain without effect on the public balance. So, neigther revenues from borrowing, nor arrears, nor compensation for arrears are part of the balance (deficit/surplus) calculation. Explaining the aggregate 5.471bn surplus of the local government and the social security funds by the settlement of arrears, like ELSTAT did, raises once more doubts about the reliability of greek statistics.

  • @Dean Plassaras on May 4, 2014 at 02:56
    No, they are not. I know the figures. But what has a settlement of arrears, as stated by ELSTAT on April, 30, to do with the public balance calculation according to ESA95 (as basis of the subsequent EAP adjustments)?

    I don‘t know what actually happened. But I know that accounting on an accrual basis means that payment obligations are expenses affecting the balance just in the year in which they accrue. When payment obligations have not been fulfilled, there are neither transfers of expenses from year to year, nor clearence of arrears. Balances, which have been calculated by including or clearing of arrears contrary to the ESA95 rules would not be correct.

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