Greek Financial Audit is the 2004 investigation to what extent the Greek public finances. It examines the government's income, expenditure and the level of Greek government borrowing.
Video Greek Financial Audit, 2004
​​â € <â €
Within the European Union, entering the Euro Zone depends on the country of the applicant that meets certain economic criteria. Measures such as the budget deficit and the level of public debt are valued, as well as the inflationary situation and the stability of the national currency exchange rates of EU member states. Requirements include budget deficits below 3% of gross domestic product (GDP), and debt below 60% of GDP, or if above, decreased.
Until 1994, Greece recorded a very high deficit, for several years in the top 10% of GDP. During the late nineties, according to figures put forward by the Greek government to the European Union, Greece's high budget deficit was significantly lowered. In 2000, given the deficit below 3% of GDP in 1999, Greece was accepted as the 12th member of the European monetary union.
Eurostat's refusal to validate Greek numbers
In March 2002, Eurostat refused to validate data submitted by the Greek government. In reaction, the NSSG (National Statistical Service of Greece) revised its debt levels by several percentage points. In September 2002, Eurostat once again refused to validate the data. The debt was revised upwards once again, and the government's balance sheet, which the Greek government presented as a surplus, became a deficit.
In March 2004, Eurostat refused again to validate the Greek number. It was shortly before the Greek elections, and a new government by New Democracy was inaugurated.
After the March 7 election, the new government said it would initiate an objective financial audit of the government account. George Papandreou, of the Panhellenic Socialist Movement (PASOK), the main opposition at the time, and two other small parties initially agreed with the need for an audit. The agreement took place in a very short time, and outside the audit firm and the central bank was not required to conduct such an audit.
Maps Greek Financial Audit, 2004
New government audit
Instead, the government generated a new estimate when investigating 1997 to 2003, and the resulting data was provided to Eurostat, who then continued and published the report. The requirement that the 1999 budget deficit should be below 3% of GDP is one of the main criteria for entering the eurozone. A revision to 3.07%, according to Eurostat (AMECO), caused controversy about the Greek recognition.
In the OECD 2005 report for Greece (p.47) it is clear that "the impact of new accounting rules on fiscal figures for 1997 to 1999 ranges from 0.7 to 1 percentage points of GDP, this change of retroactive methodology is responsible for the revised deficit exceeding 3% in 1999, the year of EMU membership qualification ". The above has led to Greece's finance minister to clarify that the 1999 budget deficit falls below the 3% limit specified when calculated by the ESA79 methodology applicable at the time of the Greek application. Because the remaining criteria have also been met, correctly received into the Euro Zone. ESA79 is also a methodology used to calculate the deficits of all other Euro Zone members at the time of their application.
The original accounting practices for military expenses were then restored in accordance with Eurostat recommendations, theoretically reducing even the Greek budget deficit calculated ESA95 1999 to below 3% (official Eurostat calculations are still pending for 1999).
The frequent mistake made in press reports is the confusion of discussions about the Greek Eurozone entry with controversy regarding the use of derivative transactions with US banks by Greece and other eurozone countries to hide reported budget deficits. A currency swap set up with Goldman Sachs allowed Greece to 'hide' the debt of 2.8 billion euros, but it affected the deficit after 2001 (when Greece was accepted into the Euro Zone) and not related to the Greek Eurozone entry.
Implications
Several arguments have been expressed about the audit implications. Some commentators talk about data forgery. The others have completely different angles. "Deviations" (word forgery never officially used) in deficit reporting are also disclosed to other Euro Zone members, primarily Italy and Portugal, with significant revisions being enforced. Also, there is an argument about the massive "creative accounting" used by many countries to meet the deficit criteria for entry into the Eurozone.
Even the practice of one-time action by so many countries has been criticized by zince in some cases, their deficit rises back more than 3% immediately after the reference year, but large economies such as Germany and France seem to be opposing the rules for years. Last but not least, changes in accounting methods often greatly affect deficit figures (Spain and Portugal, like Greece, slightly exceeding 3% in their reference year to enter, when their deficits are revised in accordance with ESA95). It is said that the New Democracy government simply miscalculated the consequences of its actions, which brought a strong reaction from Eurostat, stronger than that for other offenders.
Consequences of public finance
As a result of the financial audit, Greece falls on the list of credit loans and pays more interest on its loans compared to other EU countries. The EU Commission warns Greece about future issues if Greece, now with new data, does not comply with Euro Zone requirements.
Domestic political consequences
The New Democracy Government accused PASOK, and Costas Simitis, prime minister and PASOK president at the time, had fabricated Greek macroeconomic statistics, on the basis of European institutions accepting Greece to join the Euro Zone. All opposition parties accuse the New Democracy government of performing a false audit.
PASOK said that never falsified any data, and that the New Democracy government has just changed the way costs (mostly military fees) are calculated over the years and some other accounting techniques, and the way that PASOK uses to do it is known by Eurostat, which never against it.
Costas Simitis writes in the Financial Times that the deficit revised Greece's defamation of the EU: "The Commission should design the same auditing system for all EU countries and guarantee objectivity and impartiality while excluding domestic political interference." A few days later, the same newspaper published a Letter to the Editor by the Director General of Eurostat acknowledging the need to monitor and review government accounts independently of the political cycle, outlining the changes made but taking issue with the depiction of the Greek account revisions.
In March 2006, Eurostat made changes to the defense spending system, which seemed to legitimize some practices from the previous Costas Simitis government of Pasok. This led to criticism of the 2004 Financial Audit and the New Democracy government by PASOK and part of the press. New Democracy responded that the defense spending covered by the 2006 changes was only a small fraction of the much larger expenditures that were hideously disguised by the previous PASOK government.
See also
- Greek government debt crisis
- Fakelaki
- Greek Financial Audit, 2009-2010
European debt crisis:
- Europe's sovereign debt crisis
References
Source of the article : Wikipedia
0 Comments