Almunia hangs Papakonstantinou out to dry

The methodology followed by former Finance Minister George Papakonstantinou and his chosen in ELSTAT, Andreas Georgiou, has been “left hanging” by former EU Finance Commissioner Joaquin Almunia, who declared that “The Code of Good practice for European Statistics does not constitute a legally binding instrument”.

Specifically, Mr. Almunia responded to members of the committee as to whether and how the guidelines are binding European directions, according to which part of the calculation of the deficit spending of public enterprises is included, are also “a source of inspiration” and “do not affect existing national regulations”.

As indeed the manager of ELSTAT Nicholas Stromblos testified to the selection committee, the practice followed by Mr. Georgiou was “unethical”. Specifically, Mr. Stromblos expressed strong objections to the inclusion of public utilities, which would increase the deficit by 2 points, and as a result he was made to accept an unfavorable transfer collecting questionnaires in the Aegean!

Furthermore, the witness stated that “Twenty days before you sent an EDP notification, in which you made a massive revision of the deficit ( from 13.6% to 15.4%) you transfered a director, who had been in his post for five years, somewhere where he had previously not spent a single day? I mean to say that you could have proceeded with this director until the EDP notification, and you could have replaced him in a better way. I kept protesting in my new post about some GDP matters I will talk about later, I was moved from my second post again and went to a third one, which had to do with filling out questionnaires in the Aegean and the Greek mainland. This is a directorate we call a “fridge”, since it is a place for those who shouldn’t be involved in such matters”. According to Mr. Stromblos “The moment the deficit was recalculated, there were measures of around 4-5 billion euros taken. Apparently, there were assurances that this money would go towards interest and repayments, and thus some were paid off, whereas otherwise they would not have been. It is simple logic. It is not science”.

Equally revealing was what he stated about the “special” interest shown by Eurostat in relation to increasing the deficit, stating “if Eurostat were going to take someone’s side, it would not be Greece, it would be the lenders. This is what I personally believed. I never said that it did or that what I say is absolutely correct, even though it is now proved that Eurostat did choose that side. I am just stating that it is obvious that if it had a choice, it would take the side of the lenders”.

Estimates of tax evasion ambitious.

In his replies, Mr. Almunia severely criticized Yiannis Papathanasiou (FinMin during the ND government), stating that long before October 2009, the EU Finance Committee had issued and published warnings about Greece’s public financies and the problematic status of its statistics and structural needs. He emphasizes  that the Commission, in a note to the Eurogroup dated July 2nd, 2009, underlined that the execution of the budget for the period of January-March 2009 deviated significantly from the annual financial targets and that if these trends continue, the central government deficit will exceed 10% of the GDP, which contrasts with the official annual target for the central government deficit of 5% of the GDP.

In addition, he notes that “Greece ceased publication of monthly data on budget execution in the summer of 2009”, and added that even though “Mr. Papakonstantinou quickly realized the great danger of not achieving the financial objectives by the end of the year, he proceeded to ambitious estimates of the effects of tax evasion”.