C&B Notes

Shoot the Messenger

Political leaders in Greece are perpetuating a classic case of shooting the messenger.  Greece is doomed to its current dismal financial state until it addresses fundamental structural problems.

Greece is struggling under its austerity regime and new questions are mounting as to whether it can satisfy its bailout terms.  Some people in high places know just whom to blame — a statistician in rural Maryland. Before Greece’s debt crisis, its governments manipulated statistics and masked the size of budget deficits, waste and patronage.  The statistician, Andreas Georgiou, moved from the U.S. to become Greece’s first independent head of statistics in 2010.  The European Union certified he subsequently fixed the omissions and reported the deficit in full.

On the contrary, Mr. Georgiou’s foes claim, he manipulated the deficit figures as part of a plot to force severe austerity on Greece under the 2010 bailout “Memorandum” imposed by the EU and International Monetary Fund.  Four times in four years, Greek investigators or prosecutors have concluded that Mr. Georgiou merely applied EU accounting rules and committed no crime.  Senior politicians and judges have nonetheless kept the accusations alive.  He could face five trials, and life imprisonment in one case.

Throughout Greece’s debt crisis — history’s biggest sovereign bailout and the deepest developed-country depression since the 1930s — much of the governing class has denied responsibility and instead fallen back on conspiracy theories.  That’s raising doubts in the German-led eurozone about whether Greece is willing to learn from past mismanagement and avoid repeating its mistakes.   Berlin officials say they worry Greek statistics will become a political plaything again.  Some EU countries have privately discussed freezing further loans and debt relief until Greece supports its statisticians, according to proposals viewed by The Wall Street Journal.

Mr. Georgiou’s leading critics, economist Zoe Georganta and consultant Nikos Logothetis, say he was a pawn of IMF and European authorities, who needed the data to justify Greece’s subjection to years of austerity.  “It’s due to him that the evil continued,” Mr. Logothetis told Greek television last fall.  “If this isn’t treason, what is?”  The pair, who have made their accusations in Greek media and courtrooms for years, declined to be interviewed for this article.  Ms. Georganta argues on her website that Greece’s deficit when its debt crisis began was among the lowest in Europe — an assertion hard to reconcile with the country’s ballooning debt issuance.

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Data fraud played a part in Greece’s downfall, a European Parliament report has noted.  In October 2009, the Karamanlis government told the EU its deficit that year would be 6% of GDP.  Two days later, it lost elections.  Greece then said the deficit would be 12.5%.  EU officials were furious; investors began dumping Greek bonds.

The American-trained economist, a Greek citizen, was a manager in the IMF’s statistics department in Washington, where people who worked with him say he was known as honest, frank and stubbornly attached to rules.  The report slammed Greece for years of deception.  Countries “are supposed to cooperate in good faith,” it said.  “Deliberate misreporting or fraud is not foreseen in the regulation.”  Mr. Georgiou applied for the post of Greece’s chief statistician.  The government scored him the most-qualified applicant.  “I remember thinking Greece could and should do better,” he says.  “And I thought: This ought to be pretty straightforward.”

Meanwhile, the EU’s statistics arm, Eurostat, said the 2009 deficit figure was incomplete despite another revision, up to 13.6%.  Greece signed the bailout in May 2010.  Three months later, Mr. Georgiou arrived in Athens to become president of the new Hellenic Statistical Authority, or Elstat…In Athens, many saw Mr. Georgiou as an interloper who didn’t understand local customs, some Greek officials say.  He rebuffed calls from politicians asking for favors, they say, and ministry officials complained he was inflexible.  George Papaconstantinou, who as finance minister defended him at the time, says: “Our credibility on statistics was zero.  We needed a stickler for rules.”

In November 2010, Mr. Georgiou completed Eurostat’s checklist and revised the 2009 deficit upward to 15.4% of GDP.  He included deficits of state companies, such as the national railroad, whose sales to customers covered less than half of costs.  EU rules say such bodies are government units.  Also, Greece’s social-security system had overstated revenues and left out costs.  Smaller corrections included unpaid government bills.  The EU said Greece’s data were finally accurate. In Athens, bailout foes bit back.

Mr. Logothetis and Ms. Georganta had each applied for the job Mr. Georgiou won. The government scored them as less qualified than he, giving them positions on the agency’s board for which they had also applied.  Mr. Papaconstantinou says he regrets not vetting them more.  The pair suspected Mr. Georgiou was carrying out secret orders from the foreign creditors.  His appointment was part of “the plan to enter Greece in the Memorandums of shame and genocide of the Greek population,” they later wrote in a Greek magazine.  From Mr. Georgiou’s first day, Mr. Logothetis hacked his emails after learning private access codes, a court trying him for that hacking later found.  The court acquitted Mr. Logothetis, ruling he committed the deed but acted to protect state interests.

Board members wanted to approve the deficit data before telling the EU, according to Mr. Georgiou and indictments against him.  He told them it wasn’t the board’s job to debate the deficit calculation — that EU rules made him alone responsible for its accuracy. After discovering the email hacking, he stopped convening board meetings.  The government eventually dismissed the board.  The dissenters publicized their claim that Mr. Georgiou inflated the deficit, disputing in Greek media the inclusion of state-company deficits and claiming rules were imposed only on Greece.  (Eurostat’s website contains correspondence with other countries about applying the same rules.)

Ms. Georganta published calculations that Greece’s 2009 deficit was 3.9% of GDP.  Her website shows she looked at how much Greek debt rose from 2008 to 2009, while subtracting items she disputed from the latter year only.

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