Greek Statistician Under Scrutiny for Budget Estimates
ATHENS — Andreas Georgiou was not particularly alarmed when he was asked to testify in a judicial investigation into one of the most contentious issues in Greece today: whether the 2009 budget deficit — which precipitated not only Greece’s crash but the broader euro zone crisis — had been badly overstated.
As the director of Greece’s newly founded statistical authority, he was prepared to be summoned for questioning, but not for what actually awaited him. “To my surprise, we were called not as witnesses but as suspects,” he said.
Recruited in 2010 to help get Greece’s famously unreliable public accounting in order, Mr. Georgiou quickly found himself the target of a criminal investigation, parrying accusations of disloyalty — hiring consultants to write Greek law and of working more for his previous employer, the International Monetary Fund, than the Greek government. He, in turn, has accused his opponents of hacking into his e-mail. Prosecutors have not yet brought charges, Mr. Georgiou said, but they are still investigating him for “breach of faith against the state” for his role in calculating Greece’s deficit and debt.
While Greece’s insolvency was inevitable, its loan agreements are based solely on such numbers and every extra percentage point in the deficit — especially the ones calculated on Mr. Georgiou’s watch — has translated into spending reductions that have affected millions of lives, from salary and pension cuts to hospitals that can no longer afford to buy medicines. The connection was underscored this week with the public suicide of a 77-year-old pensioner in downtown Athens, an act that set off an outpouring of grief and anger.
The issue also has broad implications for Europe, where auditing standards have been a problem ever since the Stability and Growth Pact set a 3 percent limit on budget deficits but failed to establish strong monitoring and enforcement mechanisms — a virtual invitation to financial shenanigans. The euro crisis may be in abeyance for now. But with the finances of deeply indebted nations like Greece, Portugal and Spain continuing to deteriorate, the question of how deficits are calculated is emerging as a battleground across Europe.
Few people know that better than Mr. Georgiou, who has vowed to retain his post in the face of the judicial investigation and a separate parliamentary investigation that was wrapped up recently with no finding of wrongdoing — largely because the Socialists leading the inquiry exonerated themselves.
The latest chapter in the complex saga begins in June 2010, a month after Greece signed its first loan agreement with the so-called troika — the European Union, the European Central Bank and the International Monetary Fund — when the former finance minister, George Papaconstantinou, appointed Mr. Georgiou to run the Hellenic Statistical Authority, known as Elstat.
A year earlier, Greece had been plunged into crisis when the newly elected Socialists announced that the 2009 budget deficit would be 12.4 percent of gross domestic product, twice the previous estimate. In April 2010, the European Union’s statistics agency, Eurostat, revised Greece’s deficit upward again, to 13.6 percent, which forced Greece to seek a bailout. And in November 2010 Eurostat, working with Elstat and Mr. Georgiou, revised the deficit for 2009 upward a final time to 15.4 percent, leading the troika to demand additional budget cuts of $7.65 billion.
How that final calculation was conducted is now the subject of intense debate. Mr. Georgiou has said that it reflects Greece’s first-ever adherence to accepted European procedures. Yet some critics, including some who were on Elstat’s since-disbanded six-person board, said that Mr. Georgiou had actually applied standards that were stiffer than European norms, then tried to thwart them when they raised questions about the process.
Zoe Georganta, a professor of applied econometrics and productivity at Macedonia University of Economic and Social Sciences and Mr. Georgiou’s fiercest critic, said that the statistics czar, guided by two foreign experts hired by Eurostat, added the country’s money-losing public utilities to the government’s accounts, raising the budget deficits by three-quarters of a percentage point. This had been done before in other European countries, financial experts said, but usually to bring the deficit down, not pump it up.
“He wanted us to be a rubber stamp,” said Ms. Georganta, an expert in public accounting. Four out of six members of the former board interviewed for this article said Mr. Georgiou never adequately explained how the final 2009 deficit was calculated.
For his part, Mr. Georgiou said that members of the board had the incorrect assumption that they could “vote” on methodology and statistics, and that some represented vested interests that did not want Greece’s dire finances to come to light. “We were faced with significant pressures through the board not to revise the deficit upwards on account of fully applying European Union rules, but to minimize it,” he said.
In the past, countries in a stronger position than Greece have traditionally negotiated with Eurostat over how to classify items in the government debt. In testimony before the parliamentary committee, other Greek officials said the country had lost that ability once it accepted foreign aid.
In a telephone interview, Walter Radermacher, the director of Eurostat, acknowledged that it was not always clear how to classify public utilities, but said the larger issue was that Greece did not have accurate records. “The borderline of this general government is not something which is fixed forever, it changes more or less each year,” he said. “Our request is that all these companies are maintained in a statistics register. This register simply did not exist in Greece.”
Some see Mr. Georgiou as a crucial figure in Greece’s transition from a sovereign country to a de facto European protectorate. In a private letter Mr. Georgiou sent on Oct. 16, 2010, he consulted with Poul M. Thomsen, the I.M.F.’s representative in Greece, about changing Greek law to limit the power of Elstat’s board. Mr. Georgiou acknowledged to Parliament that the I.M.F. had not accepted his resignation until four months after he became director of Elstat so that he could qualify for an I.M.F. pension when he turned 50, raising questions about his independence.
Mr. Georgiou, who remains the head of Elstat, said it was “only natural” that as head of the statistics office he would communicate “with various stakeholders in the reliability of Greek statistics.” He added that the use of the letter in the parliamentary investigation was illegal since it had been “subjected to theft.” (A former member of the Elstat board has been charged with hacking into his e-mail.)
Ms. Georganta and other critics also objected that outside consultants hired by Eurostat were instrumental in how the government revised the law — something they say would probably never be acceptable in larger European countries. The original members of the board were dismissed in September 2010 and Parliament later passed a law to limit the board’s power.
As part of the loan agreement that Greece reached with its foreign lenders in February, it pledged to pass a measure to further expand the powers of the Elstat director and to give the board a purely advisory capacity. Greece pledged to pass the bill by March 31; it is still pending in Parliament.
Mr. Georgiou says the law change will allow Greece to continue modernizing its statistics methodology. But his critics say the new law gives Mr. Georgiou too much power, making him more easily beholden to Greece’s lenders in what his critics see as a crucial loss of sovereignty.
The Greek crisis has also led to changes in Europe. Eurostat has tripled its staff for investigating member countries’ deficits to 45 people from 15, Mr. Radermacher said.
“We didn’t have the powers to put pressure on member states to be compliant; now we have a lot of powers, and we will have more after the change in legislation,” he said, referring to new norms expected to be approved by the European Commission this year. He added that under Mr. Georgiou, Greece’s credibility on statistics has improved markedly.
But experts say that the information still varies widely across Europe. Asked if the countries in the euro zone could agree on a shared statistical reality, on a truth about the numbers, Mr. Radermacher was direct.
“The truth is not my business,” he said. “I am a statistician. I don’t like words like ‘correct’ and ‘truth.’ Statistics is about measuring against convention.”
ATHENS — Andreas Georgiou was not particularly alarmed when he was asked to testify in a judicial investigation into one of the most contentious issues in Greece today: whether the 2009 budget deficit — which precipitated not only Greece’s crash but the broader euro zone crisis — had been badly overstated.
As the director of Greece’s newly founded statistical authority, he was prepared to be summoned for questioning, but not for what actually awaited him. “To my surprise, we were called not as witnesses but as suspects,” he said.
Recruited in 2010 to help get Greece’s famously unreliable public accounting in order, Mr. Georgiou quickly found himself the target of a criminal investigation, parrying accusations of disloyalty — hiring consultants to write Greek law and of working more for his previous employer, the International Monetary Fund, than the Greek government. He, in turn, has accused his opponents of hacking into his e-mail. Prosecutors have not yet brought charges, Mr. Georgiou said, but they are still investigating him for “breach of faith against the state” for his role in calculating Greece’s deficit and debt.
While Greece’s insolvency was inevitable, its loan agreements are based solely on such numbers and every extra percentage point in the deficit — especially the ones calculated on Mr. Georgiou’s watch — has translated into spending reductions that have affected millions of lives, from salary and pension cuts to hospitals that can no longer afford to buy medicines. The connection was underscored this week with the public suicide of a 77-year-old pensioner in downtown Athens, an act that set off an outpouring of grief and anger.
The issue also has broad implications for Europe, where auditing standards have been a problem ever since the Stability and Growth Pact set a 3 percent limit on budget deficits but failed to establish strong monitoring and enforcement mechanisms — a virtual invitation to financial shenanigans. The euro crisis may be in abeyance for now. But with the finances of deeply indebted nations like Greece, Portugal and Spain continuing to deteriorate, the question of how deficits are calculated is emerging as a battleground across Europe.
Few people know that better than Mr. Georgiou, who has vowed to retain his post in the face of the judicial investigation and a separate parliamentary investigation that was wrapped up recently with no finding of wrongdoing — largely because the Socialists leading the inquiry exonerated themselves.
The latest chapter in the complex saga begins in June 2010, a month after Greece signed its first loan agreement with the so-called troika — the European Union, the European Central Bank and the International Monetary Fund — when the former finance minister, George Papaconstantinou, appointed Mr. Georgiou to run the Hellenic Statistical Authority, known as Elstat.
A year earlier, Greece had been plunged into crisis when the newly elected Socialists announced that the 2009 budget deficit would be 12.4 percent of gross domestic product, twice the previous estimate. In April 2010, the European Union’s statistics agency, Eurostat, revised Greece’s deficit upward again, to 13.6 percent, which forced Greece to seek a bailout. And in November 2010 Eurostat, working with Elstat and Mr. Georgiou, revised the deficit for 2009 upward a final time to 15.4 percent, leading the troika to demand additional budget cuts of $7.65 billion.
How that final calculation was conducted is now the subject of intense debate. Mr. Georgiou has said that it reflects Greece’s first-ever adherence to accepted European procedures. Yet some critics, including some who were on Elstat’s since-disbanded six-person board, said that Mr. Georgiou had actually applied standards that were stiffer than European norms, then tried to thwart them when they raised questions about the process.
Zoe Georganta, a professor of applied econometrics and productivity at Macedonia University of Economic and Social Sciences and Mr. Georgiou’s fiercest critic, said that the statistics czar, guided by two foreign experts hired by Eurostat, added the country’s money-losing public utilities to the government’s accounts, raising the budget deficits by three-quarters of a percentage point. This had been done before in other European countries, financial experts said, but usually to bring the deficit down, not pump it up.
“He wanted us to be a rubber stamp,” said Ms. Georganta, an expert in public accounting. Four out of six members of the former board interviewed for this article said Mr. Georgiou never adequately explained how the final 2009 deficit was calculated.
For his part, Mr. Georgiou said that members of the board had the incorrect assumption that they could “vote” on methodology and statistics, and that some represented vested interests that did not want Greece’s dire finances to come to light. “We were faced with significant pressures through the board not to revise the deficit upwards on account of fully applying European Union rules, but to minimize it,” he said.
In the past, countries in a stronger position than Greece have traditionally negotiated with Eurostat over how to classify items in the government debt. In testimony before the parliamentary committee, other Greek officials said the country had lost that ability once it accepted foreign aid.
In a telephone interview, Walter Radermacher, the director of Eurostat, acknowledged that it was not always clear how to classify public utilities, but said the larger issue was that Greece did not have accurate records. “The borderline of this general government is not something which is fixed forever, it changes more or less each year,” he said. “Our request is that all these companies are maintained in a statistics register. This register simply did not exist in Greece.”
Some see Mr. Georgiou as a crucial figure in Greece’s transition from a sovereign country to a de facto European protectorate. In a private letter Mr. Georgiou sent on Oct. 16, 2010, he consulted with Poul M. Thomsen, the I.M.F.’s representative in Greece, about changing Greek law to limit the power of Elstat’s board. Mr. Georgiou acknowledged to Parliament that the I.M.F. had not accepted his resignation until four months after he became director of Elstat so that he could qualify for an I.M.F. pension when he turned 50, raising questions about his independence.
Mr. Georgiou, who remains the head of Elstat, said it was “only natural” that as head of the statistics office he would communicate “with various stakeholders in the reliability of Greek statistics.” He added that the use of the letter in the parliamentary investigation was illegal since it had been “subjected to theft.” (A former member of the Elstat board has been charged with hacking into his e-mail.)
Ms. Georganta and other critics also objected that outside consultants hired by Eurostat were instrumental in how the government revised the law — something they say would probably never be acceptable in larger European countries. The original members of the board were dismissed in September 2010 and Parliament later passed a law to limit the board’s power.
As part of the loan agreement that Greece reached with its foreign lenders in February, it pledged to pass a measure to further expand the powers of the Elstat director and to give the board a purely advisory capacity. Greece pledged to pass the bill by March 31; it is still pending in Parliament.
Mr. Georgiou says the law change will allow Greece to continue modernizing its statistics methodology. But his critics say the new law gives Mr. Georgiou too much power, making him more easily beholden to Greece’s lenders in what his critics see as a crucial loss of sovereignty.
The Greek crisis has also led to changes in Europe. Eurostat has tripled its staff for investigating member countries’ deficits to 45 people from 15, Mr. Radermacher said.
“We didn’t have the powers to put pressure on member states to be compliant; now we have a lot of powers, and we will have more after the change in legislation,” he said, referring to new norms expected to be approved by the European Commission this year. He added that under Mr. Georgiou, Greece’s credibility on statistics has improved markedly.
But experts say that the information still varies widely across Europe. Asked if the countries in the euro zone could agree on a shared statistical reality, on a truth about the numbers, Mr. Radermacher was direct.
“The truth is not my business,” he said. “I am a statistician. I don’t like words like ‘correct’ and ‘truth.’ Statistics is about measuring against convention.”