Under the Council Regulation 479/2009 on the application of the Protocol on the excessive deficit procedure, Member States are required to report to the Commission (Eurostat), twice a year, their planned and actual government deficits and levels of government debt. The above mentioned Regulation provides that “Eurostat is responsible, on behalf of the Commission, for assessing the quality of the data and for providing the data to be used within the context of the excessive deficit procedure (…)” Member States are, therefore, required to comply with accounting rules, particularly with the statistical principles set out in Regulation 223/2009 on European statistics. Eurostat assesses whether government operations, using new financial instruments, have an impact on governments deficit and debt.
Hence, Member States must ensure that “statistics are produced in an independent manner, free from any pressures from political or interest groups, and also in a systematic, reliable and unbiased manner using professional and ethical standards.”
However, the quality of Greece’s fiscal data has been raising several concerns since 2004, when the European Commission launched an infringement procedure against it for misreporting deficit figures. The Commission found “methodological problems in the recording of taxes and social contributions, the surplus of social security funds and hospitals and the recording of debt assumptions and military expenditures.” Nevertheless, the procedure was closed in 2007. However, according to the Commission, this has not meant that Greek fiscal data “were compliant with all the applicable rules and procedures, as far as their quality was concerned.” In fact, the Commission has pointed out that between 2005 and 2009, Eurostat introduced five reservations on the quality of the data submitted by Greece.
Last January, the Commission adopted a report slamming Greece over its unreliable deficit and debit statistics. In October 2009, Greece revised its 2008 budget deficit, reported and validated by Eurostat in April, from 5.0% of GDP to 7.7%. It also revised its 2009 public deficit, reported in April, from 3.7% to 12.5%. According to the Commission such revisions have been quite common in Greece but they are “extremely rare in other EU Member States.” Moreover, the Commission has stressed that the above-mentioned revisions illustrate “the lack of quality of the Greek fiscal statistics (…) and show that the progress in the compilation of fiscal statistics in Greece, and the intense scrutiny of the Greek fiscal data by Eurostat since 2004 (…), have not sufficed to bring the quality of Greek fiscal data to the level reached by other EU Member States.”
The Commission has pointed out that the Greek public account system is “inappropriate for a correct reporting of EDP statistics.” Moreover, there is no guarantee of the “independence, integrity and accountability of the national statistical authorities.” Particularly, there is a lack of independence of the Greek statistical institute (NSSG) and the General Accounting Office (GAO) from the Ministry of Finance which, according to the Commission “has allowed the reporting of EDP data to be influenced by factors other than the regulatory and legally binding principles for the production of high quality European statistics.”
Following the misreported deficit figures by Greece in 2004, the Commission put forward a proposal amending Regulation 3605/93 as regards the quality of statistical data in the context of the excessive deficit procedure. Under the Commission proposal Eurostat would have been granted more control powers, particularly it would have been allowed to carry out "in-depth methodological visits.” The Commission wanted to extend the scope of the methodological visits beyond “the purely statistical domain.” The Commission also proposed to grant Eurostat access to all “the information required for the purposes of the data quality assessment.” The Council adopted the Regulation but the EU member states could no agreed to grant audit powers to Eurostat.
According to the Commission the statistical monitoring tools provided by the Council Regulation 2103/2005 are not enough to tackle the Greece´s issues. In fact, the Commission has stressed that Eurostat has been using, extensively, its powers to monitor Greek EDP data, including methodological visits. But, even so, it “was unable to detect the level of (hidden) interference in the Greek EDP data.” According to the Commission the Greek revisions in October have shown that the existing system “for fiscal statistics does not mitigate, to the extent necessary, the risk of, for instance, incorrect or inaccurate data being notified to the Commission.” Consequently, the Commission, using the lack of reliability of Greece’s public finance statistics as an excuse, has put forward, again, a proposal for a Council Regulation amending Regulation 479/2009 as regards the quality of statistical data in the context of the excessive deficit procedure, granting auditing power to Eurostat.
According to the Commission the draft proposal is aiming at establishing “tools for control of national systems for production of budgetary statistics” as well as minimising “the cases of incorrect reporting of deficit and debt figures.” Eurostat would be, therefore, entitled to examine Member States’public accounts so it can verify the data provided.
Under the Commission proposal Eurostat would have additional rights of access to a broader scope of information. In fact, the Commission is trying again to grant Eurostat access to all “the information required for the purposes of the data quality assessment” and not just statistical information. Moreover, there would be more “regular statistical visits” and "in-depth methodological visits” in Member States. The methodological visits would go, therefore, beyond the “purely statistical data” as their purpose will be to verify the public accounts. Eurostat would have access “to the accounts of government entities at central, state, local and social security levels (…)”
According to the Commission’s proposal the methodological visits would only be carried out in “exceptional cases where significant risks or problems with the quality of the data have been clearly identified."
Whereas presently Member States may, voluntarily, provide the assistance of experts in national accounting, at Eurostat request, under the draft proposal they would be obliged to provide such assistance for the preparation and undertaking of the methodological visits.
Taking into account the current Greek situation, the Member States, this time, are very likely to accept the Commission proposal.
