The European Union's (EU) statistical authority Eurostat said on Wednesday that debt figures provided by the Greek statistical authorities were incomplete and did not include a questionable swap operation. This puts into question the reliability of the Greek deficit.

On Feb. 12, the Eurostat requested the Greek statistical authorities to provide information on all currency off-market swaps that occured from 2001 to 2009.

“Eurostat's preliminary analysis is that although the information on swaps is incomplete, for the first time the Greek authorities have declared the existence of an off-market swap operation in 2001,” the agency said. “Eurostat will request the Greek authorities to supply, as soon as possible, all the information necessary for a complete evaluation and recording of this operation in the next EDP notification.”

Council Regulation 479/2009 requires that EU member states report EDP-related data to Eurostat twice per year — at end-March and end-September. At those times the role of Eurostat is to assess the quality of deficit and debt data provided and their compliance with national accounts rules — European system of accounts (ESA95).

“Recent press reports mention one off-market swap operation and several securitization transactions undertaken by Greek government in the period 2000-2001,” Eurostat said. “When the European system of accounts (ESA 1995) was adopted, these kinds of operations were not usual practice for governments of member states and, therefore, specific statistical rules for such government transactions did not exist.”

Eurostat said that it had no possibility to anticipate these technical innovations in the financial sector, and could only react after having been informed on the use of such innovations by EU member states.

In 2002, Eurostat developed specific guidelines for the recording of government securitization operations and in 2008 developed guidance for the recording of financial derivatives.

In September 2002, Eurostat said it asked the Greek statistical authorities to reclassify its securitization and swap operations as part of government debt according to the new guidance.

However, the agency believes that the Greek authorities did not report its off-market swap operation. In a statement yesterday, Eurostat said that during its visit to Greece in September 2008,  the Greek authorities declared that Greek government units are not allowed by law to engage in off-market financial derivatives after the setting of the statistical rules.

The absence of information from Greece about the particular swap operation highlights the fact that Eurostat depends on the goodwill of the member states and reinforces the need to strengthen Eurostat competencies.

“The role of Eurostat is not to determine if government operations are illegal or not,” the agency said.  “In the context of the use by governments of new financial instruments, the role of Eurostat is to assess if such operations should have an impact or not on government deficit and debt.”

As a result of the Greece accounting irregularity, Eurostat is seeking more power to directly examine EU member states’ public accounts, particularly where there are substantial doubts about the reliability of the statistical data submitted by a national statistical authority.  

It also wants EU member states to take appropriate measures to ensure that officials responsible for the reporting of the actual data to the commission and of the underlying government accounts are accountable and act in accordance with principles established by European law.

 

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