Context

According to the European regulations, all EU Member States have to compile government accounts, notably the government deficit and debt. The decision on the participation in the European Monetary Union would depend on the government accounts. In particular a deficit below 3% of GDP and debt below 60% of GDP, or if above, declining.

Up until 1995, Greece recorded very high deficits, for some years above 10% of GDP. Then it miraculously melted down. In 2000, given a deficit below 3% of GDP, Greece was acceoted as the 12th member of the European monetary union.

Doubts about quality of numbers, and first major revision

The quality of the Greek numbers were a source of suspicions among the European statistical community. However, nobody dared to publicly raise doubts about the quality of the numbers compiled by the National Statistical Service of Greece.

In March 2002, Eurostat refused to validate data transmitted by the Greek government. In reaction to this, the Greek government (PASOK) revised the debt level by several percentage points. In September 2002, Eurostat refused again to validate data. The debt was more revised upwards, while the government balance (the Greek government pretended they were recorded a surplus) became a deficit.

Most recent revision

In March 2004, Eurostat refused again to validate the Greek numbers. This was shortly before Greek elections and a new government (New Democracy) was inaugurated.

When the conservative party New Democracy won the March 7 elections in 2004, said it would start a an objective financial audit of the government accounts. George Papandreou, president of PASOK which was the main opposition at that time, and the other 2 smaller parties, initially agreed with the need of an audit. But it lasted a very short period of time during which neither outside auditing firms nor the central bank were asked to carry out such an audit. Instead, the government produced new estimates while investigated the years 1997 - 2003, and the resulting data were given to the Eurostat, which then went on and published a report.

It appeared that the Greek government accounts were falsified (Eurostat diplomatically avoids this word) since at least 1997. If the true figures were known, Greece would have never joined the European monetary union. Because of this falsification of accounts, the Greek government managed to save millions of euros for several years, since it benefitted from cheap interest rates.

A few commetators found surprising that the Greek public prosecutor did not start an investigation into the crime of falsification of documents. This fact could suggest that Greece is not a state of law, and that some crimes can go unpunished.

Political dispute

New Democracy's government then accused Costas Simitis and PASOK, who was the prime minister and president of PASOK at that time, of having falsified Greece's macroeconomic statistics, on the basis of which the European institutions accepted Greece to join the Eurozone. All the opposition parties accused New Democracy's government on making a census that was not a real one. Moreover PASOK said that it never falsified any data, and that New Democracy's government just changed the way costs were put in years and some other logistic techniques, and that the way PASOK used to do it, was known to the Eurostat and Eurostat never opposed to it.

Costas Simitis wrote in an article in the Financial Times claiming that Greece's deficit revision damaged Europe. There Simitis states among other things that The Commission must design an auditing system that is the same for all EU countries and guarantees objectivity and impartiality, while ruling out domestic political interference. Some days later FT received a comment by the Director General of Eurostat.

As a result of that financial audit, Greece fell in the list of the loan creditability and now pays more taxes on the loans it has with other countries. EU Commission warned Greece about future problems if Greece, now with the new data, does not comply with the Eurozone requirements.