The row in Greece over whether the former government massaged its 2000 budget deficit figures to qualify for EMU entry demonstrates more than ever the need for greater transparency.
Without good statistics, those interested in economics are flying blind without a map, said MIT professor Lester Thurow in our August Viewpoint. In questioning the reliability of Chinese, Indian and US growth rates, he concluded: never believe the reported numbers until you understand where they come from and have double-checked them.
Doubt over statistics has been highlighted recently by the report that Greece, following a change of government earlier this year, has significantly revised its budget deficit figures for the past few years. It allegedly “cooked the books” to go below the 3% deficit-to-GDP ceiling in 2000 and qualify for entry into European Monetary Union (EMU). The previous government is accused of using “creative accounting” to enable Greece to meet the EU’s Stability and Growth Pact requirements, broken repeatedly by bigger players such as France and Germany.
So would the former Greek government have “stretched” the numbers, as its successor says? Unlike the French and Germans, who have the clout to flout EU rules openly, the relatively small Greek state needed to show it had genuinely qualified for the euro club in 2000; a very big prize was at stake.
And why would the current government want to dispute its predecessor’s deficit numbers? Politics in Greece is fiercely competitive and perhaps the current government wants to divert attention away from its own burgeoning deficits as a result of hugeoverspending on the Olympics.
Which Greek government do you believe? “Neither” may be the best answer but this raises still more questions. The reliability of government statistics across Europe seems in need of reassessment, as does the Stability and Growth pact itself.
The use of statistics for political ends is no surprise, as Professor Thurow suggests, but the answer, in part, to what can be done is continued improvement in transparency and clarity in accounting, which would help expand the information flow and provide potential for double-checking.
The corporate world has strengthened disclosure; governments around the world need to follow suit. Flying blind is not a recipe for success.
