Commission tries to solidify the EU statistical system

Press conference by Louis Galea, Member of the European Court of Auditors, on the ECA special report on European statistics, (EC Audiovisual Services).

Press conference by Louis Galea, Member of the European Court of Auditors, on the ECA special report on European statistics, (EC Audiovisual Services).

The Greek ‘tragedy’ that became the script of the first chapter of Eurozone’s story of sovereign debt crisis, had in its forefront the fraudulent use of statistics. It suffices to remind that the 2009 Greek state budget was voted in parliament in December 2008 with a headline deficit of 2.8% of the GDP, only to be finalised two years later at 15.6% of the GDP. Of course this was not the first time that Greece manipulated its own statistics. In 2001 the country reportedly joined the Eurozone, also on false inflation and state budget deficit statistics.

However Greece was not the only country to manipulate its own statistics. More than ten years ago, when the Eurozone was formed many countries, even Germany, were prettifying their consumer price inflation records. At that time budget deficits were a minor issue and the main problem in joining the Eurozone was inflation and interest rates. In any case member states statistical services were then operating as an integral part of national administrations and consequently they were prone in accommodating government ‘needs’.

Statistical accommodation?

According to the latest amendment of the legal base of European Community Statistics (Eurostat), with the regulation No 223/2009, , “In order to enhance trust in European statistics, the national statistical authorities should in each Member State, as should the Community statistical authority within the Commission, enjoy professional independence and ensure impartiality and high quality in the production of European statistics”. Practically though all EU statistical services still depend on governments for their budgets and the appointment of their governing councils.

In Greece there is still controversy about the truthfulness of the government deficit and debt statistics. The Hellenic Statistical Authority (ELSTAT) insists it is “is an independent Authority enjoying operational independence, as well as administrative and financial autonomy”. However there is still a conflict within the ELSTAT’s governing council, over the 2009 government budget deficit. Some of its members argue that the final estimate of it at 15.6% of the GDP was a compromise between Athens and Brussels and largely overestimates the real deficit. The same people state that this estimate was approved only by the President of the ELSTAT, after suggestions from Brussels.

The issue has even reached the courtrooms. In view of that, there was a statement issued by the Members of the European Statistical System on recent developments concerning ELSTAT in Greece. It goes like that, “We the undersigned, who collectively as members of the European Statistical System Committee are responsible for overseeing the production of European Statistics to be in compliance with the highest professional standards throughout the European Union, wish to express our deep concern at recent developments with regard to ELSTAT in Greece…While fully respecting the independence of national judicial systems and abstaining from commenting on ongoing court cases, we are concerned that political debates surrounding judicial action taken against the Head of the Greek statistical office (ELSTAT) and the calling into question of the validity of data”.

Now the Commission comes out and sets new rules “to safeguard high quality, comparable statistics for the Macroeconomic Imbalance Procedure”. This is a very delicate and crucial matter, because the whole apparatus of the new and strict fiscal auditing of Eurozone member states is based on accurate statistics. According to the ‘two and six pack’ regulations, the statistical monitoring of the government deficits and sovereign debt plays a fundamental role. Eurozone’s fiscal health is supposed to be closely supervised by the system of member state statistical services and duly reported to Brussels, for approval, correction or even punishment. This is the widely advertised new fiscal environment of Macroeconomic Imbalance Procedure (MIP).

New beginning

As a result the EU statistical system appears as the linchpin of the new Eurozone economic and financial univercet. Unfortunately there is the negative experience of the failure of the previous system of fiscal deficit and state debt monitoring and reporting, on which the euro area was initially based. That is why the Commission is now taking a new initiative. According to a Commission Press release issued last Friday, “Robust new rules for compiling, monitoring and reporting statistics for the Macroeconomic Imbalance Procedure (MIP) have been proposed by the European Commission today. The aim is to ensure that the data used for the MIP is comparable, reliable and of the highest quality, so that Member States’ macroeconomic imbalances can be efficiently identified and addressed at an early stage”.

Time will show if the European statistical system is to avoid the blunders of past.

 

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