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I think the whole lie story is a canard to the extent it lets the banks and other politicians off the hook.

"They were lying! We would have never loaned them money!!"

Yes, the conservative gov't lied--but we're talking about projections of a yearly budget deficit here during a time of severe economic downturn. Even current Greek projections have been off by a magnitude of 4% yearly budget deficit. And indeed, Greek projections were off for every single year of the decade before being audited and reported correctly at the end of the year.

If you look at Greece's debt to GDP throughout the decade, you don't see it rising because of lying. It was 100-105% throughout the decade and then ended up at 115% after 2008.

by Upstate NY on Sat Nov 26th, 2011 at 10:28:28 AM EST
[ Parent ]
I'm all with you in blaming banks and not forgetting that the GDP ratio depends on the GDP estimate too, but the mis-reporting of Greece's deficits wasn't in projections and wasn't just in percent-of-GDPs. You may recall the November 2010 revisions. However, those were preceded by more significant revisions, which accounted for a combination of creative booking (in which Goldman Sachs advised the government) and bad tracking of data. Check this EU report for a summary. The corrections were significant in Euros, too, see for example tables on page 19 in the report, which show both the nominal and percentage value of the corrections done in 2009. For the last full year of the Karamanlis government, 2008, the deficit increased to the tune of €6 billion, most of it being hospital liabilities.

You are also wrong about the debt ratio not changing due to the revisions. Check pages 13-14 of that report for the changes in the debt ratio from 2000 to 2008. Upward revisions are due to mis-estimates, though apparently mostly ones different from those behind the deficit mis-estimates. However, the most significant change in the debt ratios is a ~10 pp downward revision done in 2007 (the report doesn't say but this one is associated with the inclusion of the black economy in the GDP estimate, I found).

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sat Nov 26th, 2011 at 01:40:28 PM EST
[ Parent ]
The Goldman Sachs swaps were way back in 2002. Unless you're referring to something else.

I actually read the Eurostat report on this issue that broke down the bad numbers and the exact audit procedures that produced the validated numbers.

The main point stands however. If Greece had been lying all along, one struggles to understand how 105% debt to GDP rose to ONLY 115% in early 2010.

If they were lying, then the published Eurostat figures showing 100-105% through the decade were wrong, correct? But if they were wrong, how does the Greek debt rise to ONLY 115% with a 15% yearly deficit in 2009? It makes no sense.

I have no doubt the Greek ministries were botching their numbers all along, but Eurostat claims it was conducting audits, and yet even if it wasn't getting to the bottom of things, even if Eurostat was throwing up its hands, it wouldn't explain why/how banks were lending to Greece when the published figures clearly showed 105% debt to GDP for a decade.

by Upstate NY on Sat Nov 26th, 2011 at 09:54:09 PM EST
[ Parent ]
Goldman Sachs: I should have checked rather than relying on memory; indeed the main deal with Goldman Sachs was in the years 2001-2005 and a heritage of the Simitis government. I conflated it with GS's 2009 attempt to advise the Greek government again, this time the freshly elected Papandreu government, but they didn't listen. (I find though in the article that in 2008, GS advised the Karamanlis government in another legal trickery regarding the swaps from 2001.)

If they were lying, then the published Eurostat figures showing 100-105% through the decade were wrong, correct?

Have you checked the link again? Yes, the debt figures were wrong and they were revised.

how does the Greek debt rise to ONLY 115% with a 15% yearly deficit in 2009?

You are confusing 2008 and 2009, and your data seems not up to date. In Eurostat's current data, the lowest debt to GDP ratio was in 2003 (when GDP grew 5.9%) at 97.4%, which grew to 113.0% in 2008 (GDP: -0.2%, start of recession). Then in 2009 (GDP: -3.3%), it jumped to 129.3%.

As I indicated, it seems true however that total debt and deficit are derived from different estimates (thus the deficit-hiding doesn't directly appear in the debt and the debt-hiding doesn't directly appear in the deficit). It's hard to check up on this, because change in debt should also be affected by exchange rate effects and other financial niceties (and possibly a host of other factors I'm ignorant about), but here is another series I derived from Eurostat data -- deficit vs. change in debt, both in million Euros:

Year20002001200220032004200520062007200820092010
Change in debt18636108987345881115132122642878315096238313640629814
Deficit509365427465973813940100681210914475228223662424125

Some years the deficit exceeds the debt increase, but you see that overall, in the past decade, debt was actually growing by more than the cumulative deficit. The "interesting" years are 2000, 2001, 2006, and 2010.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Nov 27th, 2011 at 03:26:16 AM EST
[ Parent ]
It appears 2009 was revised much later, so it's hard for me to go back, but I'm sure if you look at 2009 numbers from 2010, the troika and everyone was working under the assumption that the debt to GDP was 115%.

But as I wrote in my initial post, Greece got the numbers wrong each and every year. Yet Eurostat conducted audits and eventually reported a number that would accord with the 115% debt to GDP.

The economy fell off the wheels in late 2009.

by Upstate NY on Sun Nov 27th, 2011 at 09:05:33 AM EST
[ Parent ]
Could you give sources for your contention? For now my impression is that you either mis-remember or remember data from a period of time when 2009 deficit estimates were already out (they were estimated in advance in 2009 already after all) but debt totals circulating in the media were the last official data, that is end of 2008. And either way, you are trying to make a point based on a hazy memory while disregarding actual data and sources I quoted showing actual corrections in debt ratios.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Nov 27th, 2011 at 09:19:02 AM EST
[ Parent ]
Look at this link:

http://www.marketwatch.com/story/greeces-revised-2009-deficit-tops-15-of-gdp-2010-11-15

In November of 2010, the numbers for Greece were revised to the current number that you have.

Yet Greece's bailout plan had already been instituted for many months prior to that on the assumption that Greece's debt to GDP was 115%. The "Greeks were lying" story was also out based on the idea that their debt to GDP was at 115%. Indeed, in the Eurostate report of January 8, 2010 which went into excruciating detail on Greek statistics, and how screwed up they were, the numbers had been revised up to 115%.

The yearly budget deficit at the time was considered to be in the 11% range.

It was only AFTER the degree of recession (+5%) was determined in combination with the revised budget deficit (+15%) in late 2010, that the debt to GDP number was revised to 127%.

The "Greece lied about statistics" story came out long before that when the depth of the recession in Greece and the budget deficit was not fully known. I would submit however that these numbers are all moving targets and what needs to be known is the actual GDP rises and falls and total deficit rises and falls. With a 5% contraction in GDP, your debt is going to look much worse than it did a year earlier even if you haven't added to it much.

by Upstate NY on Sun Nov 27th, 2011 at 01:26:39 PM EST
[ Parent ]
I find the official November 2010 EU release here, and the April 2010 release with the previous data here. The GDP revisions were modest (slightly upwards for the first two years and more – c. -1% – downwards for 2008 and 2009); but there is a massive upwards correction of both deficits and debts, in Euros as well as ratios to GDP, for all years between 2006 and 2009 (in fact the deficit corrections well exceed the GDP corrections in Euros!). So again further missing/mis-estimated items were found for all successive years, which cumulated. The upwards corrections in end-of-year total debt in percentage points (it's the same story in Euros):

2006 - +8.3 (to 106.1%)
2007 - +9.3 (to 105.0%)
2008 - +11.1 (to 110.3%)
2009 - +11.7 (to 126.8%)

The "Greeks were lying" story was also out based on the idea that their debt to GDP was at 115%.

I just don't get what you are arguing about. Fact is the debt and deficit numbers had to be retroactively revised, and always revised upwards, in every year from 2005, and always for multiple preceding years. The November 2010 revisions were just the last in the line, and, just like the previous, affected multiple years of prior data.

The yearly budget deficit at the time was considered to be in the 11% range.

The April 2010 estimate (which contains a specific note from Eurostat on reservations on the data from Greece, but with estimated magnitudes of the problem below the actual November corrections) gives -13.6% for the 2009 deficit.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Nov 27th, 2011 at 04:02:30 PM EST
[ Parent ]
What I'm saying is that people didn't wake up in early 2010 and say, "Holy cow, the Greeks have 115% debt to GDP. They lied to us. We didn't know things were that bad!"

Even given the revisions you cite above, they are only 4%-5% over the previous numbers prior to 2009.

At the time, Eurostat was showing that Greece was running 100-105% debt to GDP for over a decade.

by Upstate NY on Mon Nov 28th, 2011 at 01:45:01 PM EST
[ Parent ]

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