• The leaders of the European Union and its member nations are collectively circling their wagons against Greece and its mountain of public debt. Meanwhile, something far more interesting is going on in the corridors of the EU institutions: political and economic revisionism.
The seeds of the Greek crisis—or at least the euro-zone's Greek crisis—were planted in large part in Brussels long ago. In late 2009, Athens announced that its public deficit for the year would hit 12.7% of GDP, not the 3.7% previously projected. By January 2010 the European Commission had published a report lambasting Greek government bookkeeping and lamenting that "the intense scrutiny of the Greek fiscal data by Eurostat since 2004. . . have not sufficed to bring the quality of Greek fiscal data to the level reached by other EU member states." The former head of the Greek statistical agency, Manolis Kontopirakis, was made the fall guy and hounded so thoroughly that he eventually left Europe for the relative anonymity of New York.
That commission's report, when addressing the Excessive Deficit Procedure reports that Greece had previously filed to Brussels, also noted that "further questions will need to be resolved, and it cannot be excluded that this will lead to further revisions of Greek government deficit and debt data, particularly for 2008 but possibly also for previous years." Those last words sound like an implicit admission of the EU's failed scrutiny procedures.
Of course we all know that the EU's statistical scrutiny failed. More pertinent is the role that Brussels played in its failure. Upon joining the euro, the Greek government was like a child in a candy store. Credit was available to it at 4% interest rates, when previously it had paid as much as 18%. But which irresponsible adult gave Athens the keys to the store?
Back in January 1999 when the euro was born, Greece was not able to join because it didn't meet the euro zone's budgetary and inflationary standards. By June 2000 though, Greece was admitted to the club—despite press reports throughout that year that Greece had qualified by "limbo dancing," or making great efforts to meet euro-zone standards only to let things slide as soon as it was past the barrier.
The European Central Bank similarly expressed its concern prior to Greece's euro entry, noting that its debt levels were far above the prescribed limit. A respected Bonn University economics professor, Jürgen von Hagen, told the New York Times that at the time, there were already "clear indications that the Greeks were forging the data."
So where was the European Commission during this time? Eurostat is the commission's statistics agency, boasts a staff of 900 and is tasked with analyzing and collating economic and financial data submitted by national governments—a very important role given that the commission is the guardian of European treaties and the executive arm of the EU. Is it possible that what was obvious to so many escaped Eurostat's army of specialized analysts? Certainly, if the political will to turn a blind eye is there.