BoG chief says parties knew of 2009 deficit miss

The governor of the Bank of Greece, Giorgos Provopoulos, told a parliamentary inquiry on Thursday that New Democracy and PASOK were aware that Greece’s deficit was reaching dangerous levels ahead of elections in 2009.

Provopoulos told the parliamentary committee, which is investigating whether Greece’s 2009 deficit figure was inflated on purpose, that it was clear early in 2009 that the deficit would be much larger than previously thought and would be in the double digits. He added that there were plenty of indications in the first six months of the year about the poor state of Greece’s public finances. Provopoulos told the MPs that the Bank of Greece had repeatedly warned then Prime Minister Costas Karamanlis and PASOK leader George Papandreou about the dangers ahead.

Karamanlis’s government had forecast a debt of less than 5 percent of GDP but the eventual figure surpassed 15 percent. PASOK, which came to power in October 2009, suggested that it had not known the full extent of the country’s fiscal woes until it took office. In the days after Papandreou became prime minister, the deficit was revised upward, first to over 12 percent of GDP and then over 13 percent.

Provopoulos explained to the committee that the New Democracy government had sent a deficit report a couple of days before the elections and the PASOK administration sent another report, showing a much larger deficit, 16 days after the polls. The central banker said this prompted the European Commission to ask its statistics agency, Eurostat, to review Greece’s figure and methodology.

Two former employees of the Hellenic Statistical Authority (ELSTAT) have accused its head, Andreas Georgiou, of artificially inflating the deficit to justify Greece’s request for a bailout. Georgiou vehemently denies the accusations.

Provopoulos said that the PASOK government might have been able to prevent Greece being locked out of the markets if it had implemented bold structural reforms in late 2009. He added that the reforms did not happen quickly enough and Athens was eventually forced to call on the European Union and International Monetary Fund for a bailout as it could no longer borrow money. 

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