Greece admits it cheated to join euro zone

Finance Minister George Alogoskoufis blamed the previous Socialist government, ousted in March, for what he termed "creative accounting" and for misleading EU statisticians.
.
"The problem would not be so serious if it had happened only one year," Alogoskoufis said during a parliamentary debate. "The fiscal derailment is due to actions and omissions by the previous government and we cannot hide behind our little finger anymore."
.
The admission came a day after the EU’s executive commission announced that Greece had revised its debt and deficit figures to correct errors in data sent to Brussels in recent years.
.
Eurostat, the EU’s statistics agency, will release its official figures, based on those revisions, by next week.

Greece, the EU’s poorest member at the time, failed to join the euro with the first wave of nations in 1999 because of a high budget and rising inflation. Two years of stringent economic reforms, including a 14 percent depreciation of the drachma, got it into the club in January 2001, a year before the euro currency began circulating.
.
The revelations this week have raised questions not only about whether skeptics were right, but also about the accuracy of EU statistics, which rely on data from member states. Appearing before the European Parliament in Brussels, the European Central Bank president, Jean-Claude Trichet, described the situation as "a real enormous problem," according to news agency reports.
.
"We have to be sure that the figures which are presented are reliable and pertinent," he said.
.
While Greece is not the only member state to have breached the budget cap, it is the first to admit to hiding the truth. With 10 new EU countries, many with messy finances, lining up to join the euro, economists said the EU may have to adopt tighter controls before allowing them in – a sentiment echoed by Trichet in Brussels.
.
"We must absolutely be sure that an independent institution, body, entity would guarantee, if I may, that we can rely on the figures which are presented," Trichet was quoted as saying.
.
Under EU rules, members must keep budget deficits to 3 percent of gross domestic product.
.
A review of state accounts ordered by Greece’s new government shows Athens repeatedly broke that ceiling. In 2000, the year the country’s finances should have met the criteria for joining the euro, Greece’s budget deficit was 4.1 percent of GDP, the new calculations showed, far higher than the 2 percent reported by the previous government.
.
For 2001 and 2002, the revised deficits hit 3.7 percent, more than twice the originally reported figure.
.
Greece had already revised upward its figures for 2003 and 2004, largely due to the costs of holding the Olympic Games.

Greece, the EU’s poorest member at the time, failed to join the euro with the first wave of nations in 1999 because of a high budget and rising inflation. Two years of stringent economic reforms, including a 14 percent depreciation of the drachma, got it into the club in January 2001, a year before the euro currency began circulating.
.
The revelations this week have raised questions not only about whether skeptics were right, but also about the accuracy of EU statistics, which rely on data from member states. Appearing before the European Parliament in Brussels, the European Central Bank president, Jean-Claude Trichet, described the situation as "a real enormous problem," according to news agency reports.
.
"We have to be sure that the figures which are presented are reliable and pertinent," he said.
.
While Greece is not the only member state to have breached the budget cap, it is the first to admit to hiding the truth. With 10 new EU countries, many with messy finances, lining up to join the euro, economists said the EU may have to adopt tighter controls before allowing them in – a sentiment echoed by Trichet in Brussels.
.
"We must absolutely be sure that an independent institution, body, entity would guarantee, if I may, that we can rely on the figures which are presented," Trichet was quoted as saying.
.
Under EU rules, members must keep budget deficits to 3 percent of gross domestic product.
.
A review of state accounts ordered by Greece’s new government shows Athens repeatedly broke that ceiling. In 2000, the year the country’s finances should have met the criteria for joining the euro, Greece’s budget deficit was 4.1 percent of GDP, the new calculations showed, far higher than the 2 percent reported by the previous government.
.
For 2001 and 2002, the revised deficits hit 3.7 percent, more than twice the originally reported figure.
.
Greece had already revised upward its figures for 2003 and 2004, largely due to the costs of holding the Olympic Games.
.
Prime Minister Kostas Karamanlis has accused the Socialist government of deliberately underreporting spending related to the Olympics and the military.
.
The Socialists say the conservative government was fudging budget figures itself to tarnish the credit the Socialists won for securing Greece’s admission to the euro zone in 2001.
.
Alexander Radwan, a spokesman for the center-right bloc of the European Union’s economic and monetary committee, on Tuesday called on the European Commission to re-examine Greece’s economic data for 1998 and 1999 – the years its fitness for joining was assessed. Greece’s entry to the euro zone was "perhaps premature," he said, although it was unclear what the fallout would be, if any.
.
Greece has until November to draft a plan to get its finances in order by next year.
.
"Conditions for the continuation of the economic recovery remain in place," he told the European Parliament’s economic affairs committee. He added that high oil

prices do not yet pose a risk of inflation in the euro area, although they could "dampen somewhat" economic growth.