Eurostat’s crafty ways of collaboration with governmental officials to swell Greece’s public deficit and debt
How Greek government’s accounts were lumped with billions of euros of fictional hospital invoices
The first part HERE
Imagine a retailer who customarily orders her annual stock of merchandise from her supplier, who overvalues his price because he is paid later than the date of delivery. The overvaluation includes interest plus various costs incurring to the supplier as a result of his late compensation, including a risk premium for the possibility of not being paid in full. Assume now that both the retailer and the supplier agree, for some reason, that the face value of the initial invoice is discounted by, say, 30%. In spite of the legally required adjustments actually made in their respective accounts, none the less, when asked by his superior Authority, the CEO of the retailer’s company, for some personal benefit, reports the face value of the initial invoice by hiding the realized discount. Imagine that this act is discovered and criticized by the superior Authority, which, alas, is having second thoughts, and so finds “beneficial” aspects in the CEO’s approach and they both live happily ever after.
The actors of the above theatrical show: Greece’s public hospitals (the retailer), the pharmaceutical suppliers of Greece’s public hospitals (the supplier), Greece’s Ministry of Finance (the CEO), and Eurostat (the superior Authority). To some readers, this may sound somehow too far-fetched, especially for Eurostat to have acted like the crafty “superior Authority” above, but unfortunately this is what happened.
In October 2009, the simultaneous occurrence of two events played a catalytic role towards the fake augmentation of hospital liabilities: the change of Greece’s government through snap Parliamentary Elections and the dispatch of the 2005-2008 accumulated outstanding hospital liabilities to Eurostat. It is common in most countries that a newly elected government claims that they have inherited a pile of problems from the previous government, so that in the following year they could show an improvement, due to their own problem-solving policies. This mindset led initially the new top officials of the Ministry of Finance to politically grab the opportunity offered to them by a systemic problem of Greece’s public sector, to name it “data counterfeiting”, and to manipulate, or “revise”, the accumulated hospital liabilities, coming to an unlawful overestimation of the public deficit and debt for the period 2005-2009. The striking thing is that the overestimation was not the result of transferring already materialized expenses to the year, or years, but it was the result of loading the government’s accounts for all years of previous government’s service with imaginary, yes imaginary, billions of euros! And an even more striking thing is that Eurostat went consciously along with it!
Contrary to countries that have instituted disciplinary provisions to be implemented at the disclosure of such practices, in Greece the unlawful data manipulation took uncontrollable dimensions leading to economic catastrophe as experienced today. In the case of hospital liabilities, two were the main factors, which facilitated the distortion of data: Greece’s systemic problems of following a variety of old fashioned accounting frameworks in the public sector and the secret discussions of the newly elected government with IMF officials, in order to submit the country into the IMF, the latter being revealed later.
As has already been stated by Greek Economic Statisticians, something dramatically shocking had to take place, if the IMF was to take control of the country. The idea of a fiscal crisis, in combination with a revival of the so called Greek Statistics, emerged as the perfect justification for the IMF intrusion in European affairs. Thus, statistical practices, like that of conjuring up a fake non-existent deficit out of the outstanding hospital liabilities of the 2005-2008 period, proved to be some of the most representative statistical trickery of that time, namely the years 2009 and 2010.
Payables to hospitals:money that nobody paid and nobody received
In Greece, as in the rest of the EU, public hospitals are traditionally provided with pharmaceuticals and medical equipment by suppliers, who are customarily paid later than the date of delivery, due to the required invoice validation procedures required by the Court of Audit. Regarding Greece, in September 2009, a huge number of non-validated hospital liabilities for the years 2005-2008 were accumulated, while their total value was not yet known. We should emphasize that Greece is not the only country with statistical problems of this sort. According to the European Federation of Pharmaceutical Industries and Associations (EFPIA), among which groups like Roche and Novartis, in 2011, European states owed €12-15 billion, related to more than one year, to the pharmaceutical industry.
On the 2nd of October 2009, that is before the October 2009 snap Parliamentary Elections, and within the usual Eurostat procedures, the National Statistical Service of Greece (NSSG), called ELSTAT (Hellenic Statistics Authority) since March 2010, had sent to Eurostat the deficit and debt notification tables. These included an approximate estimate of the outstanding hospital liabilities equal to €2.3 billion, based on the traditionally carried out hospital survey by the NSSG. The new government inflated the €2.3 billion by €4.3 billion making it equal to €6.6 billion as it is described in their “Technical Report on the Revision of Hospital Liabilities” (February 2010). Thus, the false augmentation of the public accounts was as high as the impressive amount of €5,4 billion. Moreover, according to the same Technical Report, out of the €6.6 billion, only the €1.2 billion had been validated by the Court of Audit.
And not only did this illegality take place, but also the new government tried to load all this extra €5.4 billion of hospital liabilities on only one year, namely the 2008. At first, Eurostat rejected this by writing:
“In the 21 October 2009 notification, an amount of €2.5 bn was added to the government deficit of 2008 on top of the €2.3 bn. This was done, according to the Greek authorities, under a direct instruction from the Ministry of Finance, in spite of the fact that the real total amount of hospital liabilities is still unknown, that there was no justification to impute this amount only in 2008 and not in previous years as well, and that the NSSG had voiced its dissent on the issue to the GAO (General Accounting Office) and to the MOF (Ministry of Finance).”
Later, in April 2010, Eurostat gave in to the new government’s unlawful demands, apparently because Eurostat’s Bureaucrats were then busy with trying to find ways to load Greece’s governmental accounts with additional illegal debt, as we have described in our article “Eurostat’s failures greatly increase the size of Greece’s debt” (issue 10-16 November 2013, page 3).
Eurostat’s April 2010 second thoughts about giving in to Greece’s new government’s demands regarding the statistical malpractice of hospital liabilities were clearly against the European Regulations ESA95 (see ESA95 par. 3.06, EC No. 2516/2000 article 2, Commission Reg. EC No. 995/2001) and against the European Statistics Code of Practice, especially regarding the principles of independence of statistical measurements, statistical objectivity and reliability. One impressive breach of Law is that a large part of hospital liabilities was NEVER paid to pharmaceutical suppliers by the Greek government. See why: One and a half months later than the illegal augmentation of the public deficit, the Ministry of Finance called the suppliers and asked them to accept a 30% discount for the period 2005-2008.
Two points we want to call attention to:
All these unlawful statistical procedures and essential injustice were incurred to the detriment of Greece’s citizens. And, astonishingly, as an exception to all other European-countries’ citizens.
All we write is based on evidential documents by both Eurostat and top Ministerial Officials of that time.
We will end up as we did in our previous article; that is with the same question: How can the EU go on with one of its core members being so unjustly treated? The 2009 statistical events need an in-depth and serious investigation and not interventions to block Greece’s judicial procedures, as Eurostat is doing. Things have to be put right and Greece’s reinstatement must ensue. Public debt is not refused, what is refused is its untrue and felonious part.
Posted on December 22, 2013, in Articles in English, Hot and tagged Basil A. Coronakis, democracy, Economics, economy, EU, EURO, Europe, Eurostat, Eurostat’s crafty ways of collaboration with governmental officials to swell Greece’s public deficit and debt, Greece, Human Rights, imperialism, politics. Bookmark the permalink. Leave a comment.