February 25, 2010 / 11:50 AM / 8 years ago

TEXT-Eurostat statement on Greece's use of derivatives

 BRUSSELS, Feb 25 (Reuters) - The European Union's statistics
office Eurostat issued the following note on the use of
derivatives in Greek budget accounting:
 INFORMATION NOTE ON GREECE
 In recent days, Eurostat has received many requests for
information concerning the role of Eurostat in Excessive Deficit
Procedure (EDP) statistics and on the specific operations
undertaken by Greece in 2000-2001. This note aims to provide a
general background on these issues.
 
 1. The role of Eurostat
 Council Regulation 479/2009 requires that Member States
report EDP-related data to Eurostat twice per year - at
end-March and end-September. At those times the role of Eurostat
is to assess the quality of deficit and debt data provided and
their compliance with national accounts rules - European system
of accounts (ESA95). Eurostat publishes afterwards the notified
EDP data by way of a news release. When Eurostat has doubts on
the quality of the reported data, it may express reservations on
the data of the Member State concerned.
 In addition to the notification periods, Eurostat maintains
very close contacts with the national statistical institutes of
Member States, by way of technical working group meetings,
visits to Member States, exchange of correspondence, etc.
 In cases of new types of transactions that are undertaken by
governments, Eurostat's role is to take initiatives to provide
the appropriate guidance for their statistical recording based
on national accounts principles. 
 In its methodological role Eurostat is assisted by the
Committee on monetary, financial and balance of payments
statistics (CMFB) composed of the representatives of the
national statistical institutes and national central banks of EU
Member States and the European Central Bank. 
 Although the responsibility for monitoring statistical data
is vested in the Commission (and in the case of the EDP it is
Eurostat who "provides" the data), it should be underlined that
Eurostat does not directly compile statistics or control their
production in the Member States. In this respect, it depends on
the data compiled and reported by the Member States, as well as
the administrative ability, goodwill and loyal co-operation of
the respective national authorities. 
 
 2. The Greek case
 Recently (8 January 2010), the Commission published a Report
on Greek Government Deficit and Debt Statistics. This Report
puts in question the reliability of Greek deficit and debt
figures provided by the Greek statistical authorities and
concludes that Greek authorities have not demonstrated the
co-operation and transparency needed for the proper assessment
by Eurostat of the quality of deficit and debt figures. Eurostat
expressed reservations on the Greek data in its biannual press
release on deficit and debt on five occasions between 2005 and
2009, despite the continuous and unique attention paid by
Eurostat to Greek government deficit and debt statistics.
 Recent press reports mention one off-market swap operation
and several securitisation transactions undertaken by Greek
government in the period 2000-2001. When the European system of
accounts (ESA 1995) was adopted, these kinds of operations were
not usual practice for governments of Member States and
therefore, specific statistical rules for such government
transactions did not exist. In consequence, Eurostat together
with the EU statistical community elaborated specific guidance
notes for the recording of government securitisation operations
(issued by Eurostat in July 2002) and for the recording of
financial derivatives (issued in March 2008). 
 Regarding the securitisation operations, Eurostat, after
being informed by the Greek authorities of these operations in
the framework of the regular consultations relating to deficit
and debt EDP notification, asked the Greek statistical
authorities in September 2002 to reclassify these operations as
part of government debt according to the Eurostat guidance. 
 Concerning the specific off-market swap operation, Greek
authorities had not informed Eurostat about this kind of
government transaction. On the contrary, during a Eurostat visit
to Greece on 15-19 September 2008, i.e. after the setting of the
statistical rules, the Greek authorities declared that, in
Greece, government units are not allowed by law to engage in
off-market financial derivatives.
 On 12 February 2010, Eurostat requested the Greek
statistical authorities to provide information on all currency
off-market swaps for 2001-2009 and their recording in EDP and
national accounts. The Greek statistical institute sent on the
evening of 23 February a package of information. 
 Eurostat's preliminary analysis is that although the
information on swaps is incomplete, for the first time the Greek
authorities have declared the existence of an off-market swap
operation in 2001.
 The Greek authorities have informed Eurostat that repayment
of the debt began in 2004. In consequence, Eurostat will have to
determine, in cooperation with the Greek authorities, what will
be the increase in government debt due to this specific swap
operation from 2004 onwards. 
 Eurostat will request the Greek authorities to supply, as
soon as possible, all the information necessary for a complete
evaluation and recording of this operation in the next EDP
notification.
 
 3. Eurostat's comments
 The role of Eurostat is not to determine if government
operations are illegal or not. In the context of the use by
governments of new financial instruments, the role of Eurostat
is to assess if such operations should have an impact or not on
government deficit and debt. 
 Eurostat has no possibility to anticipate technical
innovations in the financial sector, and can only react after
having been informed on the use of such innovations by Member
States.
 The absence of information from Greece about the particular
swap operation highlights the fact that Eurostat depends on the
goodwill of Member States and reinforces the need to strengthen
Eurostat competencies, as requested by the Commission in its
proposal of 15 February 2010 for an amended Council Regulation
regarding EDP statistics. 
 The purpose of the amended regulation is to allow the
Commission and Member States to work more effectively together,
based on a two-pillar approach: first, more frequent and
comprehensive regular statistical visits in the context of the
standard EDP procedure; second, where a risk-based assessment
identifies specific and significant problems, Eurostat may
conduct additional methodological visits.
In particular, there is a need for the recognition of the
right for Eurostat to directly examine public accounts where
there are substantial doubts about the reliability of the
statistical data submitted by a national statistical authority -
together with the corresponding obligation of national
authorities to keep and make available all of the relevant
sources of information.
 Moreover, this proposal also asks Member States to take
appropriate measures to ensure that officials responsible for
the reporting of the actual data to the Commission and of the
underlying government accounts are accountable and act in
accordance with principles established by European law."
 

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