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Greek deficit data could still turn out worse-EU

BRUSSELS, Jan 11 (Reuters) - Greek budget deficit and debt figures may be revised further because the current institutional setup for Greek statistics is ineffective and prone to political interference, the European Commission said.

The Commission, the European Union’s executive arm, said in a report that the EU’s statistics office Eurostat could not validate the latest deficit and debt figures that Greece sent in October 2009 regarding 2008 and earlier data.

“Where the ... notification of 21 October 2009 is concerned, the data have not been validated by Eurostat and a substantial number of unanswered questions and pending issues still remain in some key areas, such as social security funds, hospital arrears, and transactions between government and public enterprises,” said the Commission report, obtained by Reuters.

“These 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,” the report said.

The Commission prepared the report on the request of EU finance ministers after the new government in Athens revised its 2008 budget deficit to 7.7 percent of gross domestic product from 5.0 percent reported in April.

Greece also revised its 2009 budget deficit forecast to 12.5 percent of GDP from 3.7 percent forecast in April.

This had triggered downgrades of Greek debt by rating agencies and a sharp widening of spreads of Greek bonds over German paper and sent the euro lower against the dollar.

“Regarding government deficit and debt data for Greece: for the time being, in view of the described size and nature of the data revisions, the lack of reliability and the shortage of evidence supporting the deficit figures reported, Eurostat is at present not in a position to validate figures which are of acceptable statistical quality,” the Commission report said.

“Regarding institutional issues, actors and procedures, the present institutional setting, which has showed its weakness, inefficiency and permeability to political interference throughout the years, does not guarantee the professional independence and full accountability of the (Greek statistics office) NSSG,” the report said.

The report will be discussed by EU finance ministers at their next meeting in Brussels next week.

“The shortcomings in the operational and administrative capacity of some of the institutions involved in the production of ... (deficit and debt) statistics in Greece, referred to in this report, will have to be decisively addressed by the Greek authorities without further delay,” the report said.

Greece said in November it planned to grant its statistics office full independence and create a commission to investigate shortcomings, with officials from the EU’s statistical office Eurostat helping out.

“Unless the institutional weaknesses uncovered during the investigation of the irregularities underlying the 2009 notifications of data are corrected and proper checks and balances introduced, the reliability of Greek deficit and debt data will remain in question,” the report said.

Reporting by Jan Strupczewski, Editing by Chizu Nomiyama

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