SEVEN years ago Greece was in a complete financial mess. The national accounts had been falsified over an extensive period to give an impression that the country’s debt was significantly lower than it really was. This mattered because Greece had been selling bonds to international investors on the basis of inaccurate data. Moreover, when Greece was allowed to join the European Single Currency in 2001, the numbers were also fixed.
Membership of the euro zone gave Greece the opportunity to access to borrowings at virtually the same cost as Germany, Europe’s strongest economy. The Greek government, businesses and individuals went on a spending spree, further inflating the country’s debt.
In the end Athens discovered that there was simply too little income from the country’s notoriously inefficient and corrupt taxation system to be able to meet debt repayments. The country faced bankruptcy unless it could persuade lenders to defer or waive payments. In the end, Germany led a euro zone bailout which involved paying off private investors by buying up their debt and meanwhile issuing Greece fresh loans.
But the mood in Brussels was not helped by the tactics of successive Greek governments in resisting fundamental economic reforms. One Greek politician quoted the old adage that if someone owed the bank $100,000 the bank owned them, but if they owed the bank a $100 million, then they owned the bank.
One early EU reform condition that Athens did accept, was the appointment of an independent Greek statistical agency, Elstat. Its chief was the respected economist and former IMF official Andreas Georgiou. Within months, Elstat had produced a revised figure for the ratio of Greek debt to is gross domestic product. In 2009, the finance ministry had been insisting that it was “only” around 13.6 percent — a ratio that was quite bad enough. Georgiou’s team crunched the numbers and discovered it was actually 15.5 percent. The revelation shocked the markets, triggered the first of three bail-outs by euro zone countries and the IMF and began a period of increasing austerity which has now lasted almost a decade and shows little sign of ending.
It is because of the crisis that has hit all but the very wealthiest Greeks, that Athens politicians cast around for someone other than themselves to blame. They lit upon Andreas Georgiou. Even though Elstat’s figures had been checked and verified by the European statistics organization Eurostat, Georgiou and two colleagues were charged with the criminal offense of “undermining the national interest”.
This savage and stupid response appalled many experts, not least in Brussels. There was relief when a court threw out the case. But last week the Greek Supreme Court overturned the acquittal and ruled that the three men should be tried again.
This has renewed international despair at the willfulness of the Greek establishment and its readiness to blame anyone but itself for the terrible financial plight into which it has plunged the country. Even supposing Georgiou’s figures were in fact wrong, the remedy is clearly to demonstrate the error not prosecute the official responsible. This has not been done. However, this absurd legal action does actually open the door to the prosecution of the real culprits among politicians and officials who knowingly cooked the books. Meanwhile the renewed prosecution of Georgiou and his two colleagues does more than anything to undermine the “Greek national interest”.
