Herman Van Rompuy, President of the European Council

The European Commission on Tuesday accused Greece of statistics fraud while the new Finance Minister says:"There is no skeleton in the closet." 

In a report prepared by Eurostat, the EU's statistics office, the Commission said figures from Greece were so unreliable that its budget deficit and public debt might be even higher than the government had claimed in October 2009.

The ECOFIN council of EU finance ministers on November 10, 2009 requested a report on Greek statistics. The report focused on Greek statistical data and methodological problems that arose between 2004 and 2009.

In October, the new Greek socialist government estimated its 2009 deficit would be 12.5 per cent of gross domestic product, up from 3.7 per cent predicted in April. It also revised its 2008 deficit up to 7.7 per cent from 5 per cent.

The Greek Finance Ministry said in a statement Tuesday:"A law rendering the national statistical agency independent has been sent to the EU and the ECB for comments and will be submitted to Parliament. The law incorporates a number of provisions for the fundamental reform of the National Statistical System, including its harmonization with the European Statistical System, a new code of conduct and the creation of a Statistical Council."

The Commission report says that On October 2nd and 21st, "the Greek authorities transmitted two different sets of complete Excessive Deficit Procedure (EDP) notification tables to Eurostat, covering the government deficit and debt data for 2005-2008, and a forecast for 2009."

The report says the most recent revisions "are an illustration of the lack of quality of the Greek fiscal statistics (and of macroeconomic statistics in general) and show that the progress in the compilation of fiscal statistics in Greece, and the intense scrutiny of the Greek fiscal data by Eurostat since 2004 (including 10 EDP visits and 5 reservations on the notified data), have not sufficed to bring the quality of Greek fiscal data to the level reached by other EU Member States."

The Commission warns that "where the EDP notification of 21 October 2009 is concerned, the data have not been validated by Eurostat and a substantial number of un-answered questions and pending issues still remain in some key areas, such as social security funds, hospital arrears, and transactions between government and public enterprises. 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 Commission report also says Greece overstated the surplus of its social security sector by €2.8bn between 2001 and 2003. It said EU fiscal data were generally of high quality and Greece represented a one-off problem. However, it cautioned that it lacked audit powers and so relied substantially on the goodwill and integrity of member-states to supply accurate data.

Also on Tuesday, the European Union's new permanent president said Greece is now taking steps to meet the "substantial" challenge posed by its huge debt and public deficit.

"Greece faces very substantial economic and fiscal challenges and it is a matter of common interest for the European Union as a whole and more particularly for the members of the eurozone that Greece manages to meet those challenges,"Herman Van Rompuy told reporters in Athens.

Greece's public debt is 113 per cent of gross domestic product (GDP).

"After our discussion I am confident that the Greek government is already taking the necessary further steps to address the situation,"Van Rompuy said after meeting with Greek Prime Minister George Papandreou.

"Resolute fiscal consolidation should start without delay in 2010 and the deficit should be brought below three percent by the end of 2012," he said.

"This commitment needs to be supported by concrete and credible measures with a front-loading of the effort," he added.

Greek Finance Minister George Papaconstantinou is reported to have said in an interview with the German newspaper Handelsblatt, published today that his government had carried out a thorough re-examination of its finances.

"There is no skeleton in the closet," he told the newspaper and added: "We have re-calculated everything again, taking into account hospital debt, higher costs and a decline in receipts last year. It's a solid basis for reducing the deficit in the years to come."