We got an update today on how the whole austerity thing is going in Greece — where, last you may have heard, protesters were killing innocent bank employees in defense of their unsustainable government-provided benefits.
Bottom line: It’s not going so well. But what’s most interesting here is the bald-faced way in which the Greek government is lying about its performance. It’s a type of lie that sounds the same in any language. From The Wall Street Journal’s report (subscription required):
The Greek government Monday vowed to press ahead with tough fiscal action despite an upward revision in its 2009 deficit by the European Union’s statistics agency.
In a statement following the release of Eurostat’s revised data, the finance ministry said Greece had already surpassed its 2010 budget goals by shrinking its deficit to 9.4% of gross domestic product this year. It also reaffirmed its plan to cut the deficit to below 3% of GDP by 2014, in line with its agreement with international lenders.
Eurostat earlier Monday said Greece’s budget deficit in 2009 reached 15.4% of GDP, nearly two percentage points higher than previously forecast.
“Despite the data revision, the deficit reduction in 2010 is larger than initially targeted; six percentage points of GDP against a targeted reduction of 5.5 percentage points,” the Greek finance ministry said. “The 2010 deficit resulting from the new revised figures and general government accounts after the reclassification is estimated to be 9.4% of GDP, a reduction in excess of €14 billion ($19.17 billion) compared to 2009.”
The revision comes as Greece scrambles to meet its deficit targets for this year and next under the terms of a €110 billion bailout agreed to in May with the International Monetary Fund and the European Union. A delegation of IMF, EU and European Central Bank officials are in Athens Monday to review Greece’s progress in meeting those goals, and to decide on its eligibility to receive a third installment of that loan this year.
Under the terms of the loan, Greece must cut its budget deficit to 8.1% of GDP this year—from a previously estimated [13.6%] gap in 2009—and to 7.6% of GDP in 2011. (Emphasis added throughout.)
Did you see what happened there?
The Greek budget deficit was originally estimated to have been 13.6 percent of the country’s gross domestic product (GDP) in 2009, and the government in Athens agreed to cut the 2010 deficit by 5.5 percentage points, to 8.1 percent.
Now, the deficit turns out to have been much, much higher — 15.4 percent of GDP. Athens is now pledging a reduction to only 9.4 percent of GDP.
But the Greek government actually wants more credit for this turn of events, because it says it will be cutting the deficit by 6 percentage points instead of 5.5. The government wants us to completely ignore the fact that its deficit was larger in 2009 than it was supposed to be, and remain larger than it was supposed to be in 2010.
We are talking about nearly enough beyond-budget deficit spending over those two years to negate the $19.2 billion in deficits that Athens says it will be cutting. And at this point, who believes that the Greeks will hit even that upwardly revised target?
I would ask, “What’s Greek for chutzpah?” except that it sounds the same the world over. Politicians find one way to describe their actions as terrible rather than horrendous, and then want the public to pat them on the back for it.
As I warned over the weekend, be wary of this kind of talk when Congress and the White House start considering proposals from the president’s deficit commission. Increasing spending by a smaller amount than expected is not good enough.