More Greek Statistics? Troika Confirms Primary Surplus

9:17 am ET Apr 23, 2014

The Wall Street Journal

By  MATINA STEVIS and  CHARLES FORELLE

The European Commission said Wednesday that Greece recorded a primary surplus of €1.5 billion in 2013, overshooting a target of a balanced primary balance and paving the way for the country’s talks on debt relief later this year.

Hurray, many said: Athens has finally met its budget goals, after years of failing to comply with austerity targets that crushed the economy and were later viewed as too tough even by Greece’s creditors. This latest development means that the Greek government can redistribute some of the above-target surplus to its citizens. (In theory, it also means Greece could default on external debt and continue paying pensions and salaries internally from the taxes it raises, but that’s a different story.)

The figure is “a reflection of the remarkable progress Greece has made in repairing its public finances since 2010,” said Simon O’Connor, a spokesman for the commission.

But take a step back, and look more closely: something isn’t quite right. Indeed, the European Union’s statistics arm, Eurostat, reported Wednesday that Greece had a government deficit in 2013 of €23 billion, and spent €7.2 billion on interest payments. That makes the primary balance—under the definition widely used by economists and Eurostat itself—a deficit of €16 billion, or 8.7% of Greece’s gross domestic product.

A Eurostat spokesman said the commission’s “primary surplus” figure includes adjustments to the Eurostat definition, though he said he didn’t know precisely what they were and referred questions to a commission spokesman.

Mr. O’Connor obliged with details:

First, we excluded interest expenditure of 4.0% of GDP.

So far so good. That’s in keeping with the standard definition of a primary surplus.

But then the tweaking goes on:

Second, we exclude several specific items, mainly to better reflect the underlying structural fiscal position.

In 2013, these adjustments amounted to 9.5% of GDP, mainly reflecting the one-off cost of the support to the banking sector, which amounted to 10.8% of GDP according to the programme definition, and the transfers from Member States to Greece corresponding to profits on Greek Bonds held by the Eurosystem Central Banks, which amounted to 1.5% of GDP.

This brings us to a primary surplus of 0.8% of GDP.

He also provided a table that broke down those additional exceptions, as a percentage of gross domestic product. (Greece’s GDP in 2013 was €182 billion.)