To fix Greece, get your figures straight

 10/01/2016 12:29 pm ET
The Huffington Post


Michael G. Jacobides
Sir Donald Gordon Chair of Entrepreneurship and Innovation, London Business School
Greece has been making headlines again - and for all the wrong reasons. Egged on by government propaganda, the judicial system has allowed a rather grotesque case to be made against Mr Andreas Georgiou, former president of the Hellenic Statistical Authority (ELSTAT). His alleged crime was using applicable international rules to report the Greek government’s budget deficit, which had the effect of increasing it by just under 3% to a whopping 15% of GDP. Confusing cause and effect, some hot-headed Greek prosecutors claim that Georgiou’s un-sugarcoated report caused financial and social damage, leading to the EU/IMF Memorandum. Several commentators have already pointed out that shooting the messenger is a spineless, head-in-the-sand attitude. Now we have to accept that only accurate, internationally comparable figures can begin to save Greece from its financial woes.



To be fair, there are some figures that get serious play. However, they are the short-term financial goals of the Memorandum - in particular, revenues and budget expenditures. Other figures get far less airtime, as does the suicidal way in which financial corners are cut - senseless policies leading to a spiral of contraction, contribution and tax avoidance, and corporate demise. If only we focused on the right figures, things could be so different.

First up: the debt level. Here, public discourse continues to look at the wrong numbers. The term “debt to GDP” is, strange as it may sound, misleading and counterproductive. Unlike in 2009, nearly all Greek government debt that is scheduled to be repaid in the near future has an ESM back-up facility to refinance on highly concessional terms such as very low interest rates, generous grace periods and contractually agreed-upon maturities of up to almost 50 years. Calculating the debt in “present” (i.e. today’s) value, as the leading governments and businesses that follow the international accounting rules IPSAS/IFRS do, gives a much rosier view. And that is without even calculating “net debt” - that is, deducting the significant value of government financial holdings. The paradox is that instead of communicating the advantages of the Greek government debt (which will continue to improve from already agreed-upon restructuring and reprofiling), the official line continues to be that Greece will collapse without debt forgiveness.

Secondly, very few look at the impact of the Greek government’s policies on its role as manager of taxpayers’ property, including financial assets (e.g. banking shares), non-financial assets (e.g. fixed assets), financial liabilities and non-financial liabilities (e.g. government pensions). Reporting a proper balance sheet would make it clear that the reckless negotiation tactics of 2015-16 wiped out more than €30bn in government net worth - a self-inflicted loss to the taxpayer. We need to continuously assess the government’s total management capacity, including its balance sheet and changes in its net worth, to build trust and confidence not only with creditors but also with taxpayers.

Last but not least, the Greek government continues to operate without key performance indicators in vital areas such as healthcare, education, social protection and the environment. Most of the government initiatives this year have been disastrous as they affected areas which are not measured, and for which few seem to bother. Without accurate and internationally comparable numbers, and without Key Performance Indicators on policy, Greece is like a car without a driver.

The lack of figures is even more important in a country with weak media and little investigative and professional journalism. Adding insult to injury the government just restricted non-state TV to four channels through a dubious auction process won, among others by a major state contractor and a shipping owner with shady connections. All this gives politicians a license to obfuscate and avoid reality.

It’s no surprise that Greece is falling behind with its Memorandum commitments for better data in public administration. The government has hobbled the Digital Establishment Plan of the State, with the current draft legislation providing little transparency on accountability, spending, liabilities or even how many public servants have been hired. What is surprising is that Greece’s creditors don’t seem that bothered.

Creditors now need to focus on accurate, transparent and internationally comparable data, and get serious about tracking what’s happening to the Public Administration. Without data, KPI and transparency, with media weak and the population confused and depressed from one of the most significant GDP reductions in history, Greece will find itself wading through one crisis to the next. With the right data, however, Greece could finally begin to reform itself. It’s about time.