Hans-Werner Sinn Accuses Troika of Misleading the Public
Apr 24, 2014
The President of the Ifo Institute, Hans-Werner Sinn, has contradicted the statement by the Troika of the EU Commission, the ECB and the IMF that Greece generated a budget surplus of 0.8 percent of GDP in 2013. “This announcement is tantamount to misleading the public. In reality, there can be no talk of budget surpluses,” said Sinn on Thursday in Munich. “What the Troika had a Commission speaker announce in Brussels was a figure that simply excluded any items of expenditure declared to be non-recurring, and notably the costs of the bank bailout, although it is far from clear that further bank bailout funds will not be required in the future. Budget balances can always be made positive if enough items of expenditure are left out of them. That is why it is so important to abide by the Eurostat rules on primary deficit calculation, and not to bend those rules at will whenever it is convenient.”
Calculated according to the Maastricht rules and as published by Eurostat, Greece’s budget deficit for 2013 totalled 23 billion euros, which corresponds to 12.7 percent of Greece’s gross domestic product (GDP). The primary deficit published by Eurostat, in other words the deficit without the state’s interest burden, was clearly negative at 8.7 percent of GDP. “The Greek government definitely does not have any budget surplus, as reported in yesterday’s ZDF heute journal news programme, for example”, said Sinn.
“Greece is on the verge of bankruptcy and would have been obliged to declare itself insolvent a long time ago if private credit had not been replaced by low-interest credit from the community of states. All of the forecasts of Greece’s debt sustainability published by the Troika and the EU in recent years have been based on highly exaggerated estimates of growth. The only reason that Greece can now access market credit again is the explicit and implicit promise of a bailout by the community of states and the ECB, which effectively means that Greece’s debts would be repaid by the taxpayers of other countries in the case of a crisis,” Sinn concluded.