Eurostat released today the validated fiscal data for 2010.

Under the framework of the Excessive Deficit Procedure (EDP), the collection of fiscal data for the General Government is the responsibility of the Hellenic Statistical Authority (ELSTAT), the General Directorate of Treasury and Budget of the General Accounting Office, and the Bank of Greece.

Subsequently, Hellenic Statistical Authority (ELSTAT) estimates the General Government budget deficit following the ESA95 methodology and notifies Eurostat, which validates and releases the final data. Annually, Hellenic Statistical Authority (ELSTAT) sends two notifications to Eurostat with preliminary and final data respectively.

It should be highlighted that following a series of institutional reforms implemented by the Government, most notably the establishment of the independent Hellenic Statistical Authority (ELSTAT), Eurostat no longer has reservations about the quality of Greek deficit data.  Greek statistical data are now characterized by absolute transparency and credibility.

According to today’s announcement for 2010, the Hellenic Statistical Authority (ELSTAT) has sent to Eurostat the first notification with preliminary data, estimating the General Government deficit for 2010 at 10.5% of GDP.

Based on these data, in 2010 Greece had the second largest deficit in the E.U after Ireland (-32.4%) and close to the United Kingdom (-10.4%), followed by Spain (-9.2%) and Portugal (-9.1%). Moreover, Greece had the largest annual reduction among E.U countries in 2010 –  5 percentage points.  This reduction is the largest ever achieved by Greece or by any Eurozone Member State in one year.

As to public debt, based on the data from Eurostat for 2010, Greece had the highest debt in the E.U (142.8% of GDP), with Italy coming second (119% of GDP), followed by Belgium (96.8% of GDP) and Ireland (96.2%).

The observed deviation in the General Government deficit for 2010 relative to the estimate in the State Budget 2011 (9.4% of GDP) is mainly due to the following reasons:

a)   The impact of the recession on GDP in 2010 was larger than anticipated. According to the State Budget 2011, GDP in 2010 was estimated to be 231,888 million Euro while the Hellenic Statistical Authority (ELSTAT) estimates the figure as 230,173 million Euro. This change contributed to an increase in the General Government deficit as a share of GDP by 0.1%.

 

b)   The deterioration in tax revenues (0.6% of GDP) resulting from the fact that the recession in the last quarter of 2010 was larger than projected in the State Budget 2011. It should be noted that tax revenues for 2010 on a national accounts basis are determined also by the level of certain categories of revenues in the first two months of 2011, which to a large degree reflect economic activity in the last quarter of the previous year.

 

c)    The deterioration in the fiscal balance of Local Governments (0.25% of GDP) that is due to the payment of past debts at the end of 2010.

 

d)   The deterioration in the financial performance of the Social Security Funds (0.5% of GDP) as the larger than projected increase in unemployment led to a reduction in social security contributions. As with tax revenues, it should be noted that the performance of Social Security Funds for 2010 on a national accounts basis is determined also by the level of certain categories of social security contributions in the first two months of 2011.

 

e)   The deterioration in the financial performance of public hospitals (0.3% of GDP).

 

On the other hand, relative to the figures in the State Budget 2011, the fiscal data released today show an improvement in the balance of reclassified State-owned Enterprises (0.35% of GDP), as well as in the accrued interest payments adjustment of national accounts (0.29% of GDP). 

In summary, it is clear that the above-mentioned differences are mainly the result of the deeper than anticipated recession of the Greek economy that affected tax revenues and social security contributions. At the same time, they underline the difficulties in reducing the deficit in areas of the budget or of the public administration where more effort is necessary, as in addressing tax and social security evasion, and containing expenditures in hospitals, social security funds, local administration and public enterprises.

In any case, the Greek Government remains committed to achieving its deficit targets under the Economic Adjustment Programme and all necessary measures in that direction are accounted for in the context of the Medium Term Fiscal Strategy, which will be submitted to Parliament by May 15 2011.