EU raps Greece over deficit
Helena Smith in Athens and Larry Elliott
Wed 1 Dec 2004 19.07 EST
The European Union last night started legal action against Athens after it was revealed that a systematic under-reporting of Greece's budget deficit should have ruled the country out of joining the single currency.
Brussels said it was acting to ensure Greece "puts its house in order" as it emerged that without creative accounting, the country would have failed the test for membership of monetary union in every year since 1997.
François Le Bail, speaking for the European commission, said: "The commission is going to start infringement procedures against Greece," - a move that could lead to a court fine but not ejection from the 12-nation eurozone.
Countries in the European Union that wished to join the single currency - launched in 1999 - had to meet tough pre-entry tests, including a budget deficit below 3% of gross domestic product.
An investigation by Eurostat, the EU's statistics agency, found that Greece's deficits in the years 1997 to 1999 were massively under-reported. It raised the 1997 deficit to 6.6% of GDP from the previous government figure of 4%. For 1998 and 1999, the budget deficit figures were increased to 4.3% and 3.4% from 2.5% and 1.8% respectively.
In Greece, the conservative government elected this year blamed the former socialist administration for the country's humiliation in being lambasted by Brussels.
Addressing the Greek parliament, finance minister Giorgos Alogoskoufis accused the previous government of submitting bogus figures to secure entry to the eurozone.
"You are responsible for running the country's public finances off the rails," said Mr Alogoskoufis, as he presented the Eurostat report before the 300-seat assembly. "You have led the Greek people astray and denigrated us in front of our partners."
Although the findings were embarrassing for the country they also signalled a "new era of transparency," he said.