Creative bookkeeping: Not just a Greek problem
There have been other instances of creative bookkeeping in Europe.
The Rossio metro station sign in Lisbon, Portugal, is shown here. Portugal classified subsidies to the Lisbon subway as equity purchases in 2001 鈥� just one example of the creative bookkeeping rampant in European countries.
Newscom
A specter is haunting Europe 鈥� the specter of creative bookkeeping.
In an article in this morning鈥檚 Wall Street Journal (鈥溾��), Charles Forelle and Susanne Craig provide more examples of the 鈥渁ggressive鈥� bookkeeping that European nations have deployed to satisfy the deficit and debt targets of the Growth and Stability Pact.
Greece, of course, takes honors in the field, not just for its recent use of derivatives to hide liabilities (), but also for other creative moves in the past. For example, the authors report that Greece:
insisted to the Eurostat statistics authority that large portions of its military spending were 鈥渃onfidential鈥� and thus excluded from deficit calculations. In 2000, Greece reported that it spent 鈧�828 million ($1.13 billion) on the military鈥攁bout a fourth of the 鈧�3.17 billion it later said it spent. Greece admitted to underreporting military spending by 鈧�8.7 billion between 1997 and 2003.
Such shenanigans are hardly unique to the Greeks. Other players include:
鈥� Portugal, which 鈥渃lassified subsidies to the Lisbon subway and other state enterprises as equity purchases鈥� in 2001, and
鈥� France, which 鈥渁rranged a deal with the soon-to-be privatized France Telecom in 1997 under which the company paid the government a lump sum of more than 鈧�5 billion. In return, France agreed to assume pension liabilities for France Telecom workers. The billions from France Telecom helped narrow France鈥檚 budget gap.鈥�
鈥� Although dated, these examples illustrate some basic strategies that governments use to conceal the size of their deficits and debts: pretend the spending does not exist (Greece), pretend that spending is really an investment (Portugal), or pretend the future pension liabilities aren鈥檛 real (France).
A topic for another day is how these strategies may have been used in the United States. Suffice it to say that strategy three鈥搃gnoring future pension costs鈥搃swidespread both in governments and the private sector.
------------------------
海角大神 has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.