Goldman analyst Erik Nielsen has goofed. Over Greece.
On Wednesday the analyst, in addition to musing over a possible Greek bailout, said some interesting things about just-published fiscal numbers from the Greek Finance Ministry:
Big revision up in their 2009 fiscal deficit: Late yesterday, the Greek finance ministry amended its website for its 2009 fiscal cash execution, adding close to EUR 6bn to expenditures in December for a total of EUR 11.8bn, which takes the full-year deficit to EUR 37.9bn – up from EUR 29.4bn reported previously. This implies an increase in their 2009 central government budget deficit from about 12.2% of GDP to about 16% of GDP. There has been made no explanation for this revision, but we think it may be associated with payment of arrears to hospitals, which means that the general government deficit may have increased by less. Regardless, given the uncertainties, it is a stunning revision to make to the December payments without an explanation. Hopefully, it’s a good use of money, like clearance of arrears, but it would be good to know.
There was no explanation for the revision because it was not, in fact, a revision.
Numbers released from the ministry did indeed show the cash balance deteriorating by about €6bn in December — bringing the balance for the year to that circa €38bn figure. That is indeed higher than the €29bn or so (12 per cent of GDP figure) the Greek government has already reported to Eurostat, which collates economic statistics for eurozone countries, as its annual deficit.
But, there are some crucial differences between the monthly and annual data. As JP Morgan analyst Marta Bastoni points out, the most important one is that the monthly data is based on a cash basis, while the Eurostat annual budget deficit is on an accrual basis.
Cue a rather awkward climb-down from Nielsen. Via Zero Hedge:
It appears that there has been some misunderstanding of my reference to the 2009 Greek budget numbers in the note below:
I reported the publication of the central government cash deficit of EUR 37.9bn (about 16% of GDP) in 2009, but by using the word “increase” compared with the previously reported deficit (on an accrual basis) of EUR 29.4bn (about 12.2% of GDP) (and the word “revision” in the subject line), I may mistakenly have led some to believe that the previously reported number had been changed to a new and higher number – when indeed I made comparisons between the numbers on the different definitions. (Cash is cash; while Eurostat cares about the accrual definition.) I still find it difficult to understand why the cash deficit would have been so much higher than the previously reported deficit on an accrual basis; hopefully, this will be clarified in coming days.
Apologies for any misunderstandings.
Erik Nielsen
So the Greek budget deficit remains about 12 per cent of GDP — not that that’s likely to inspire much confidence in an already jittery market — and one that’s distrustful of Greek economic stats to boot.
Related links:
Goldman’s Trojan currency swap – FT Alphaville
The European exit strategy, revisited – FT Alphaville
Greece debt crisis in depth – FT