Byzantine Accounting

So, the Greek government yesterday made its IMF payment, and this happened without the drama we could observe two weeks ago. Moreover, Greek civill servants and pensioners got their pay cheques, too. Sure, it was a small amount of $ 200, mio  that went to the IMF but then given the rumour that the Greek state is bankrupt (Varoufakis) or at least illiquid, the silent payment can be seen already as a step forward. Does this mean that the next IMF tranche of $ 700 mio will take the same quiet route? Not so, if one looks at the Greek budget data of the first three quarters of 2015. At first glance those data indicate a surprising improvement, not least in regards to the primary budget where the accounts show a surplus of Euro 1.7 bn – very much ahead of the expected surplus of Euro 119 mio. Is this a new Greek miracle that defies all the talks about a incompetent government or another case of creative book keeping where previous Greek governments (with the help of Goldman Sachs) were so successfully engaged? A closer look hints to some less fancy answers. The improvement is driven by developments on the spending side as well as the revenue side of the ledger. With regards to revenues, it seems that Greek tax authorities have been a bit more successful to engage all sectors in tax payments. A further crucial factor can be found in the Public Investment Budget. This item under-delivered in regards to expectations but still was crucial in bringing in additional EU funds that made the budget shine. What sounds promising comes with a huge question mark, though. The real driver for the improved primary surplus stems from the spending side where the Greek government underspent significantly. This is not a turn towards the kind of austerity the Brussels Institutions are asking for. Actually, the decrease in spending ]comes mainly from delaying required payments to third party suppliers. In other words, private companies that provided goods and services to the public sector are not getting paid in time.

It is fair to say that the Syriza-led government is a quite active government that works on quite a number of levels to avoid insolvency. The most recent budget data are no reason, however, to look with optimism into the next few weeks.