Monday, 6 February 2012

The mystery of the primary surplus

Eleven days ago, Stephanie Flanders, economics editor of the BBC, announced that "the Greek government has slashed its way to a primary budget surplus: as of now it is only borrowing money to pay off the debt...look at the Greek government's budget outturns for the second half of 2011, published earlier this month. As Graham Turner of GFC Economics has noted, these show a real step-change in the effort to cut spending and actually collect more Greek taxes...In the second half of 2011...the Greeks seem to have managed a 1.8bn euro primary surplus."

Sundry bloggers picked up on this remarkable turnaround in Greece's budgetary fortunes, noting that it may make a default more likely, in that if you're running a primary deficit you can't afford to default.  And I made a note to look into how Greece had managed it against all expectations.

So I went looking for the data published in January.  And I couldn't find it.  All the mentions of the story I can find online refer to Flanders' article.  It's not mentioned on the GFC Economics site, nor on the associated blog.  So I had a look at the IMF fiscal monitor update, dated two days before Flanders' article.  "headline deficits were larger than expected in Greece owing in part to a weaker economic outturn..." and at its latest (December) country report on Greece " Through end-September, the primary general government balance fell short of the program target by €280 million, or 0.1 percent of GDP". The plan in that document is for a primary surplus starting in Q2 of 2012, revising a previous plan for a primary surplus from Q4 2011.  And here's the IMF country head in Athens last week, insisting that Greece has achieved a lot, but not taking the opportunity to mention a primary surplus.

I see two possibilities.  One is that Greece, having achieved this breakthrough, has chosen to conceal it from the IMF and whisper it only to Graham Turner, who has exploited his scoop not by publishing it but by passing it on to Stephanie Flanders.  And the other is that there has been a misunderstanding somewhere.  I'm keeping an open mind...


  1. Megan Greene and I both queried this, because it didn't agree with data from the Greek government. I don't know if Flanders replied to her. In the meantime, Yiannis Mouzakis did an analysis of figures from the Greek Fin Min and concluded that Greece did indeed run a very small primary surplus from June to October last year before falling back into deficit again. His figures are here!/YiannisMouzakis/status/163902471788433408/photo/1/large


  2. I've been snooping around for this info lately, as it is being whispered again in the blogsphere that there is indeed a primary surplus nobody mentions and I found this: