Monday, September 26, 2016

EU's Dombrovskis: Greece government populism made adjustment worse

Reuters
September 26, 2016

Greece has had to go through tougher austerity than it would have otherwise been necessary, because of the populist stance of the left-wing government of Alexis Tsipras in 2015, European Commission Vice-President Valdis Dombrovskis said on Monday.

Tsipras, who took power in January 2015, rejected belt-tightening in public finances requested by lenders in exchange for emergency loans and reversed some of the reforms introduced by the previous Greek governments.

As new loans were frozen, Greece defaulted on the International Monetary Fund in July 2015 and had to introduce capital controls to prevent its banking system from collapse.

"Populism doesn't solve problems. Populism creates problems," Dombrovskis told a round-table in Riga in a discussion on the growing support for populist parties in many EU countries.

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Plan to Let Migrant Children Attend School Enrages Many Greeks

by Niki Kitsantoni

New York Times

September 25, 2016

Mariya bint Loqman Abdlkarim is 9. She arrived in Greece in February after fleeing Syria with her family and crossing from Turkey in a rickety boat. Since then, she has been living in a shabby state-run camp, her future uncertain, her present reduced to the bare necessities.

Not long ago, the Greek government decided to give her a shot at something closer to a normal life: Along with 22,000 other refugee children, she would be allowed to attend public school starting in October.

But as with many aspects of Europe’s effort to cope with the huge numbers of migrants who have come to its shores, the plan quickly ran into intense opposition, in this case from parents in a number of communities near camps in northern Greece. The refugee children, the parents said, might have contagious diseases. Cultural differences, they said, might disrupt learning.

Last week, an association representing the parents of schoolchildren in the small town of Filippiada in western Greece sent a letter to local officials and the Education Ministry, saying “explicitly and categorically that we will not accept, under any circumstance and without any compromise, that the children of so-called irregular immigrants” attend local schools, referring to migrants entering the country illegally.

“They come from another continent with completely different diseases and health conditions,” the letter said, adding that the refugees have a “different outlook regarding the role of the family, of women, of religion.” Their presence would “alter the Greek character of the schools,” the letter said, adding, “We will not allow religious fanaticism.”

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Friday, September 23, 2016

Greece: Staff Concluding Statement of the 2016 Article IV Mission

International Monetary Fund
September 23, 2016

A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF's Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.


The authorities have consented to the publication of this statement. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.

1. Greece has made significant progress in unwinding its macroeconomic imbalances, but growth has remained elusive and risks are high. Greece has managed to reduce its fiscal primary and current account deficits from double digits to around zero over the last six years. This is an impressive adjustment for a country belonging to a currency union, where policy levers are limited. The initial fiscal adjustment was based on important reforms. However, it has become increasingly reliant on one-off and ad-hoc adjustments that could not be sustained, denting policy credibility. Recurrent political crises and confidence shocks associated with the inability to sustain the reform effort resulted in a high cost for society, with output having declined by 25 percent and still stagnating, and unemployment and poverty rates remaining much higher than before the crisis. Looking forward, growth prospects remain weak and subject to high downside risks, and unemployment is expected to stay in the double digits until the middle of the century.

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The Firefighter’s Lament

by Marcus Walker

Wall Street Journal

September 22, 2016

The Greek debt crisis is one of the great economic debacles of modern times. A country’s sins caught up with it in 2009. A continent dithered and fluffed its response. A spreading panic threatened the euro and the world’s recovery from the Great Recession.

Seven years on, the effects linger. Greece is stuck in the deepest depression in a developed economy since the 1930s. Southern Europe is suffering a lost decade. The European Union has become a byword for economic pain, making it an easy target for both the anti-capitalist left and the nationalist right. The euro has survived, but as an unhappy marriage with prohibitive divorce costs. How many European countries would choose it again?

What went wrong is still hotly disputed. Clashing popular narratives stress the laxity of Mediterranean debtors or the coldness of German-led creditors. Experts variously blame the euro’s inherent flaws or avoidable policy errors.

Getting the story right matters for finding a better ending, not least in Greece. For years leading up to 2009, Greece’s governments burned through money and hid the fact. Today much of the country has forgotten the arsonists who laid the fire and blames instead the firefighters who tried, albeit haplessly, to put it out.

Game Over: The Inside Story of the Greek Crisis tells the tragedy of a firefighter overwhelmed by the scale of the blaze. George Papaconstantinou, a British-educated economist whose career in politics proved short, will forever be remembered as the finance minister who signed “the memorandum” in May 2010: Greece’s €110 billion bailout deal, worth $144 billion at the time, with the German-led eurozone and the International Monetary Fund. The deal was German tough love: It saved Greece from bankruptcy but at the cost of drastic austerity that deepened its slump and broke its morale. The economy lost a quarter of its jobs and output.

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Thursday, September 22, 2016

Syriza lifts block on €8bn tourist project at old Athens airport

by Kerin Hope

Financial Times

September 22, 2016

Construction on an €8bn private project to redevelop a sprawling coastal site south of Athens as a tourism and leisure hub has been cleared to begin this year after Greece’s parliament gave its backing on Thursday.

The leftwing Syriza-led government dropped its opposition to the scheme after the privatisation agency, Taiped, tightened the terms of a sale-and-lease agreement that the previous centre-right led administration had signed with an international investor consortium.

Alecos Flambouraris, minister for co-ordination and a senior Syriza member, told parliament before Wednesday’s vote to ratify the project: “We are [still] against privatisation but we are in favour of the development of publicly owned real estate.”

It would be the most ambitious development project ever undertaken in Greece. Few in Athens believed it would go ahead even with pressure from bailout creditors, given the snail-paced progress of privatisation under successive governments.

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In interview, Tsipras sketches out path for Greece to exit crisis

by Arshad Mohammed & Lesley Wroughton

Reuters

September 23, 2016

Greece's prime minister on Tuesday sketched out a path he hopes will finally allow his country to exit its seven-year-old economic crisis, holding out the possibility of positive growth this year and a partial return to the bond markets in 2017.

Alexis Tsipras told Reuters in a rare interview that government revenues and tourist flows have been strong and that Greece could grow by 0.2 to 0.4 percent this year, well above Eurostat's forecast for a 0.3 percent contraction.

Asked if he thought Greece could meet or exceed Eurostat’s forecast of 2.7 percent growth for next year, Tsipras noted that it had exceeded the predictions so far this year and said that he expected "the same" for 2017. However, he said this would depend on the messages sent to the financial markets and whether there is a return of foreign investment.

He also said he hoped Greece could within the next six months be included in the European Central Bank's quantitative easing (QE) programme from which it has so far been excluded because of its low credit rating.

If that happens, it could then test markets’ appetite for Greek debt next year. "I think that will be a strong message we will be ready to prepare the procedure to issue bonds," he said.

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Wednesday, September 21, 2016

Tsipras Defeat in Attica Battle Bolsters Bank of Greece Governor

by Marcus Bensasson

Bloomberg

September 21, 2016

Advantage Yannis Stournaras.

In the battle of wits between Greece’s central bank governor and Prime Minister Alexis Tsipras, the former seems to have won the latest round, giving him a leg up should he harbor any ambitions of a return to politics.

Stournaras, a former finance minister, threatened to put Attica Bank under administration if it didn’t appoint his nominee as chief executive officer. The move ruffled feathers in the government, which sees Attica -- majority owned by state-backed pension funds -- as a vehicle of influence over the financial sector as the only lender falling outside the European Central Bank’s direct regulatory purview. Faced with Stournaras’s threat, Attica shareholders backed his nominee on Tuesday, bolstering the Bank of Greece governor who has questioned Tsipras on everything from his tax-heavy fiscal policies to his dealings with creditors.

“There’s a cold war going on between the two that occasionally flares into skirmishes,” said Aristides Hatzis, a professor of law and economics at the University of Athens. “In Syriza and the government there are a lot of voices that want to see Stournaras’s head roll, but the leadership understands it can’t do that because he has the ECB’s backing.”

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Tuesday, September 20, 2016

Fire at Lesbos migrant camp highlights mounting despair

by Kerin Hope

Financial Times

September 20, 2016

A fire that swept through an overcrowded camp for refugees and migrants on the Aegean island of Lesbos serves as a stark reminder of the worsening conditions faced by more than 60,000 asylum seekers stranded across Greece.

Tensions were running high in the Moria camp even before Monday night’s blaze, which broke out after a clash between Afghans and Pakistanis over food distribution, engulfing scores of tents and containers that provided shelter for about 4,500 people in facilities designed for around 2,500.

More than 3,000 asylum-seekers were evacuated, a Greek police official said. There were no casualties but the UN High Commission for Refugees, which has a presence at the camp, said more than 30 people with light injuries were treated at a local hospital.

The fire also burnt nearby farmland and olive groves, further angering local residents who have grown increasingly resentful of the asylum seekers over the summer as foreign tourist arrivals plunged and Greek visitors also stayed away.

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Brunnermeier, James & Landau, "The Euro and the Battle of Ideas"

The Euro and the Battle of Ideas
Markus K. Brunnermeier, Harold James & Jean-Pierre Landau
Princeton University Press, 2016

Why is Europe’s great monetary endeavor, the Euro, in trouble? A string of economic difficulties in Greece, Ireland, Spain, Italy, and other Eurozone nations has left observers wondering whether the currency union can survive. In this book, Markus Brunnermeier, Harold James, and Jean-Pierre Landau argue that the core problem with the Euro lies in the philosophical differences between the founding countries of the Eurozone, particularly Germany and France. But the authors also show how these seemingly incompatible differences can be reconciled to ensure Europe’s survival.

As the authors demonstrate, Germany, a federal state with strong regional governments, saw the Maastricht Treaty, the framework for the Euro, as a set of rules. France, on the other hand, with a more centralized system of government, saw the framework as flexible, to be overseen by governments. The authors discuss how the troubles faced by the Euro have led its member states to focus on national, as opposed to collective, responses, a reaction explained by the resurgence of the battle of economic ideas: rules vs. discretion, liability vs. solidarity, solvency vs. liquidity, austerity vs. stimulus.

Weaving together economic analysis and historical reflection, The Euro and the Battle of Ideas provides a forensic investigation and a road map for Europe’s future.

Markus K. Brunnermeier is the Edwards S. Sanford Professor of Economics at Princeton University and Director of Princeton's Bendheim Center of Finance. He has written extensively on financial crises and monetary policy. Harold James is professor of history and international affairs and the Claude and Lore Kelly Professor of European Studies at Princeton University. His books include Making the European Monetary Union and Europe Reborn. Jean-Pierre Landau is former deputy governor of the Banque de France and executive director of the International Monetary Fund and the World Bank. He is associate professor of economics at Sciences Po in Paris.

Sunday, September 18, 2016

Greek Government, Central Bank Seek to Defuse Tension over Lender

by Stelios Bouras & Marcus Walker

Wall Street Journal

September 18, 2016

Greece’s government and central bank sought to defuse a power struggle over a troubled lender, which has reignited tensions between the central bank and the ruling left-wing Syriza party.

Prime Minister Alexis Tsipras met with Bank of Greece Governor Yannis Stournaras on Saturday in a bid to smooth a row over who should run Attica Bank, a lender that finances public-works contractors, 57% of whose loans are nonperforming.

“There is no plan to sideline me,” Mr. Stournaras told reporters, responding to suggestions that the government was seeking to weaken the independent central bank. A senior government official said there were “no shadows” over relations with the Bank of Greece.

The spat escalated in recent days when police raided a business owned by Mr. Stournaras’s wife, the morning after Mr. Stournaras had told the government he wouldn’t approve its preferred candidate for chief executive of Attica Bank.

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Thursday, September 15, 2016

Greek prosecutors raid offices of central bank chief’s wife

by Kerin Hope

Financial Times

September 15, 2016

Greek prosecutors have raided an office belonging to the wife of Yannis Stournaras, the central bank governor, as part of an anti-corruption investigation allegedly linked with the consulting company she owns, a bank official said.

The probe concerns an EU-funded advertising campaign for a Greek state organisation in which Mindwork Business Solutions, a consulting company owned by Lina Nicolopoulou, the governor’s wife, took part as a subcontractor.

Documents and electronic material belonging to Ms Nicolopoulou and her team were seized, according to Proto Thema, a Greek news website that first reported the raid.

Officials at the Athens prosecutor’s office and the government’s anti-corruption department could not be reached for comment.

Ms Nicolopoulou strongly denied wrongdoing. “The real target is my husband who is being attacked in order to serve specific political purposes,” she said.

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Monday, September 12, 2016

Greek foot-dragging on reform hampers rise of EU’s ‘Club Med’

by Tony Barber

Financial Times

September 12, 2016

Just when his government’s indolent attitude to economic reform is again exasperating Greece’s eurozone partners, Alexis Tsipras presided over a mini-summit of southern European leaders that was the diplomatic equivalent of a poke in the eye to Germany and other creditors.

Friday’s seven-nation meeting in Athens, to which the leftwing Greek premier invited representatives of Cyprus, France, Italy, Malta, Portugal and Spain, produced a familiar list of rather unfocused demands for EU economic policies, putting the accent on growth and employment instead of austerity.

In the eyes of Germany, the Netherlands and other northern eurozone nations, the mini-summit was more significant for giving an unwelcome foretaste of how a caucus of southerners might emerge as a vocal lobby in the EU after Britain’s departure reduces the bloc to 27 members.

Markus Ferber, a conservative Bavarian deputy in the European Parliament, voiced concern that “the ‘Club Med’ group, after Britain’s exit, will possess a blocking minority, with which they will obstruct all the laws that don’t suit them”. Mr Ferber described this group as “a strong coalition of reform-resistant redistributors”.

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Tsipras relying on 'political theater'

CNBC
September 12, 2016

Wolfango Piccoli, co-president at Teneo Intelligence, says that Greek Prime Minister Alexis Tsipras' disagreements with financial authorities are unhelpfully "wasting time."

Sunday, September 11, 2016

Greece’s Alexis Tsipras Seeks to Revive his Political Fortunes on Economic Promises

by Nektaria Stamouli & Marcus Walker

Wall Street Journal

September 12, 2016

Greek Prime Minister Alexis Tsipras, languishing in polls, sought to reboot his premiership over the weekend. But his economically depressed country has largely given up hope on the imminent change he is promising.

Europe’s most electorally successful populist has become nearly as unpopular as the Greek political establishment he ousted almost two years ago. A recent survey showed only 19% of Greeks view him favorably and 85% are dissatisfied with his government.

Such low approval ratings—familiar to Europe’s least-popular establishment politicians, such as French President François Hollande—reflect how the star of the eurozone’s antiausterity movement has come down to earth.

Because of its deep economic crisis, Greece was ahead of the rest of Europe in the revolt against mainstream centrist parties. Elsewhere, antiestablishment populists of the anticapitalist left and the nationalist right are now on the rise. In Greece, they have been partners in government since early 2015, in a coalition led by Mr. Tsipras’s left-wing Syriza party, and their appeal is on the wane.

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Friday, September 9, 2016

Tsipras seeks influence for Mediterranean states

by Kerin Hope & Jim Brunsden

Financial Times

September 9, 2016

The leaders of five Mediterranean EU member states convened in Athens in the hope of cementing a political alliance that will allow them to exercise more influence over European policymaking on economic growth, regulating flows of asylum seekers and tackling social inequality.

“Our countries were hardest hit by the economic crisis . . . and are now on the front line of the migrant inflows . . . We need a common approach, common positions,” said Alexis Tsipras, the Greek prime minister, who hosted Friday’s gathering of heads of state and government of France, Portugal, Greece, Cyprus and Malta.

For Mr Tsipras himself, who first proposed the idea of an EU “southern front”, with the backing of François Hollande, the French president, the summit was an opportunity to play a new role.

The Greek premier has recast himself within days from radical opponent of austerity policies to a European statesman committed to building a broad-based regional initiative.

Left-of-centre leaders across the continent, many of them hit by falling approval ratings, seized on Mr Tsipras’s proposal. It was first aired two weeks ago in Paris, where Mr Tsipras was attending a meeting of European socialist leaders as an observer.

Yet Greece’s lacklustre record on economic reform suggests that Mr Tsipras may lack credibility in his new role.

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Wednesday, September 7, 2016

Syriza Strains Greece’s Credibility

by Yannis Palaiologos

Wall Street Journal

September 7, 2016

Independent institutions remain anathema to the government in Greece. Two cases that have dominated the headlines in recent weeks demonstrate how the country’s populist government, led by the hard-left Syriza party, continues to put politics before reform and refuses to learn the right lessons from the country’s recent past.

The criminal case against economist Andreas Georgiou returned to the spotlight last month when it was reopened by the country’s Supreme Court. A longtime official with the International Monetary Fund, Mr. Georgiou had been appointed six years ago to head the independent Hellenistic Statistical Authority, or Elstat. The prime minister at the time, George Papandreou, created Elstat as a response to the discovery that the government under his predecessor, Costas Karamanlis, had underreported the country’s fiscal deficit.

After an exhaustive review, Mr. Georgiou revised the 2009 deficit figure upward to 15.4% of gross domestic product from 13.6%. Elstat’s European Union counterpart, Eurostat, fully accepted the result, as it did all subsequent figures produced by Elstat during Mr. Georgiou’s five-year term. The age-old practice of putting asterisks of doubt next to Greece’s budget numbers ceased after 2010.

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Monday, September 5, 2016

‘Game Over’ by George Papaconstantinou

by Peter Spiegel

Financial Times

September 5, 2016

George Papaconstantinou had already resigned as Greece’s finance minister and was holidaying with his Dutch wife’s family near Amsterdam when he received the news: the so-called Lagarde list of wealthy Greeks with secret Swiss bank accounts had allegedly been interfered with. Three names had been deleted. They were all Papaconstantinou’s relatives. The implications were clear.

“Certain moments in life are kept in the memory for ever, in every vivid detail,” he writes of accusations he tampered with the list while in office. “I still remember the shock and disbelief, the dizziness, the anger.”

For the next two years, the UK and US-educated economist would be at the centre of the highest-profile Greek political show trial in a generation. Ultimately, a special court would acquit him of all but a misdemeanour charge after investigators found the tampered USB stick was not the one he handed to Greek financial investigators. But the trial, concluded last year, is sadly relevant once again.

Game Over, Papaconstantinou’s memoirs of the six-year debt crisis, became a bestseller when published in Greece this year. The arrival of the English-language edition could not be better timed: Athens is again gripped by the impending trial of a political figure blamed for dragging the country into its pernicious eurozone bailout. Now in the dock is Andreas Georgiou, a former International Monetary Fund economist hired by Papaconstantinou in 2010 to set up a statistics agency as part of an effort to bring discipline to the government books.

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Wednesday, August 31, 2016

The Hidden Costs of Volunteering in Greece

by Jacqueline Kantor

Pacific Standard

August 31, 2016

It’s been weeks since Heidi Liedtke left Greece, and still she dreams about the run-down room in an abandoned hospital where she taught English to a group of pregnant teenagers from Aleppo. Even now, her Facebook feed remains a constant stream of updates from Athens, most of her notifications from volunteer groups. Almost every day, she messages her friends back in Greece to make sure they’re all right and safe. Though Liedtke keeps looking up airfare to return, she knows going back will make it harder to leave a second time.

One month after graduating from American University, Liedtke flew to Greece in search of an opportunity to use her Arabic skills and understanding of the Middle East to help, in any way, with one of the biggest humanitarian crises of our time. As one of thousands of independent volunteers, she found herself in one of the most unusual aid situations to date, one that has led to under-qualified individuals handling complex issues.

People come to Greece in search of the opportunity to make some sort of dent in an issue that seems limitless; weeks later, when they emerge from the insular world of refugee volunteering, they find themselves out of their element and out of support.

“Typically I don’t talk about it [to family] because there’s so much to say that I don’t know where to begin,” Liedtke says. “What do I prioritize? The time I distracted a group of children’s attention from a fight on the other side of a caravan? The issues with voluntourism? I can’t sum it up in one conversation.”

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Greece Auctions Off Broadcast Licenses

by Nektaria Stamouli & Marcus Walker

Wall Street Journal

August 31, 2016

Greece was auctioning off broadcast licenses on Wednesday in a move the left-led government says will clean up a corrupt media sector but that critics say is a bid for political control of TV.

Gathered in a government building in the Greek capital, executives from eight companies started the auction early Tuesday, with offers beginning at €3 million ($3,341,250) and increasing in increments of €500,000.

The sale, which will reduce the number of national private television stations from seven to four, was expected to continue until late Wednesday or early Thursday. Existing broadcasters who don’t win a license are required to go off the air within three months, the government has said.

Under the country’s bailout plan with international creditors, the government promised to auction broadcast licenses for the first time. Licenses have been granted without charge since Greece first allowed private broadcasting in 1989.

The decision by the ruling left-wing Syriza party to license only four channels, however, has outraged Greek media officials and the opposition, who accuse Prime Minister Alexis Tsipras of seeking to forge political alliances with favored business groups.

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Monday, August 29, 2016

Greece May Face Aid-Payout Delay as EU Warns on Backsliding

by Jonathan Stearns

Bloomberg

August 29, 2016

Greece’s finance chief said the next international aid payout to the country may be delayed as the European Union stepped up warnings about domestic political meddling in the Greek state.

Finance Minister Euclid Tsakalotos raised the possibility of the government in Athens failing to qualify on time for a 2.8 billion-euro ($3.1 billion) disbursement due in September from the euro area. That’s what remains of a 10.3 billion-euro tranche that finance ministers approved in principle three months ago.

“If there is a delay, it’ll be days not weeks,” Tsakalotos told Bloomberg News in Brussels on Monday before a meeting with EU Economic Affairs Commissioner Pierre Moscovici. “Part of the reason for the meeting is to discuss the process to ensure there aren’t delays.”

Slipping timetables have been a regular feature of loan payouts to Greece since it first turned to the euro area and the International Monetary Fund for a rescue in 2010. Now in it’s third bailout, the country faces continued creditor warnings about backsliding on overhauls that are a condition for aid.

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Thursday, August 25, 2016

Former Greek chief statistician gets backing from Brussels

by Arthur Beesley

Financial Times

August 24, 2016

Brussels has urged Athens to repudiate claims that Greece’s national statistics agency produced false data under its former chief, intervening in a domestic criminal case that has angered the country’s international lenders.

The European Commission’s call for Greece to back Elstat, the country’s statistical body, has also raised questions over its bailout loans. Athens is required to uphold public support for the country’s statistics as a condition for international aid.

The commission stopped short of demanding a halt to criminal proceedings against Andreas Georgiou, who faces trial over allegations that Elstat inflated deficit figures, which supported the case for years of harsh austerity in a succession of bailouts. Mr Georgiou has denied any wrongdoing.

“The commission and Eurostat continue to have full confidence in the quality and reliability of the data delivered by Elstat during the term of office of Mr Georgiou,” the commission said in a letter to Athens on Wednesday.

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