The public debt of Greece is undoubtedly a snowball that grows over time and has its roots in the 1980s. From €1.6 billion (or 22% of GDP) at the end of 1980, it reached €320 billion (or 180% of GDP) in 2017.

There is multiple finger pointing at the 2004-2009 period, which recorded a significant jump in the public debt. The reasoning behind this finger pointing is based on the simplistic notion that, at the end of 2003 the debt was 181.5 billion, while at the end of 2009 it had reached 301.1 billion1 . Therefore, the difference between these time points, which is 119.6 billion, is allegedly due to mismanagement of the public finances, during the New Democracy (ND) era.

The first thing that many ignore or neglect intentionally is the dates. The K. Karamanlis government took office from the second quarter of 2004 and left office at the end of the third quarter of 2009. This half year is too important to be excluded from the calculations. Adjusting for that, we see that at the end of March 2004 the public debt was €187.6 billion, while at the end of September 2009, it was €297.3 billion. Therefore, over the 5.5 years of the ND government the increase in debt was in fact €109.6 billion.

Moreover, when ND came to power, it had to pay interest on the public debt inherited from the previous government. The interest payments on public debt then ran at an annual rate of around €9 billion and had to be paid even if the fiscal deficit could be reduced to zero. Public debt inherited by the then government was at fixed rate bonds (93%) and had an average life of 6.2 years. Meaning that, throughout the 5.5 years of the ND government, interest worth €49.8 billion had to be paid, an amount that should be deducted to find the own responsibilities of ND.


In addition, during the spring of 2004, the new government found in the files of the General Accounting Office many expenditures due from the past and also loans, which were not registered in the public debt. In particular:

Procurements of multi billion worth of military equipment have been concealed, although funded by loans provided by London banks. These loans were not recorded in the Public debt with the excuse that deliveries had not reached Greece to the last piece. In the meantime, fund advances and disbursements to the constructing factories had already been made. Eurostat had identified unfiled outlays worth €8.6 billion, which were not recorded in debt. During the ND government the accuracy of Public accounts was restored.

With the endorsement of deputy Minister of Finance Mr. Dris, a mammoth size bond incorporating 18 swaps was issued by the Hellenic Republic, in June 2001, with Goldman Sachs as the underwriter. This concealed type of loan was never included in debt records. As time went by, the swaps increased the value of the bond/loan, further burdening Public debt. Unsuccessful attempts, via two “extenders” of the initial contract, were made in 2002 & 2003 to mitigate the increase. As the value of the swap loaded bond increased beyond control, the incoming ND government had to unbundle the bond from its swaps, letting €5.2 billion to be added to the existing debt.

A few billion euros of government debts to third party public and private entities was also left unpaid. The main debts were to the state owned Agricultural Bank, which otherwise could turn insolvent, the major social security organization, IKA, and various other pension funds, all of them totaling €2.3 billion. At the same time, an amount of up to €2.2 billion of guarantees forfeited for Public Utility Organizations debts granted up to 2003, had also to be paid by the ND government, together with the cost of four securitizations issued by the K. Simitis government, which unnecessarily induced tax and admin charges abroad.

The act that really changed the foundation of the fiscal books of the Hellenic Republic was the deficit for the year 2009. A mounting literature has already been raised, which enumerates the erroneous entries in expenditures and revenues, and how the statistical definitions of ESA 95 were “twisted” with the aim to artificially augment the deficit of the general government. In a nutshell, a deficit for that year, which could not possibly exceed 9% of GDP, with continuous revisions at the end of 2009 and during 2010, increased to over 15%. Thus, €14.7 billion were added to the deficit and debt of 2009, beyond any rule of the then existing national accounts.

Given the above mentioned amounts, our investigation leads to the conclusion that, while many deliberately accuse that during the 2004-2009 period the debt increased by €119.6 billion, this actually grew only by €26.8 billion. An increase that in time of a profound international crisis (2008-2009) was justifiable in the effort to mitigate recession.

The EU / Eurostat was not blameless

The major changes in statistics made by the government of G. Papandreou in 2009-2010 led to a fundamental revision of Greece’s fiscal data maintained by the EU for some twenty years back. As a result, our history became binding and the basis for all programs/MOUs that followed. Now the public debt and deficit have become an incriminating narrative about the past of our country. This seems to have been with the “eulogies” of the EU, led by objectives to penalize the “bad boy”, Greece, which continuously created and creates problems to the eurozone.

The danger with the revised statistics is that the criteria, on which the entry of Greece to the eurozone took place, were base on wrong calculations, since the deficit was not below 3% of GDP, as the older data attested. In addition, the public debt too did not present the downward trend evidenced by the old data. The new EU, OECD and IMF statistics show today that, during the critical three years prior to the entry of Greece to the eurozone, the deficit averaged 5.2% of GDP, whereas in 2002 it was 6%. These negative indicators about the deficit and public debt are warning bells and, at a period of intense relations between Greece and the EU, they may become a weapon in the hands of those, who do not wish our stay in the eurozone.

Public debt comparison between the 1996-03 and the 2004-09 periods

According to the data presented above (see also the analysis in the table), the real annual growth of the public debt, during the Karamanlis government, averaged €5 billion annually.

During the Simitis governments, the debt increased from €92.1 billion, in January 1996, to €187.6, in April 2004. From the resulting difference of €95.5 billion, the public debt due to borrowings of the K. Mitsotakis government should be deducted, while the debt transfers made to the Karamanlis government should be added. The increase of the debt of the 1981-1995 period is apportioned by 75% to the PASOK governments and by 25% to the ND government. Of the latter, the accruing interest payments amounted to €14.2 billion. Therefore, the adjusted increase of debt during the Simitis government was €99.6 billion.

Thus, the comparison of the two periods (1996-03 and 2004-09) shows that, during the Karamanlis government, the annual increase of public debt was €5 billion, while in the Simitis government €12 billion. These nominal amounts demonstrate that the annual increase of the public debt, over the Simitis time, was running at a rate of nearly 2.5 times greater than that of the Karamanlis time. However, a fairer comparison of the amounts ought to be made as a percentage of GDP. Hence, during the Karamanlis period, the annual increase of the public debt was 2.3% of GDP, while over the Simitis period 8.6% of GDP. Consequently, the comparison shows that, during the Simitis government, the annual increase of the public debt was almost four times greater than during the Karamanlis government.

1 Debt statistics are from the EU AMECO data bank.