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Greece's Bailout Package September 2015 Issue 6142 www.theaccountant-online.com The Accountant EDITOR’S LETTER Tantalized Greece Editor: Carlos Martin Tornero Tel: +44 (0)20 7406 6706 A large number of legendary stories, chron- As if Zeus would have hurled Email: [email protected] icles and anecdotes from both history and my- his thunderbolt at Greece’s Deputy Editor: Vincent Huck Tel: +44 (0)20 7406 6709 thology could illustrate Greece’s current trag- accounting books. Eureka! Email: [email protected] edy. The best one, to draw an analogy which There is no unsustainable Reporter: Franchesca Hashemi captures Greece’s burden after the third bailout, debt anymore. The problem is that Greece’s Tel: +44 (0)20 7406 6704 Email: [email protected] is that of Tantalus. creditors either play dumb or don’t want IPSAS The English verb, tantalize, comes from this themselves; otherwise any bailout should have Contributors: Alex Malley and Nick Dunbar hero’s eternal punishment in the Greek under- been subjected to the condition of using those (comment) world or the Tartarus. As the mythological ac- international standards. The Accountant is a sister publication of International Accounting Bulletin count has it, Tantalus was condemned to stand Well, it happens that governments and poli- in a pool, under a fruit tree. ticians are not always for transparency. Take Group Publisher: Ameet Phadnis Whenever he was thirsty, the water would re- Germany for example, Greece’s biggest single Tel: +44 (0)20 7406 6561 cede; and whenever he was hungry, the branch country creditor. For its federal government, Email: [email protected] bearing the fruit would be no more at his reach. Germany still uses cash accounting. That spares Subscription Enquiries: Sharon Howley Similar dynamics can be identified when mea- Angela Merkel of telling taxpayers that the mon- Tel: +44 (0)20 7406 6615 Email: [email protected] suring Greece’s debt, but with a third party com- eys given to the Greeks should have been booked Sales Executive: Alex Aubrey ing in to rescue Tantalus from his as a loss under IPSAS. But Germans Tel: +44 (0)20 3096 2606 torment. are intelligent people, capable Email: [email protected] Official lenders in subsequent of squaring the circle: the rescue Director of Events: Ray Giddings Tel: +44 (0) 203 096 2585 bailouts have given Greece the packages given to Greeks banks Email: [email protected] chance to reach the fruit and quench will also end up servicing their Customer Services the thirst that Tantalus never had. debts with German counterparts. Tel: 020 3096 2636 or 020 3096 2622 Email: [email protected] Among the Good Samaritans are the Don’t get me wrong, Greeks are IMF and European partners, notably the masters of their own destiny, ACCA members may include reading Germany and France. and should take responsibility for The Accountant towards their CPD if it has provided knowledge/skills relevant to their Yet the loans, like a Trojan horse, being stuck in the Tartarus. Yet role or career aspirations hid unpleasant surprises for prodi- Greek mythologies fall short in ex- For more information on accessing The Accountant gal Greece: austerity measures im- plaining this descend to the under- content online, including a five-year archive, please telephone +44 (0)20 7406 6615/6593 posed by what nowadays seems to world. A thorough account of how be the economic orthodoxy. But the debt was formed (and how the London Office A lighter burden by 71-73 Carter Lane whether you are a staunch Keynes- psyche of Greek society contrib- London, EC4V 5EG accountants’ standards ian or a stalwart supporter of Fried- uted to it) can be found in Jason Asia Office rich Hayek, there is a problem at the Manolopoulos’ book: Greece’s ‘Odi- 20 Maxwell Road #04-02J, Maxwell House very outset: Greece’s debt numbers ous’ Debt: The Looting of the Hel- Singapore 069113 don’t add up. lenic Republic by the Euro, the Political Elite and Tel: +65 6383 4688 Email: [email protected] Under accrual-based International Public the Investment Community. Financial New Publishing Ltd, 2014 Sector Accounting Standards (IPSAS), Greece’s Another essential book, shedding light on the Registered in the UK No 6931627 gross debt is 68% of GDP and not 180% – lower connection between democracy and accoun- ISSN 0001-4710 than Germany’s 80% (These are 2013 figures of tancy, is Jacob Soll’s The Reckoning: Financial Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not Japonica Partners, one of the largest private Accountability and the Rise and Fall of Nations. be reproduced, stored in a data retrieval system or transmitted by any form or means, electronic, holders of Greek bonds). Defying logic and com- The chapter about the first bailout in history mechanical, photocopying, recording or otherwise, mon sense, Greece’s debt is being measured (engineered by Robert Walpole, the first Prime without the prior permission of the publishers. at its face value and not at its fair value. That Minister of Great Britain) will help you debunk Carlos Martin Tornero Te Accountant Editor means the concessionary terms of the bailout the many myths contemporary politicians want Journalist of the Year for Regulatory Issues 2014 (e.g. low interest rates and long-term maturi- to perpetuate. In the meantime, on pages 10- State Street UK Institutional Press Awards ties) are unaccounted for, despite being a sort 15, you can read our country survey on Greece. of debt relief. So with IPSAS the problem seems to be solved. Carlos Martin Tornero CONTENTS NEWS 02-03 COUNTRY SURVEY 10-15 IN FOCUS 04-09 DATA MONITOR 16-21 www.theaccountant-online.com September 2015 ❙ 1 COUNTRY SURVEY GREECE The Accountant Debt under IPSAS: Greece’s cathartic hope Under International Public Sector Accounting Standards (IPSAS) Greece’s debt burden as a percentage of GDP would be lower than Germany’s. After a third bailout Greece is a spectator of her self-inflicted tragedy, yet creditors deny her the catharsis IPSAS might bring to the country’s public finances, writes Carlos Martin Tornero s chaos, my friend, says on the other sovereign debt in Munich under the auspices country is not getting the benefit that oth- end of the line in California economic of investment firm Japonica Partners, whose erwise should get from rating agencies and historian Jacob Soll. As we speak about founder and CEO Paul Kazarian is one of capital markets.” Greece’s recent bailout agreement, a the largest holders of Greek government As Serafeim argues, if Greece used IPSAS I bonds. the discussion about what the country needs news alert pops up in our phones: Alexis Tsipras, the Greek Prime Minister, resigns At this forum, all accountants agreed that to do next would be re-framed. Accord- and calls for a snap election. in the real world Greece’s debt would have ing to him the culture of transparency and In July Greece and its creditors have agreed been restructured many times and would accountability that IPSAS would bring, on a third bailout package of €86bn ($98bn) not be worth as much, Soll says, while could increase much-needed investor confi- so that the country can avoid defaulting on non-accountants scoffed at this accounting dence in Greece, and internally would lead its debt. dimension of the problem. to better decision making. Yet in June ahead of the deadline for debt Soll says: “They said this is the world of Among those who have attempted to get repayments 61.3% of the Greek people, the politics, not the real world, where we Greece’s debt figures right are, for obvious tired of long-standing austerity measures, have agreements to honour. Now, I under- reasons, Kazarian’s Japonica Partners. They had voted “No” in a referendum about the stand political agreements, but accounting is estimated that at the end of 2013 Greece’s conditions associated with the new bailout. rarely on the public’s agenda: is something gross debt was 68% of GDP (lower than Many had seen the referendum as a de we don’t discuss and gets swept under the Germany’s 80%) and its net debt just 18%. facto ‘Grexit’ plebiscite, a No-vote meaning rug.” Those calculations contrast with the 175- departure from the EU single currency and Another attendee at Japonica’s debt con- 180 % of GDP that the Maastricht Treaty’s perhaps from the political union as well. ference was George Serafeim, Jakurski Fam- face value definition of debt shows. The rest is already recent history: Tsipras ily associate professor of business adminis- At the standard setting board that sets negotiates and accepts the tough conditions tration at Harvard Business School. IPSAS, technical manager Paul Mason says that come with the deal; the Greek parlia- Serafeim believes that Greece is failing to he hasn’t seen Japonica’s figures himself but ment and the EU partners approve it; and recover because of its inability to build trust the accounting for financial instruments in Tsipras wins the second snap election in a and confidence, in which accounting has a IPSAS is the same as for the private sector year, thus revalidating his mandate to man- big part to play, he says. under IFRS. age the bailout package after being chal- An Athenian himself, Serafeim under- “What you need is all the information lenged by the most anti-austerity flank of his scores that Greece’s debt burden has never about what the terms are and what the mar- own Syriza party.
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