You may think the title of this article is ridiculous, but sadly it is not. One of the problems seen so frequently in the EU and Eurozone in particular is the difficulty of collecting correct or even reasonably accurate data. The body that regulates national debt data across the Eurozone is the European Statistical System (ESS), which comprises of Eurostat and National Statistical Institutions (NSI's).
Eurostat has no direct involvement in the compilation of data collected by EU member states. It is down to each EU member state's NSI to collect and submit the data to Eurostat, which uses the information to help the European Commission (EC) make decisions. The lack of involvement in the collection of data from the European administrative system led to huge disparities in the reported debt figures and reality of the deficit.
In an attempt to resolve the problems with inaccurate reporting of national debt figures across the Eurozone a code of best practice was set up in 2005 called the, 'European Statistics Code of Practice' (EC, n.d.). However as the true depth of the problems came to light in a 2004 report (Evans-Pritchard, 2010), when it was discovered Greece had failed to comply with ESS set regulations and had continued to hide enormous debt, the EC decided it had to act. In 2008 the European Statistical Governance Advisory Board (ESGAB) was set up to regulate the NSI's (EC, n.d.).
Although a code of best practice had been set up and a new board of regulation was put in place the Eurozone continued to become more indebted indicating the actions of the ESS failed. Further action was applied with the Excessive Deficit Procedure (EDP), which was an attempt to get heavily indebted Eurozone member states within debt boundaries set by the Stability and Growth Pact (SGP). As the level of debt seen across the Eurozone continues to rise, it would indicate the EDP has also been unsuccessful.
The fact that member states had failed to hit the SGP targets in the first place is evidence the ESS has little if any control over fiscal policy set by each member state. The SGP was an attempt to harmonise fiscal policy throughout the Eurozone in an effort to influence stability for the Euro currency (EC, n.d.). As this has been near to impossible the role of the European Central Bank (ECB) has increased significantly in recent years in an attempt to maintain economic stability in the region.
The efforts made by the EC to stabilise the sovereign debt crisis throughout the Eurozone started with the European Financial Stability Fund (EFSF), which sold bonds and other debt instruments on the capital markets generating funds to be lent to the failing states. On 8th October 2012 the EFSF was superseded by the European Stability Mechanism (ESM), as the permanent tool to be used to resolve sovereign debt issues in the Eurozone, although the EFSF is still used in Greece, Portugal and Ireland, the ESM has replaced its operations in Spain (Europa, n.d.).
Even though there is now a mechanism in place to provide failing states with funds, it begs the question as to whether the EC is even aware of how much funding is required to resolve the issues in the Eurozone. If the debt figures have been hidden and continue to be misreported by many member states it makes the new mechanism a bottomless pit for further loans. The only member states where the true extent of sovereign debt is known for certain are the PIIGS, which have either been investigated or controlled directly by Brussels in some shape or form.
The EC cannot hide the simple fact that to this day it does not have strong enough control of the reporting or regulation of national debt levels across the Eurozone, which makes any mechanism imposed at best ineffective and at worse a blank cheque. The EC cannot even claim to know how much sovereign debt exists in the Eurozone due to the poor reporting of the NSI's. It therefore raises the question as to how the EC expects to make plans for a resolution to the debt problems across the Eurozone when it does not even know the full extent of the debt that exists in the first place.
If you found this article interesting you can find out more information on the limitations of the EC to regulate the debt figures across the Eurozone and the Euro Crisis in general in a book written by the author. The book is available here.
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