Greece is downgrading itself

On December 19 Standard and Poor’s raised its rating of Greek sovereign debt by six notches, to B-minus from selective default.

The government’s decision to prosecute a statistician indicates that the upgrade was premature.

According to S&P, the ratings change “balances our view of euro-zone member states’ determination to support Greece’s euro-zone membership and the Greek government’s commitment to a fiscal and structural adjustment against the economic and political challenges of doing so.”

And, indeed, European governments and institutions, particularly the European Central Bank, have made it clear that they are prepared to go to great lengths to save the euro,  including propping up Greece.

For their part, the Greeks are putting up with difficult austerity measures, resignedly, if not stoically, in order to remain in the euro-zone.

According to Greek Finance Minister Yannis Stournaras, “It is a very important decision, but there is no room for complacency. It is a decision which creates a climate of optimism, but we know that the road is still long and uphill.”

Nonetheless, the government’s decision to prosecute the Greek statistical agency’s (Elsat) Andreas Georgiou indicates that Greece still falls well short of “investment grade.”

Georgiou, a long-time international civil servant who was brought in to clean up Elsat, faces life in prison, standing accused of having overstated Greece’s deficit.  An NPR Planet Money podcast suggests Georgiou is resented within Elsat because of his efforts to introduce modern, internationally accepted standards.   An editorial in yesterday’s Financial Times cites senior Greek officials who state that Georgiou is being made a scapegoat in a political battle over who should bear the blame for the country’s austerity.

The Financial Times concludes: “Shooting the messenger will not make that truth disappear.”

The reality is far worse.  Shooting the messenger means that we can’t trust the data coming out of Athens.  That should make investors, governments, and ratings agencies nervous.

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