GREECE fiddled its way into the European single currency and should not have been allowed to join, according to the European Commission and other members of the euro.

In the most embarrassing episode yet to hit the EU’s flagship project, the European Commission started legal action against Greece for “vast discrepancies” in its accounts over a seven-year period.

Revised data show that the country’s finances were in such poor shape that it broke the public borrowing rules every year and has still not met the euro entry criteria. A European Commission spokeswoman said: “It is clear that Greece would not have joined the euro with the figures we have now.”

A spokesman for a leading euro member said: “In international relations, there is a principle of acting in good faith. We should have been more vigilant — and we will be in future.” A spokesman for another euro member state said: “Greece should never have joined, but what can you do? This is terribly embarrassing. It’s definitely damaging confidence in the euro.”

Bitter recriminations have broken out between the institutions of the European Union, with the European Commission, which is responsible for verifying the figures, trying to spread blame to governments for also being hoodwinked.

The former socialist government of Greece hid its massive budget deficits between 1997 and 2003 by understating military spending, exaggerating VAT receipts and overestimating surpluses in a social security fund. The scandal was only uncovered in March, when the newly elected conservative Government ordered a review and found that the government budget deficit had been understated by an average of 2 per cent of GDP every year between 1997 and 2003. Greece had said its government borrowing in 2003 was 1.7 per cent of GDP, when in fact it was 4.6 per cent. Every year during the period, Greece’s government deficit has been in excess of 3 per cent of GDP, but it presented to the European Commission and governments figures showing the deficit was well under 3 per cent of GDP, the level permitted by treaties governing the euro.

The Commission, which published a review of the figures, blamed the former Greek Government for misleading it. “We expect member states to send reliable figures. It is a system based on co-operation. The main responsibility for misrepresentation lies first and foremost with the Greek authorities,” said a Commission spokeswoman.

The Commission began legal action against Greece, but admitted that there would be no penalty. “There is no sanction. We didn’t provide for countries not sending the right data,” the spokeswoman said.

It is the second big blow to the euro since the collapse earlier this year of the stability pact, which upheld government borrowing rules, after France and Germany also exceeded the limits. There is no prospect that Greece will now be kicked out of the euro, and a Greek government spokesman played down the scandal.

“The most important thing is that we reduce our deficit, not bickering about the past. It’s not a big issue — quite frankly, it is much ado about nothing,” the spokesman said.

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