WRITTEN QUESTION E-0231/03

by Antonios Trakatellis (PPE-DE) to the Commission

(4 February 2003)

Subject: Input of Community resources into the Greek economy

Commission estimates and data relating to the Greek economy (updating of the stability programme for 2001 and 2002) show that the rate of growth of GDP in Greece was 4,10 % in 2001. This is presented as evidence of the good performance of the Greek economy compared to the EU average. However, according to the Commission report drawn up by the Budget Directorate-General in September 2002, the input of Community resources into Greece amounted to 3,50 % of the GDP for 2001 and 3,65 % for 2000. The corresponding figures relating to the contribution made by the input of Community resources to GDP for 2001 for other Member States of the European Union given in this report were as follows: Portugal: 1,53 %, Ireland: 1,13 % and Spain: 1,24 % of GDP. This means that the growth of GDP in Greece derives essentially from a redistribution of EU budget resources, since, according to Commission statistics, Community input of all kinds Structural Funds, Cohesion Fund, European Agricultural Guarantee and Guidance Fund and European Social Fund, etc. amounted to 85,4 % of the growth in the GDP of Greece in 2001.

1. Can the Commission confirm that the input of Community resources in Greece corresponded to 3,50 % of GDP in 2001 and 3,65 % in 2000 and that the 4,1 % increase of Greek GDP in 2001 is due almost entirely to the input of Community resources?

2. What contribution has the Community budget made in the growth of Greek GDP in 2002 and what amounts of these funds entered Greece in the same year?

3. On the basis of the data available, what are the multiplier effects of such a significant transfer of Community funds to the Greek economy for 2000, 2001 and 2002?

4. On the basis of the data available, what is the potential for the Greek economy to continue growing under its own impetus after the expiry of the third CSF in 2006?

Answer given by Mr Solbes Mira on behalf of the Commission

(13 March 2003)

As one of the Union's poorer Member States (with Gross domestic production (GDP) per capita in purchasing power standards (PPS) at 68 % of the 15 Member States average in 2001), Greece is a net recipient from the Union budget. The net budgetary balance was approximately 3,5 % of GDP in 2001. The main sources of funds are the European Agriculture Guidance and Guarantee Fund (EAGGF)-Guarantee Section and Structural Operations. Payments to Greece in 2000 and 2001 were not noticeably higher than in previous years, relative to GDP, as shown for Structural Funds payments in Table 1.

>TABLE>

The main aim of the supply-oriented Cohesion policy is not to stimulate short-run demand but to raise long-run productivity and competitiveness. Nevertheless, public investment supported by Union Structural Funds translates into increased domestic demand. The contribution of domestic demand to GDP growth can however be dampened by a negative contribution of the foreign balance, not least via imports of goods and services, mainly from other Member states, including equipment goods which contribute to raising the long-run productivity and growth potential of the economy. In Greece, in 2002, real GDP growth was driven by strong domestic demand, namely sustained private consumption and both public and private investment, while the contribution of the external balance was negative due to the impact on exports of a slowdown of world demand and a recovery of imports.

In the context of the Second Cohesion Report in January 2001, an evaluation was made of the potential impact of the Structural Funds on GDP in the Cohesion countries in 2000-2006. The macroeconomic model used, Hermin, not only assesses short-run demand side effects, but also potential long-run effects on the economy's supply potential i.e. investment in human capital and infrastructure are assumed to raise productivity, to increase an economy's attractiveness to Foreign direct investment (FDI), and to improve the competitiveness of indigenous industries. The evaluation showed that the Community Support Framework could raise real GDP by about 5-6 % in 2000-2006, compared to the baseline scenario. Even if the artificial assumption is made that funding stops after 2006, long-run supply effects continue at around 2 %.

Although Greece's good growth performance since 1996 is partly due to the impact of Union co-financed public investment, other policies have also been crucial, particularly the mix of monetary, fiscal and wage moderation policies which allowed Greece to enter the eurozone and have provided positive conditions for private investment. The 2002 update of the stability programme of Greece, prepared under the requirements of the Stability and Growth Pact, shows that real GDP growth is expected to remain above the Union average in the coming years. Longer term growth prospects will clearly depend on the pursuit of stability-oriented macroeconomic policies, not least to ensure the sustainability of public finances, as well as steps to improve the functioning of product and labour markets in order to sustain investment flows. On several occasions, the Commission and Council have recommended that such policies are indeed implemented by the Greek government.