WRITTEN QUESTION E-3400/02

by Antonios Trakatellis (PPE-DE) to the Commission

(29 November 2002)

Subject: Downturn in Greek economic indicators and growth prospects

The fact that the GDP growth rate for Greece (4 % for 2001), presented as indicative of sound economic performance compared with the European average, is in fact being achieved through EU budget-based redistribution, since, according to the Commission's information, the figure for 2001 is in fact 3,5 %, lends credence to concerns regarding prospects for sustained economic growth in Greece following expiry of the third CSF (2006) and the reduction or halting of large injections of Community funding. Furthermore, this is accompanied by an increase in the balance of payments current account deficit (Bank of Greece statistics for January August 2002), resulting from a 13 % drop in trade figures and a substantial decline in transfers, that is to say remittances from emigrants, and in net revenue from the EU.

Whereas the fact that Greek products are being squeezed out of foreign markets is leading to a loss in production figures and an increase in unemployment:

1. What does the Commission estimate will be the level of public debt following the revised Eurostat figures for the years 2000, 2001, 2002 and 2003?

2. What will be the impact of these revised figures on the public deficit for the years 2000-2002 and what are the Commission's estimates for the year 2003?

3. What state guarantees have been provided in the form of loans for public-sector undertakings (public enterprises and bodies, Olympic Airways, Greek railways), and through social funds and local authorities and what percentage of the public deficit does this constitute?

4. What measures does the Commission recommend to rationalise the Greek economy (public debt rescheduling, reduction of public deficit) while continuing to implement the programme of public investment at the same rate?

Answer given by Mr Solbes Mira on behalf of the Commission

(20 December 2002)

1. The methodological changes to data reporting agreed between the Greek authorities and the Commission in the course of 2002 implied that the government debt ratio stood at 106,2 % of the gross domestic product (GDP) in 2000 and 107 % of GDP in 2001. On this revised basis, the Commission Autumn 2002 forecasts estimate the government debt ratio to GDP at 105,8 % in 2002 and project a further reduction to 102 % of GDP in 2003 based on the elements included in the draft State Budget for 2003 and on the assumption of unchanged policies.

2. The recent methodological revision of reported data revealed a general government deficit of 1,8 % of GDP in 2000 and 1,2 % of GDP in 2001. The Commission Autumn 2002 forecasts estimate the general government deficit at 1,3 % of GDP in 2002 and project a deficit of 1,1 % of GDP in 2003.

3. According to information provided by the 2002 State Budget document, the stock of State guarantees was equal to 6,1 % of GDP in 2001 while new State guarantees were equal to EUR 1 080 million in 2001 (or 0,8 % of GDP). According to information provided by the Greek government in the second reporting under the excessive deficit procedure (November 2002), debt taken over by the government due to guarantees falling due for payment in 2001 amounted to EUR 494 million in 2001 (or 0,4 % of GDP) and are estimated at EUR 330 million in 2002 (or 0,2 % of GDP).

4. The budgetary position of Member States is assessed by the Commission on the basis of the stability/convergence programmes and their updates prepared by the Member States under the requirements of the Stability and Growth Pact. Following the submission of the 2001 updated stability programme of Greece, the Council, on a recommendation by the Commission, issued an opinion on 12 February 2002. According to this the Council strongly encourages the Greek authorities to set promptly a clear binding norm for current primary expenditure as it was recommended in its

opinion on the 2000 stability programme; in addition, the Council considers it is appropriate to keep high primary surpluses above 6 % of GDP and to pursue, if necessary, further budgetary adjustment effort, taking into account the high level of debt. Furthermore, taking into consideration the still very high level of the government debt ratio, as well as the perspective of increasing budgetary costs stemming from the ageing population, the Council urges the Greek government to take advantage of the current favourable macroeconomic situation to reduce the government debt as fast as possible. The 2002 update of the Greek stability programme, 2002-2006, was submitted on 2 December 2002. The Commission will issue a recommendation for a Council opinion in early 2003, assessing the compliance of the budgetary position and its prospects with the requirements of the Stability and Growth Pact.