WRITTEN QUESTION E-0274/00 by Paulo Casaca (PSE) to the Commission. Use of PPPs for the purpose of regional policy.
Date: 2000-02-07
Institutions: European Parliament, Provisional data
Subjects: EU regional policy, advisory committee (EU), econometrics, purchasing power parity, statistical method

C 330 E/114

Official Journal of the European Communities

EN

21.11.2000

(2000/C 330 E/127)

WRITTEN QUESTION E-0273/00

by Paulo Casaca (PSE) to the Commission

(7 February 2000)

Subject: Theoretical basis of Eurostat(cid:146)s PPP data

In its reply to question E-2218/99 (1) the Commission takes the view that using PPP in Community rules in
countries which have adopted the euro is (cid:145)completely correct(cid:146) and a reflection of (cid:145)current practice(cid:146).

Can the Commission quote a single reference from economic theory which supports the practice of using
PPP in order to compare the GDP prices of countries which use the same currency?

(1) OJ C 219 E, 1.8.2000, p. 124.

Answer given by Mr Solbes Mira on behalf of the Commission

(30 March 2000)

International comparisons of gross domestic product (GDP) in real terms are only possible if the following
three conditions are met: the definition of GDP must be the same, GDP must be expressed in the same
monetary unit, and it must be evaluated at the same price level.

GDP estimates, both for Member States and for other countries, generally meet the first condition but do
not meet the other two because they are expressed in the national currency and are evaluated in
accordance with the prices of the country in question. The use of purchasing power parities (PPPs) allows
these last two conditions to be met.

It seems therefore that where two Member States share the same national currency, or where this currency
has a fixed and intangible parity with another currency, PPPs are still useful because in this case the first
two conditions are met but the third (price levels) is not always.

Moreover, even if price differences were to diminish in future (price convergence) as a result of the internal
market and European monetary union, the experience of the United States or of Belgium and Luxembourg
shows that significant differences between regional or national price levels could continue to exist for a
long time.

Similarly, PPPs are used to compare the GDPs of countries such as the United States and Argentina, even
though the Argentine peso has a fixed peg to the American dollar (1 peso = 1 $). In the United States, the
use of regional PPPs was recommended for poverty comparisons. In addition, the Federal Government uses
PPPs to carry out cost-of-living adjustments for its employees who work in different places of employment
throughout the United States.

It therefore seems that the realisation of European monetary union in no way eliminates the significance of
the use of PPPs at European level; on the contrary, these will continue to represent a valuable economic
tool.

(2000/C 330 E/128)

WRITTEN QUESTION E-0274/00

by Paulo Casaca (PSE) to the Commission

(7 February 2000)

Subject: Use of PPPs for the purpose of regional policy

In its reply to question E-2218/99 (1) the Commission takes the view that the use of PPPs in Community
rules and, in particular, in the rules relating to regional policy is (cid:145)completely correct(cid:146) and reflects (cid:145)current
practice(cid:146), and it backs up this view by claiming that its methodology is accepted by the OECD and the UN.

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Official Journal of the European Communities

C 330 E/115

However, at its fourth seminar on regional information at the service of regional policy in Europe, which
was held in Rennes in January 1998, Eurostat(cid:146)s advisory committee on social and economic matters
concluded that the validity of figures for GDP and for regional disparities depends on whether euros or
PPPs are used, especially in view of the fact that national PPP rates are employed despite the major
differences which exist between regions within the same Member State.

As regards the use of PPPs for the purposes of Community rules, does the Commission not consider the
opinion of Eurostat(cid:146)s advisory committee to be more important than the fact that the PPP indicator is used
by other international institutions for completely different purposes and with completely different results?

(1) OJ C 219 E, 1.8.2000, p. 124.

Answer given by Mr Solbes Mira on behalf of the Commission

(28 March 2000)

Following its fourth seminar on (cid:145)Regional information serving regional policy in Europe(cid:146), held at Rennes
in January 1998, the European Advisory Committee on Statistical Information in the Economic and Social
Spheres (CEIES) drew the following conclusion: (cid:145)The significance of GDP and regional disparities depend to
some extent on whether measurements are in ecus or PPS, especially since national PPS rates are used
despite major differences between regions within a given Member State(cid:146).

Article 3 of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on
the Structural Funds (1) stipulates that (cid:145)The regions covered by Objective 1 shall be regions corresponding
to level II of the Nomenclature of Territorial Statistical Units (NUTS level II) whose per capita GDP,
measured in purchasing power parities and calculated on the basis of Community figures for the last three
years available on 26 March 1999, is less than 75 % of the Community average(cid:146).

A presentation given during the seminar concluded that:
(cid:145)It seems that the criterion proposed for the
designation of Objective 1 regions in Agenda 2000 (cid:129) NUTS II GDP per head in PPS (cid:129) is mostly justified
by convenience. GDP is used because it is published and available. PPS are used because, historically, they
were more stable than exchange rates (cid:133) An important question is whether other single criteria are more
convincing. In practice, this seems unlikely(cid:146).

The Commission does not currently calculate regional purchasing power parities, but is studying the
feasibility of doing so.

(1) OJ L 161, 26.6.1999.

(2000/C 330 E/129)

WRITTEN QUESTION P-0282/00

by Adriana Poli Bortone (UEN) to the Commission

(3 February 2000)

Subject: Crisis in the olive oil market: proposal to set up a Community olive oil databank

In response to the serious crisis in the olive oil market (a crisis which is due to continue during the
1999/2000 marketing year), Italy has carried out investigations at the frontiers across which large amounts
of oil from EU and non-EU countries are imported.

Most oil for human consumption which is imported into Italy comes from outside the Community (cid:129)
sometimes by means of triangular arrangements involving Spanish and Greek operators which are not
always transparent.