The funding gap created by the extension of the Greek fiscal streamlining program by two years will be partly covered by cutting some 3 billion euros’ worth of funds from the European Union-subsidized National Strategic Reference Framework.
The loss of funding channeled from Brussels to Athens stems from the increase of EU participation in the subsidy framework to 95 percent, as agreed by the European Commission. This increase is essentially an accounting trick that leads to the reduction of national resources, entailing a cut of the framework’s budget from the current levels of 24.5 billion euros – which is the sum of the European and national participation for the 2007-2013 funding period – to 21.5 billion euros.
The decision signals the second reduction of the framework and means 3 billion euros less of funding available through what is basically the only instrument for growth the country has.
The European Commission appears to have also agreed to greater participation for the next funding period, from 2014 to 2020, a prospect that has been confirmed by European Commissioner for Economic and Monetary Affairs Olli Rehn.
On the other hand, one positive aspect of the Eurogroup agreement last Monday on the Greek program concerns the increase in funds this country will receive over the next funding period. Athens appears to have secured an estimated 14 billion euros of EU funds aimed at growth, against just 11.2 billion that Greece would have received based on the recent proposals by the president of the European Council, Herman van Rompuy.
The increase in EU funds that was apparently achieved at the recent EU summit will be confirmed in the next meeting of the bloc’s heads of state and government in early 2013 and should contribute toward the reduction of the Greek public debt by 2.7 percentage points of gross domestic product by 2020 and by 5.2 percentage points by 2022. Greece reportedly secured this increase in subsidies by citing the prolonged recession and its distance from the EU average.