ECONOMY

EBEA warns of enlargement risks

Greece’s biggest challenge as the European Union expands to take on 10 more members in 2004 is to close the prosperity gap between it and other developed member states, the Athens Chamber of Commerce and Industry (EBEA) said yesterday. «In the enlarged EU, Greece should seek to cover the gap which separates it from developed European countries,» Drakoulis Foundoukakos, president of EBEA, said. At the Copenhagen Summit last week, EU leaders agreed to open the door to 10 countries in 2004, namely Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. Foundoukakos said the catching-up process would not be easy, especially as even some of the candidate countries are ahead of Greece. A recent survey by accounting firm PricewaterhouseCoopers rated Greece in 18th place out of 25 European countries. The study looked into countries’ macroeconomic stability, economic restructuring and infrastructure, among others. «Comparisons will be continuous and merciless. The competition will get more and more aggressive,» Foundoukakos said. On top of all these challenges, Greece in 2006 will have to learn to live without the generous inflow of EU community funds to which it has been accustomed in the last 16 years. The Third Community Support Framework, the third tranche of EU funds, is due to end in 2006. The bulk of transfer funds is then expected to shift to the poorer new members. «The biggest danger for Greece as a result of the enlargement process is that it might not achieve real convergence with the developed countries,» Foundoukakos warned. Even the Bank of Greece has reservations. Governor Nicholas Garganas recently said real convergence would only come about in 40 years, based on current growth rates. Foundoukakos said the low level of foreign direct investments and declining exports underscored the long road ahead for Greece. FDI in the January-October period showed a massive net outflow while falling exports jacked up the current account deficit, Bank of Greece statistics released early this week showed. «It’s time to change goals and policies,» Foundoukakos said, with Greece’s presidency of the EU next year as the starting point. Reforming the civil service, deregulating markets, strengthening competitiveness, cutting taxes and reforming the social security system could help lay the foundations. «As long as the government balks at pushing for all these changes, the chances of Greece losing its competitiveness and battle for real convergence will increase,» he warned.