ECONOMY

Greece complies with EU guidelines only ‘partly’

The European Commission’s report on the general orientations of economic policy in the 15 member states in 2002 pinpoints productivity, public finances and unemployment – that is, the three factors that ultimately determine competitiveness – as Greece’s main challenges. The Commission describes the country’s economic policy efforts last year as inadequate, and calls for an acceleration of reforms, particularly as regards social security, and more and bolder measures for inflation, public debt and primary fiscal spending. To be sure, Greece was not the odd man out; the Commission leveled strict criticism against almost all countries, and Greece stands somewhere in the middle as regards its compliance with guidelines. On the issues of competitiveness and prices, the Commission points out that the Greek economy is relatively insulated; half the sum of imports and exports as a percentage of GDP is limited to 16.5 percent, against 75 percent of Belgium, for instance, and it notes that such a lag can only be partly explained by the country’s geographical position – suggesting a competitiveness problem. It stresses that Greek labor productivity is the second lowest in Europe, despite a significant improvement in recent years; it says an improvement in the environment for business is necessary, by reducing red tape and simplifying the tax system. It also notes that Greece has one of the lowest investment rates in research, particularly in the private sector. The Commission applauds the deregulation of the telecoms sector but is critical of slow progress in the power industry, and notes that Greece and France are laggards in the harmonization of single market legislation. It notes that despite an improvement, public debt remains high and the budget still shows a deficit. The report warns that problems that the country’s social security system may face in the medium term may have been underestimated, describing measures to discourage early retirement as inadequate. Further, it notes that the level of employment remains low (55.4 percent of the population), against an EU average of 64 percent and a target of 70 percent. Much greater efforts are also needed in workers’ training programs. The Commission finds that satisfactory progress on issues of encouraging entrepreneurship and the knowledge-based economy. Greece’s fiscal deficit was 0.8 percent, against a planned budget surplus of 1.3 percent, the largest spread in the EU.