ECONOMY

Greece has long road ahead to achieve convergence with EU

Despite an impressive improvement in 2002, Greece still faces an uphill struggle to converge with the economies of its European Union partners, according to data released on Thursday by Eurostat. Comparing members’ per capita gross domestic product (GDP), adjusted for purchasing power parity, as the accompanying table does, provides a more objective way of looking at a country’s prosperity level. In some cases, however, figures may be misleading, as in the case of Ireland, whose GDP may be high but much of which is produced by foreign companies operating there and which repatriate a large part of their earnings. Still, Ireland certainly lies above Belgium and the UK and closer to the Netherlands and Austria in the table if we make this adjustment. Needless to say, its progress, here documented only since 1995, is spectacular if we consider that, back in the early 1990s it was considered one of Europe’s four «poor» countries, alongside Greece, Portugal and Spain. The other three, as the table shows, still bring up the rear. Greece’s big improvement in 2002 is due to its significant economic growth (4.1 percent) at a time when most European economies stagnated. This gave it the chance to catch up with Portugal and no longer be alone in last place. On the other hand, a great part of its economic growth is due to the construction of Olympic projects and the inflows of EU funds through the Third Community Support Framework (CSFIII). This, once again, begs the question as to whether Greece can sustain higher growth than the EU average after the Olympics and after CSFIII subsidies dry up, around 2008 (although the program itself ends in 2006). Yesterday, the CSFIII monitoring committee announced that projects engaging some 63 percent of the available funds had already been approved, up from 47 percent in the same period last year. This is a rather slow pace and the cumbersome EU auditing procedures mean that less than half of that amount has already reached state coffers. The committee is «hopeful» that, by year’s end, Greece will have received 30 percent of the earmarked EU funds. The State, which co-finances all CSFIII projects, will have spent 23 percent of its own earmarked money. Unless Greece takes advantage of next year’s Olympics to attract more foreign investment, it is unlikely that it will sustain the growth needed to reach «convergence,» that is, in the table’s terms, reach 100 by early in the next decade, as the government wants. Actually, the pessimistic assessment by a trade official, that Greece has already missed its chance to attract significant foreign investment, may be true.