NEWS

Greece a model to avoid

In a stinging appraisal of Greece’s economy after its accession to the EU, a report by the Economist Corporate Network has presented Greece as an example for the countries of Central and Eastern Europe to avoid after they join the union in May. The report, called «Lessons for CEE from Spain, Portugal, Greece and Ireland,» and dated October 2003, compared Ireland, which now has a GDP per capita 26 percent higher than the EU average, with Greece, which is at 66 percent. «In 1973, when Ireland joined the European Community, Greece was the wealthier of the two countries, with a GDP per capita around 70 percent of the average of the 15 countries that make up today’s EU. Ireland was hovering just above 60 percent. Greece managed to mismanage its accession so badly that, despite its recent improvement in economic performance, the country’s relative wealth is still lower than when it joined in 1981,» the report said. It presented statistics from Eurostat, pointing out that 20 years after Ireland acceded, its GDP per capita had risen from 61 percent to 83 percent, hitting 126 percent in 2002, nine years later. Greece, which was at 69 percent of the EU average GDP per capita in 1981, slipped to 64 percent 20 years later and rose to 66 percent in 2002, behind Portugal (69 percent) and Spain (84 percent). The report said Ireland has very important lessons for most of the new EU members, though it noted that «it’s clear that Ireland’s cultural and linguistic affinity to the US and its coming-of-age in the globalizing 1990s are two key factors that cannot be imitated – not to mention controversial tax policies.» Ireland attracted companies by providing «low taxes, a well-educated work force trained around investors’ needs, good infrastructure, a consensus with unions… and a proactive government listening hard to what investors were talking about,» the report said. The contrast with Greece is striking. «Greece has been set up as a model of everything that can go wrong after EU accession,» the report said. «The economy grew less than 1 percent on average for the first 15 years of membership.» It added: «Accession coincided with a left-wing government which spent heavily and refused to implement EU directives. That meant Greece benefited from none of the integration effect of accession – foreign investors stayed away, exports were not competitive, the single market passed Greece by. Secondly, the economy was kept afloat by an influx of EU funds that amounted to 7 percent of GDP. Rather than supporting growth, the money allowed anti-growth policies to continue and fostered corruption.» It added, though, «Once Greece decided to aim for monetary union in the early 1990s, its economy picked up.»