THE 2ND CSF (DELORS-II PACKAGE) FOR GREECE AND ITS IMPACT ON THE GREEK ECONOMY - AN EX-ANTE ASSESSMENT USING A MACROECONOMETRIC MODEL

The Greek Community Support Framework (CSF), which is operational duri ng the period 1994-99, is designed to finance large-scale development projects and investment in physical and human capital in Greece, aimin g to gear the economy onto a sustainable path of economic growth and d evelopment. This process of real convergence is viewed as a prerequisi te for the cohesion of EU and the sustainability of the nominal conver gence objective of the Maastricht Treaty in the way to Economic and Mo netary Union of Europe. The paper provides, first, an overview of the Greek CSF and, second, an ex ante assessment of the effects that the S econd CSF is likely to have on the economy of Greece. The analysis del ineates four types of CSF actions according to whether they aim at (i) raising 'hard' infrastructure, (ii) financing 'soft' infrastructure i nterventions (such as R&D, health services, etc), (iii) supporting pro ductive investment, and, (iv) training the labour force into new skill s and improving the civil service. The effects are analysed first assu ming that CSF operates only through raising the components of income a nd aggregate demand, and then bg incorporating externalities on the pr oductivity of output in various sectors and the reduction in costs. We find that in the absence of externalities, output rises during the pe riod of the CSF 1994-99 but then returns to the benchmark course witho ut any lasting improvement. When all types of externalities are taken into account, total output in year 2010 will be higher than baseline b y an impressive 9.5%, and will continue to grow at a rate faster by 0. 26% per annum than would be otherwise, while employment expands by an average of 95,000 new jobs.