The Second CSF (Delors' II Package) for Greece and its Impact on the Greek Economy

The Greek Community Support Framework (CSF), which is operational during the period 1994-99, is designed to finance large-scale development projects and investment in physical and human capital in Greece, aiming to gear the economy onto a sustainable path of economic growth and development. This process of real convergence is viewed as a prerequisite for the cohesion of EU and the sustainability of the nominal convergence objective of the Maastricht Treaty in the way to Economic and Monetary Union of Europe. The paper provides, first, an overview of the Greek CSF and, second, an ex ante assessment of the effects that the Second CSF is likely to have on the economy of Greece. The analysis delineates four types of CSF actions according to whether they aim at (i) raising 'hard' infrastructure, (ii) financing 'soft' infrastructure interventions (such as R&D, health services, etc), (iii) supporting productive investment, and, (iv) training the labour force into new skills and improving the civil service. The effects are analysed first assuming that CSF operates only through raising the components of income and aggregate demand, and then by incorporating externalities on the productivity of output in various sectors and the reduction in costs. We find that in the absence of externalities, output rises during the period of the CSF 1994-99 but then returns to the benchmark course without any lasting improvement. When all types of externalities are taken into account, total output in year 2010 will be higher than baseline by 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.