Growth in Greece? Barroso and Papademos say: “Yes, we can!”

Given that the Greek economy contracted by 7 percent of gross domestic product last year and is on course to complete this year one of the sharpest peak-to-trough drops seen in the developed world, the idea of growth in Greece almost seems like a bad joke. Yet growth is the new buzz word in Brussels. Twelve EU states recently signed a letter demanding a greater emphasis be placed on it, analysts are talking about it, European Parliament President Martin Schulz came to Athens to talk about it and politicians are trying to find ways to generate it. Growth is very much the new black, or at least this year’s austerity.

It was in this vein that a meeting between European Commission President Jose Manuel Barroso and Greek Prime Minister Lucas Papademos took place in the Belgian capital this week. Although growth is the word on everybody’s lips, the talk of boosting economies and creating jobs in the EU remains rather vague. Tuesday’s talks between Papademos and Barroso did not produce a specific conclusion but they had a much greater focus than we have been accustomed to.

The discussions about how to put to good use EU structural funds for a series of projects appear to have been substantive and concrete proposals are within touching distance. Greece has received 8 billion euros of the 20 billion available in its 2007-2013 envelope, leaving some 12 billion euros to be absorbed by the end of next year. Barroso said that now the second Greek bailout is almost settled, the time is right to pay more attention to actions that could boost growth and tackle unemployment, which has passed 20 percent and rose the fastest in the European Union last year, according to Eurostat figures out this week.

“Even if implementation [of the second program] is swift and effective, it will take time for the full benefits of these reforms to be felt,” he said. “The question now is how can we accelerate some programs which can give concrete support for Greece: support for growth, support for creation of jobs and also to mitigate the social impact of some of the [austerity] measures.”

Greece has been notoriously poor at absorbing EU funds — which divide into structural, regional and social — unless it has been for major infrastructure projects. This is because the disbursement of the funds requires from the member state a level of coordination, policy planning and administrative effectiveness that Greece has not been able to produce very often.

This time, however, Greece has an advantage as the EU Task Force has been in Athens since last September, tackling exactly this problem. The Commission-appointed team is providing technical assistance on how Greece can improve its public administration and on setting up projects that qualify for funding.

“There is an urgent need to complement the policies and reforms included in the second economic program with concrete measures and other actions that can have an immediate and positive impact on economic activity, employment and to help address the social consequences of the adjustment effort,” said Papademos.

One of the most significant areas being examined by Athens and Brussels is to provide working capital for small and medium-sized enterprises (SMEs). As many as 60,000 SMEs are expected to close down this year. In many cases, they cannot survive in the turbulent economy because they are being starved of cash by ultra-cautious and liquidity-strapped banks.

Barroso and Papademos agreed that at least 500 million euros of EU funds be provided to SMEs as working capital via Greek banks. Greece will be the first EU country in which this happens. The EU has never before allowed its cash to be used to support businesses in this way. Greek government sources said that the amount available may be increased to as much as 750 million euros through leveraging. The European Investment Bank has been asked to help in this process and all that remains before the project gets under way is for the EIB to accept its role in the scheme.

Hans Martens, the head of Brussels-based think tank the European Policy Center, says that the EU must switch its focus to growth across the Union, not just in Greece, and the use of structural funds is one of the ways to do this. “We have been pushing austerity too much; we forgot growth and jobs,” he said during a European Journalism Center seminar in Brussels this week.

“We need to give Europe hope. We have a total of 80 billion euros of structural funds lying around. That’s a scandal.”

Papademos added that EU funds would also be used to create a “risk-sharing instrument” to finance infrastructure projects. Sources said that this would, again, involve the EIB in a leveraging process aimed at drawing in as much funding as possible. A handful of semi-complete highway projects will be top of those that will be completed with the new money.

In some ways, this is seen as a precursor to the “project bonds” that the European Commission has been advocating over the past few months. This would see Brussels issue bonds to investors to raise money for infrastructure projects across EU countries, rather than in one member state. There are plans for 60 billion euros to be raised for the “Connecting Europe Facility” to get the scheme rolling.

Papademos also referred to cooperation between Athens and Brussels on several “strategic projects” such as the Helios scheme, from which Greece is projected to earn about 15 billion euros by exporting solar energy to Northern European countries. Germany has expressed an interest in working with Greece on the project but its participation is being held up by internal differences, sources said. They added that Barroso and Papademos discussed similar cooperation on initiatives to detect and drill for oil and gas in Greek waters.

Out of three types of EU funding available, Greece’s absorption of money from the European Social Fund (ESF) has been the poorest. This is looking like a terrible waste, given that the ESF provides money — among other things — for programs designed to tackle unemployment. With more than a million Greeks out of work, financial assistance could help alleviate the problem — albeit without negating the need for the economy to be overhauled so it becomes more competitive and productive. Making better use of the ESF was discussed in some depth at Tuesday’s meeting.

European Commission sources told Kathimerini English Edition that one of its action teams visited Athens recently to discuss methods to tackle youth unemployment with business leaders and unions. Action plans for Greece and other EU countries are due to be drawn up by national governments in April and given final approval by the Commission.

Of course, the path walked by Brussels and Athens is littered with good intentions that never materialized but there are some indications that the two sides are taking this round of discussions very seriously. The European Commission president admitted there had been mistakes on both sides in the past but that the extraordinary circumstances in Greece would act as a spur to get things right this time. “People learn,” he said. “Now, the sense of urgency is completely different.”

Greek government sources said that Commission’s technical teams have already visited Greece to discuss ways of ensuring the money is put to use. The two sides have also exchanged detailed data and are in regular contact, sources said. There is an urgency on the Greek side because if the government doesn’t find ways to allocate the money by the end of next year, it will lose whatever is left in the EU coffers.

Another sign that the Commission is attaching greater importance to these negotiations than it has in the past is that several other commissioners, including Economic Affairs chief Olli Rehn, head of regional policy Johannes Hahn and energy supremo Guenther Oettinger, took part in Tuesday’s talks with the Greek delegation.

However, both Papademos and Barroso flatly rejected an earlier suggestion by Luxembourg Prime Minister Jean-Claude Juncker that some kind of “reconstruction” commissioner should be appointed to oversee the use of structural funds in Greece.

Barroso said that managing the process of disbursing structural funds to Greece is a task “not for one commissioner but for all the Commission.” The Portuguese was asked last year by EU leaders to set up the Task Force for Greece to oversee the allocation process but Juncker’s proposal seemed to undermine this process. A visibly agitated Barroso hit back at the proposal.

“No solution can be found outside Greece,” he said. “It is an illusion to believe someone outside Greece can solve its problems,” he said.

Martens, however, suggested that Greece should not balk at demands for an EU official to be appointed to oversee the allocation of funds. If Greeks face a choice of“humiliation and jobs,” they should still choose jobs, he said.

Greek government sources said that the discussions on Tuesday touched on the strengthening of the EU Task Force in Greece, which has about a dozen staff in Athens, as a way of ensuring that the Commission could monitor the absorption of funds. Athens and Brussels are due to finalize at the end of March all the plans discussed this week before the process of allocating as much of the 12 billion euros as possible can begin.

The onus is now on both sides to make this plan work. It will not solve all of Greece’s problems but it could make a difference to thousands of people’s lives and provide a glimmer of the hope that has been lacking.

“Yes, Greece can. Together, Greece and Europe can,” said Barroso in faltering Greek at the end of the joint press conference with Papademos on Tuesday. This time, more than ever, actions will have to follow the nice words.

Nick Malkoutzis

3 responses to “Growth in Greece? Barroso and Papademos say: “Yes, we can!”

  1. I’d love to see those EU funds used outside Athens, in the periphery. probably a pipe dream but that’s where I believe the growth potential really is.

  2. <>

    But in even MORE cases they are simply being starved of cash paying customers who are out of work, burdened with new taxes and have no money at all to spend. No point at all in borrowing money for a ‘working’ business venture if there is no cash flow to service the debt … which IS the whole underlying problem in Greece, anyway.

    Whatever Euro ‘liquidity’ gets generated it will inevitably seep into the hands of speculators just waiting to scoop up Greek assets at firesale prices – a perfect situation for ‘vulture’ capitalists.

    JS

  3. “Yes, we can” does not equal “yes, we will.”

    This is like saying “I think I can do it” is the same as “I already did it”.

    Actions speak louder than words.

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