The Effects of the Second Community Support Framework 1994–99 on the Greek Economy

Abstract

The purpose of this paper in to provide an ex ante assessment of the effects that the second Community Support Framework (CSF) is likely to have on the economy of Greece in the short and medium run by employing the projections of a four-sector annual macroeconometric model. The model is simulated under alternative assumptions accordingly to whether the effects are stemming from the demand side of the economy or incorporate the supply-side externalities that show the improvement of factor productivity by CSF actions. 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 externalities are taken into account, total output in year 2010 will be higher than baseline by an impressive 9.5 percent, and will continue to grow at a rate faster by 0.26 percent per annum than would be otherwise. Over the period of simulation the output growth rate averages above the benchmark rate by 0.55 percent per annum, and employment expands by an average of 95,000 new jobs. This finding has serious implications for the allocation, implementation, and monitoring of the Plan, because it calls for actions that ensure the maximum possible efficiency if a lasting improvement is to occur in the economy.