Greece, Portugal Test EC Capacity to Grow the Two Poorest Members of the European Community Provide Sharply Different Models of Integration: Portugal Emphasizes Fiscal Discipline; Greece Pursues Social Welfare

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IF the European Community were a classroom, Portugal would undoubtedly be the most promising new student - while Greece might be called the black sheep.

Vaunted in the hallways of EC headquarters in Brussels as "the Korea of Europe," Portugal is repeatedly praised for its high economic growth - second only to Japan among industrialized countries over recent years - a fast-moving modernization program, and an unrelenting effort to correct bad budgetary and inflationary habits.

Greece, on the other hand, brings groans from Community officials. With failing grades in all the criteria the EC uses to judge economic integration, Greece stands out as an embarrassing reminder of the Community's inability to make all its members toe the low-inflation, free-market, economic line. Test cases for EC

The two poorest of what are called the Community's "poor four," a club that also includes Spain and Ireland, Portugal and Greece together make up only about 6 percent of the EC's population of 340 million people, and an even smaller percentage of its huge economy. But they matter in part because they stand as tests of the EC's ability to integrate Europe's fringes into its wealthy mainstream.

With the EC focusing growing attention on how to draw the ex-communist states of Eastern Europe into its prosperous democratic fold, Portugal and Greece represent what the EC will be able to do, and how well it will be able to do it, for poor neighbors in need of fundamental reform and modernization.

As models for the future, Portugal's performance since it joined the EC in 1986 will undoubtedly be pushed to the spotlight, while Greece, which joined in 1981, will be pushed to the background - or see its failed stabilization plans, its huge public debt and stubbornly high inflation, singled out as examples of what not to do.

What such a heavy focus on macroeconomic criteria overlooks, however, some experts point out, is Greece's stronger performance in the social arena, and the comparatively better job it has done until now of spreading the fruits of economic growth.

"Until the 1980s, Greece's economic performance outdistanced both Spain's and Portugal's, while over the past decade the latter two have done better at managing their economies, but at the end of the day the social indicators are generally better in Greece," says Nicos Christodoulakis, an economist with the Athens School of Economics and Business.

"Poverty rates are lower here than in Spain, much lower than in Portugal," he says, "and our literacy and education rates are higher," he says.

Adds George Alogoskoufis, chairman of economic advisers at the Greek Ministry of National Economy, "Income distribution is much more even in Greece than in Portugal, which is why you don't see the terribly poor and rundown neighborhoods {in Athens} that you do in Lisbon."

What worries economists like Mr. Christodoulakis, however, is the "live-for-today" attitude they say Greece has developed over the last decade of high public spending, when the public debt ballooned to 135 percent of gross domestic product.

Just a few years ago Greece's per capita GDP was still comfortably ahead of Portugal's, but the Iberian country is now on the verge of overtaking the Balkan nation. And while Portugal is busy investing in its future, partially with EC funds, Greece is focusing less on future returns than on propping up the public-consumption gains now threatened by an inevitable belt-tightening.

"The Greek people are preoccupied with eating their bread today," says Christodoulakis, "while Portugal is busy building ovens for baking bread tomorrow."

The Athens economist says Greece's stagnation took hold in the 1980s, when governments developed a pattern of heavy public spending, with bounding increases in the months preceding national elections as the party in power attempted to preserve a parliamentary majority. …


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