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Greece International Economic Policy in the 1990s
Sources: The Library of Congress Country Studies; CIA World Factbook
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    In the 1980s and 1990s, the dominant factor in Greece's international economic policy has been participation in the EC (now the EU). EU policies for internal market unification, free capital movements, and movement toward implementation of the Economic and Monetary Union (EMU), set forth in the Maastricht Treaty, form the main axes of Greek policy. The guidelines of Greece's participation in the EMU were set in 1993 when the EC Council of Ministers approved a five-year Convergence Plan. By 1998 the plan calls for Greece to have reduced the annual inflation rate to 4 percent, increased GDP growth from 2 percent to 4 percent per year, reduced the public-sector deficit to 0.2 percent of GDP, and reduced unemployment to 7.7 percent. Some of the goals were modified in 1994.

    Having liberalized all restrictions on its trade within the community since the 1980s, Greece has proceeded in the 1990s with the liberalization of capital movements. Remaining restrictions on short-term capital movements were eliminated slightly ahead of schedule in May 1994 when Greece faced a speculative attack against the drachma.

    The EMU includes plans for the eventual creation of a single European currency. As countries converge toward the common currency, their ability to conduct national economic policy will be correspondingly reduced. Already, for example, the liberalization of financial markets and the freedom of capital movements has reduced the flexibility of Greece's monetary policy, by requiring that domestic interest rates be aligned with those prevailing in European money markets. Presumably, the loss of national control over this phase of Greece's economic policy will be balanced by large resource transfers that will raise economic levels in real terms for the less developed partners.

    Greece's regional economic policy is mainly oriented to newly arising market economies in the Balkans and the Black Sea region. The policy envisions unified infrastructural communications and transportation networks; the implementation of a "drachma zone" in the Balkans to enhance Balkan currency convertibility and introduce the trading of Balkan currencies in the Athens foreign-exchange market; support for Balkan firms in the form of financial services and contributions to EU programs for private-sector initiatives; and export guarantee plans for Greek firms trading with enterprises from formerly socialist economies (see Transportation and Telecommunications , this ch.).

    Commercial initiatives in the Balkans and the expansion of Greek activities in the EU have forced considerable adjustment in Greece's domestic economy. After the prolonged slump of the 1980s and early 1990s, the Greek economy entered a period of adjustment in 1991. In that period, conformity to EC regulations had the potential to streamline troublesome aspects of the system by shrinking the influence of the public sector and stimulating privatization. If full-scale participation in the international economy helps Greece tighten its macroeconomic policies and continue structural reform, the long-term prospects of exploiting available resources will improve.

    At the end of 1994, the PASOK stewardship of the national economy received mixed reviews. The Greek business community continued to vacillate about committing large amounts of capital to new investment; the government's large debt had increased, although at a slower rate; and few of the planned, large-scale EU-funded infrastructure projects had begun. On the other hand, inflation continued to decline, attaining twenty-year lows by the end of 1994; manufacturing production showed signs of reviving; reformed tax laws were successfully implemented to reduce special-interest bias and increase the rate of revenue collection; and exchange controls were removed completely without endangering Greece's balance of payments or its exchange rate. Expert projections for 1995 included a continued restraint on income and consumption and a continued rise in unemployment. On the other hand, if confidence in the economy were to continue to increase, public and private investment would stimulate new growth in the mid-1990s that could overcome Greece's divergences from the European average in growth rate, inflation, and rate of fiscal consolidation.

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    Invaluable current information and statistics on economic policy and trends are provided by the Economist Intelligence Unit's quarterly Country Report: Greece and the Organisation for Economic Co-operation and Development (OECD) annual OECD Economic Survey: Greece. General descriptions of Greece's telecommunications and media systems are available in The World's News Media, edited by Harry Drost, and Eli M. Noam's Telecommunications in Europe. Economic development in the postwar period is discussed in The Economy of Greece, 1944- 66 by Wray O. Candilis and in Nicos P. Mouzelis's Modern Greece: Facets of Underdevelopment. Greece and Yugoslavia by Nicholas V. Gianaris describes the historical development of the economy of those countries and economic policies in the 1970s and 1980s. In his The Development of the Greek Economy, 1950-1991, George A. Jouganatos places an econometric analysis of postwar economic events in the context of political events. A broad review of Greek economic evolution in the twentieth century can be found in The Greek Economy in the Twentieth Century by Andrew F. Freris. Greece, the New Europe, and the Changing International Order, edited by Harry J. Psomiades and Stavros Thomadakis, provides an extensive analysis of issues pertaining to Greek membership in the European Community. The National Statistical Service of Greece publishes a Monthly Statistical Bulletin that includes economic indicators. The most current information can be found in the London daily Financial Times and in the monthly economic supplements of the Foreign Broadcast Information Service's Daily Report: Western Europe. (For further information and complete citations, see Bibliography.)

    Data as of December 1994

    NOTE: The information regarding Greece on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Greece International Economic Policy in the 1990s information contained here. All suggestions for corrections of any errors about Greece International Economic Policy in the 1990s should be addressed to the Library of Congress and the CIA.

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Revised 10-Nov-04
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