Greece overview

A comparison between Greece and Portugal is particularly interesting since the two countries share common experiences. They are both small South European countries, belonging to the European Mediterranean "periphery", with less developed economic structures and institutions and relatively low income per head. In 1974 they experienced transition to democracy, after the fall of the forty-year dictatorship in Portugal and the seven-year junta in Greece, while they joined the European Community in the 1980s. Over the two last decades both countries embarked on an effort at modernizing their productive structures, reducing the macroeconomic imbalances and enhancing their position in view of an increasingly internationalized economy. For the achievement of these objectives Greece and Portugal have been following more or less similar directions but their economic performance has been rather different. The purpose of this paper is to evaluate economic policies and to examine the factors that have shaped economic policy making in Greece and Portugal over the 1980s and 1990s. Policy outcome is assessed in terms of its success or failure. We shall try to analyze whether these two countries followed a successful policy path in terms of policy choices and policy constraints. We shall also try to identify the principal determinants for their economic performance. Of particular interest is the investigation of the speed and degree of achievement of economic reform in the two countries. The debate over the determinants of the type of policies adopted by governments to deal with macroeconomic imbalances, structural and industrial adjustment and declining competitiveness, focuses on a variety of interrelated, overlapping and not mutually exclusive issues(1). In particular, national specific characteristics, such as historical traditions and legacies and national institutional variables, deriving from the political and economic environment inherited by the government, to a great extent explain policy choice and outcome. The institutional characteristics comprise the role of interest groups and political parties on policy formation as well as the state capacity to impose policy options, such as state tradition, autonomy of the bureaucracy, degree of polarization or consent characterizing the political system. In addition, the prevailing views regarding the state of the economy but also the actual state and structure of the economy, are among the factors in shaping policy options (e.g. the existence of "economic crisis" and the availability of foreign aid). Finally, the influence of international factors and trends seem to play a crucial role in determining policy options in the longer-run time horizon. Furthermore the government exercises direct control of factors, such as the timing of policy actions (e.g. reform initiative), the composition of policymaking team, the comprehensiveness of adjustment programmes. In our paper, the varying experience of policies pursued in Greece and Portugal in the 1980s and 1990s is presented and discussed. We focus on the Greek case, which is dealt more thoroughly since it is less known to the English speaking readers, while the Portuguese case is better covered in the relevant literature. Elements of the Portuguese experience will be used here to supplement our assessment of policy making and reform effort in Greece. A comparative approach is more useful, since the common experience shared as well as the different policies followed by Greece and Portugal allow us to recognize the interrelation between various determinants of policy choice and economic success. The Greek Experience Structural Characteristics and Early Post-War Developments After the end of the Civil-War (1949) with the defeat of the left-wing alliance, Greece enjoyed political stability almost exclusively with conservative governments in power until 1981. The Communist Party was banned until after the end of the seven-year military dictatorship (1967-74). The repercussions of the Civil-War were the political discrimination of the "losers", which in certain circumstances went as far as the deprivation of civil liberties (isolation camps) until the fall of the junta in 1974. These discriminations effectively lead to the formation of a "two-tier" society, where whoever did not adopt the right-wing views, had difficulty in finding dependent employment, including the public sector and was forced to seek for precarious jobs, outside formal employment. This resulted in a lot of people becoming self-employed or setting up small personal businesses which functioned -and to a great extend still do- at the fringe of formality, rules and regulations.

The current President of Greece, Mr Karolos Papoulias, was sworn in as Greece's sixth President on 12 March 2005, and is serving a five-year term. The President has no powers to initiate legislation and is required to appoint as Prime Minister the leader of the political party with an absolute majority of seats in Parliament. The President must be elected by two-thirds majority or, on the third ballot, by a three-fifths majority. In the event this does not happen, parliament is dissolved and an election is held, whereby the President is elected by a simple majority of members in the new house.

The unicameral parliament consists of 300 members, elected under a system of reinforced proportional representation. Each Parliament is elected for a maximum of four years. In the most recent parliamentary elections (September 2007), the New Democracy party was re-elected with a reduced majority, claiming 152 of the 300 seats in Parliament, and Kostas Karamanlis was sworn in as Prime Minister. The Panhellenic Socialist Movement (PASOK) remains the principal opposition party although it won only 102 seats in the 2007 elections, the lowest in its history.

Greece is a member of the European Union and last held the Presidency from January to July 2003. In the June 2004 European Parliament elections, the New Democracy party won 43 per cent of the Greek vote (or 11 out of the 24 Greeks seats). Greek voter participation (63 per cent) in the European Parliament elections was slightly higher than the European average.

The Asia-Pacific region has not historically figured prominently in Greece's foreign policy agenda, which focuses on the European Union, the Balkans and its near neighbours (in particular Cyprus and Turkey). In 2009 Greece holds the chairmanship of the Organisation for Security and Co-operation in Europe (OSCE).

Greece has a long-established political and cultural relationship with the Republic of Cyprus. Resolution of the Cyprus issue remains a key foreign policy priority of the Greek Government. While the relationship between Greece and Turkey has historically experienced difficulties, in the past few years bilateral cooperation between the two has improved with the establishment of a Greek-Turkish Steering Committee which explores avenues for cooperation in fields such as the economy, trade, tourism, environment, culture and combating crime.

Greece is also keen to establish closer relations with its neighbours in the Balkans. The Government views the Balkans as being of high strategic and economic importance and believes their closer association with the European Union would ensure peace and stability in the region. Balkan states are an important destination for Greek investment.

Economic Overview

Greece has a population of 11.1 million, GDP of US$313.8 billion and an estimated GDP per capita of US$28,152 (2007 estimates). Principal export destinations are Germany, Italy, and Cyprus, while the main import sources are Germany, Italy and Russia (see Greece - Fact Sheet). Economic growth averaged over 4 per cent each year since 2003. The economy is however increasingly affected by the global economic crisis, with the Greek Government now forecasting a reduced growth rate of 1.1 per cent for 2009.

The main engine of the Greek economy is the services sector (75.1 per cent of GDP in 2007) although manufacturing accounts for 21 per cent of GDP. Greece has little heavy industry, with the once substantial shipbuilding industry in decline over recent years. Greece has long had one of the largest registered merchant marine fleets in the world, constituting around 20 per cent of the world fleet in terms of capacity in deadweight tonnage. Agriculture is of major socio-economic importance to Greece (3.7 per cent of GDP in 2007), with approximately 12 per cent of the population employed in the sector. The main agricultural products are sugar, wheat, cotton, tobacco, olives and olive oil. The Greek mining industry, which contributes 0.5 per cent of GDP, has been buoyed in recent years by the growing demand for mining products by China and Northeast Asia, but faces an uncertain future with the effect of the global slowdown. Principal mining products are bentonite, perlite, caustic and deadburned magnesia, alumina, aluminium bauxite, nickel, pumice and marble.