Greek
Economy and Euro .
.The Greek Economy and The Introduction of Euro
Greek
Economy and Euro ..
|
 |
|
 |
|
|
|
|
|
|
|
|
|
|
|
|
|
 |
.
.
Greek Economy and Euro
The Drachma
Greek currency was the Drachma.
On January 2002 euro banknotes and coins have been put into circulation
simultaneously in all euro area
member states. The Greek drachma has a history that goes back to
the beginning of the use of coins as money. Usually coins bore images of
plantsand animals or gods and goddesses, sometimes views of cities
or temples. The word "drachma" is Greek for "handful. You could go into
a shop and use drachma anywhere in Greece. With the Euro, you could
go anywhere in Euro-land and use the same money. This seems attractive.
In a monetary union, there is only one set of interest rates. There
are very small differences in rates as the banks compete for business.
In Euro-land, there is a single rate for the whole of the monetary
union countries.
The Historical Experience
Successful and long lasting Single Currency areas, which history
shows are almost invariably nation states, have some key characteristics.The
differences in competitiveness and living standards between different regions
of the Single Currency area need to be reasonably small. Secondly,
because some regions will inevitably do better than others, there needs
to be sufficient taxation and spending power in the hands of the government
of the Single Currency area to even out the disparities to an acceptable
extent. Thirdly, for the same reason, it has to be reasonably easy for
those without jobs in depressed areas to move to more prosperous regions
to find work.
Past experience of Single Currency areas
There is plenty of historical experience of Single Currency areas
made up of nation states. The late nineteenth century saw the Latin Union,
a Single Currency area comprising France, Belgium, Switzerland and Italy.
Within the EU itself, there have been two distinct periods when the currencies
of Member States were locked together - in the Currency Snake between 1970
and 1975, and in the Exchange Rate Mechanism between 1979 and 1993. Both
succumbed to economic failure, triggering a combination of political and
speculative pressures, which led to their collapse. In all cases, the arguments
for currency stability were very similar to those heard todayfor Euro.
History, therefore, is full of ominous warning signals about the current
drive to establish European Monetary Union. The difference this time is
that it was a peaceful move as all the previous tries they were the outcomes
of war. The following table is shown the important historical steps for
Greece in order to start using the Euro as its currency.
. 
.
Table 1. Table of Events prior of Greece's entry to use of Euro currency.
|
|
|
|
|
|
|
|
|
|
June 19, 2000 |
|
|
|
|
|
|
|
.Greece has been committed to fulfil the economic criteria set in
the Maastricht Treaty for all countries-members. These criteria describe
the goals each country-member must achieve in order to participate in the
third phase of the European economic and monetary integration, which was
accomplished, with the introduction of the Euro, the single European currency,
in January 1999. Greece has been steadily improving the main macroeconomic
figures of the economy. Inflation fell in October at 2,9%, down from two-digit
figures a few years ago. The budget deficit, felt steadily, reached 4.2%
of GDP this year, compared with 7.4% in 1996. Both inflation and deficit
are expected to fall next year below the level required for the Euro zone.
Consequently and given the recovery the Greek economy is experiencing.
Greece was expected to fully participate the third phase of the European
economic and monetary integration at the beginning of 2002. In line with
that, GDP grew by 4.5% in 1997, which is much better than the European
average. The GDP growth moves along with a roughly 10.9% increase in total
investment in Greece over
the same period.
Growth this year and next will be driven by public and private investment, bolstered by substantial transfers from EU structural funds. The new "Santer" Package provided over GDR 15,000bn in grants over the next five years. Most funds will be used to create new jobs and to complete a series of major infrastructure projects launched under the previous EU package.
While the oil price rise will drive up inflation rates across the
EU, it may have a bigger impact on Greek inflation. The government has
appealed to manufacturers and wholesalers to restrict price increases in
the run-up to Euro-zone entry. Adverse weather conditions, however, have
pushed up prices of fresh fruit and vegetables that make up a sizeable
portion of the Greek consumer price basket.
Reducing the Debt
Greece's public debt, at 104% of GDP, was well outside the 60% of GDP Maastricht ceiling. It did not fulfil the let-out clause of showing a steadily declining trend, which enabled Belgium and Italy to enter the Euro with a public debt higher than Greece's. The debt has declined by seven percentage points of GDP over the past four years. The Ministry of Finance will make a sustained effort next year to speed debt-reduction, so that Greece can stabilise public debt below 100% of GDP.
The fact that Athens was recently nominated host city of the 2004
Olympic Games will further boost economic activity. The Athens
Stock Exchange, the second best emerging market in the world since
1997, is drawing the interest of international funds.
Euro Consequences
The coming of the euro is the beginning of a new era for 72% of the
Greek population, however,one out of three Greeks is worried about the
consequences of the new currency on his or herfinancial status and lifestyle,
and half of them are not ready to use it in their everyday transactions.
These were the results of Kapa-Research, the findings of which were published
in "Ta Nea" newspaper. According
to the information of the newspaper, 48.9% of those asked stated
they were satisfied with the instituting of the euro, while 46% answered
that they are not that satisfied that the drachma is being done away with.
However 55.4% of those asked expressed their concern
about falling victim to some sort of scam during the first months
of the euro's circulation, and 66.8% does not believe that the state can
protect them fromprofiteering schemes. At the same time, the establishment
of the euro finds Greeks so unprepared that 66.7% stated that it had not
yet calculated its income in the new currency, and only 64.5% knew that
the drachma will be completely withdrawn from the market in March
2002.
During the first quarter of 2002 at the latest, all prices should
be set in euro with equivalents in national currency units in the case
of mail order and distance selling and at sales outlets where scriptural
payments predominate. Sales receipts should then show an equivalent in
the drachma unit for the total to be paid. Public administrations
and businesses should as early as possible in 2002 pay their employees'
wages and salaries
in euro, with an indication of the equivalent of the final amount
in the national currency unit. At the very least, pay slips should show
amounts in the national currency unit and in euro. Wage negotiations between
management and labourshould be conducted in euro till May 2002. Advice
of payment of retirement pensions should as early as possible in May show
amounts in Drachma currency unit and in euro; where appropriate, the pensions
themselves should be paid in euro with an indication of the equivalent
of the final amount in the national currency unit.
A lthough prices will be in whole cents after conversion there is
a rule that states that the third decimal place must be rounded up between
5-9 and rounded down between 0 to 4. Hopefully the Euro may even standardise
prices across the EU, although as we see in the UK there are price differences
from one region to another. So who knows, maybe there will be little difference
in prices all round.
About Greece
A number of major large scale infrastructure projects co-financed
by the European Union, already underway, make Greece even more attractive
for investment. Two new highways crossing the country south - north and
west - east of more than 1,500 km. The
Rio-Antirio bridge, The new
Athens airport, the modernization of railways,
the new Athens subway
lines, a new
pipeline that spreads the use of natural gas around the country further
fighting
pollution, as well as numerous other new airport and port facilities,
offer considerable opportunities to foreign investors to
participate as suppliers, contractors or in project financing.
Greek companies have already invested in neighbouring countries often in joint venture with a company from Europe or the US. The impact of the Kosovo conflict proved less damaging than was feared. Greek companies are expected to play an important role in rebuilding the Balkan region as funds for reconstruction are disbursed under the Stability Pact. Once in Greece either on their own or in joint effort with Greek partners, business people will find a most favourable ambiance for their base of operations. In order to support both foreign and domestic investment, the government of Greece provides generous incentives for projects in the primary, secondary and services sectors of the economy, including tourism. The incentives take the form of either cash grants and interest rate relief or tax allowances.
This page wasTranscribed by Ioannis Zacharopoulos
Page Last updated 17th April 2002
Copyright © Trademarks belong to their companies and organisations
that have them registered
