From: gd8f@kelvin.seas.Virginia.EDU (Gregory  Dandulakis)
Subject: Re: Greece and the EC (Spyros)
Organization: University of Virginia
Date: Sat, 9 Jan 1993 21:11:54 GMT


In article <1993Jan9.123820@imhfhp16.epfl.ch> gavrila@imhfhp16.epfl.ch (Spyros Gavrilakis) writes:
>
>You forgot to mention that Saturn's postion in the sky was in
>a position unfavourable to Greek EC entry.


When someone is ready to accept that major political decisions are
taken on "democracy sentimental" basis, while he is ready to blame his (?)
country for anything which his "ideological priesthood" offers, then comes
to the above ridiculous reasoning.

My answer to your irony, for backing up my thoughts, is the following:


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       "GREECE IN THE 1990s, Taking Its Place In Europe"
        -----------------------------------------------

by Robert McDonald, The  Economist  Intelligence Unit Economic Pro-
spects Series, BI LTD, Special Report No 2099, London-New York, 1991.

------------------------------------------------------------------------


--WAS SUCCESSFUL, DESPITE THE COMMISSION'S DOUBTS
The Commission, viewing the matter exclusively from an economic perspec-
tive, advised that at least a  decade  would  be necessary before Greece 
could qualify. The Council of Ministers, acting more on political senti-
ment, overruled  this decision saying  that negotiations leading to full 
membership should commence and that  the transition period should follow 
rather than precede accession. The first phase of talks leading to agre-
ement in principle was  completed in  July 1977. It took another two ye-
ars, however, to  negotiate  details of such complex issues as: Mediter-
ranean products (a new policy which had to be considered in the light of 
the looming Iberian  applications); application of the Common Agricultu-
ral Policy; Greek budget contributions pending the introduction of value 
added tax; a common  shipping  policy; Greek  access to the regional and 
social funds; and free  movement of labour. The  Treaty of Accession was 
not signed until  May 1979 with  formal entry postponed until January 1, 
1981 - two years later than Karamanlis had hoped. A general transitional 
period of five years applied  with a special period of seven years cove-
ring free movement of workers and the treatment of certain  agricultural 
products.

...

SOCIALISTS CONFRONTED A STAGNANT ECONOMY--
Pasok claimed to have inherited a "scorched earth" economy. Although the 
second oil shock was partly to blame, the situation was certainly diffi-
cult. Growth was stagnant, inflation was 24 per cent and large increases 
in unemployment were looming. 300 enterprises, including some of the hi-
ghest  profile companies  in the country, hovered  on the brink of bank-
ruptcy because of over-extended credit positions.

--BUT WENT AHEAD WITH IMPROVING SOCIAL CONDITIONS
International agencies urged  moderation of wage costs and improved pro-
ductivity and competitiveness, with their consequent increases in levels 
of unemployment. The socialists were determined to minimise unemployment 
and at the same time to  try to expand social  services and welfare pay-
ments, particularly  for the lowest paid. Their  nostrum  was demand led 
growth coupled with measures to create new jobs. Public sector employees 
were given an immediate 5 per cent wage rise with further 10 per cent at 
the  beginning of 1982. From  January 1, 1982, minimum  wage  and salary 
scales were increased by approximately 40 per cent  and inflation index-
ing of wages (ATA) was introduced. Arbitration courts made rulings which 
meant that private sector  wages were forced to follow  public sector a-
wards. Prices were frozen for raw  and intermediate materials  and basic 
consumer  goods, and a ceiling  was placed on rents. Employment creation 
schemes involved salary  subsidies to employers taking on new employees, 
reductions in the social security premiums paid by employers in small to 
medium  sized industries, contraction  of the working week, extension of 
vacations and restrictions on redundancies.


POLICY MEASURES TO RESTORE GROWTH
Credit was  relaxed to  small and medium sized businesses in the hope of 
promoting investment. Attempts  were made to  try to reorient the credit 
provided  to large concerns away from  speculative to productive activi-
ties. Lending was stepped  up for low income housing. An effort was made 
to reduce the public  sector deficit  by tightening up on  collection of 
direct taxes and  extending indirect taxes, but  this was swamped by the 
large industrial subsidies and increases in social spending with the re-
sult that the public sector deficit grew rapidly.

--BUT PROFITS WERE SQUEEZED--

--AND THE PUBLIC SECTOR WENT INTO HEAVY DEFICIT

...

--THE SOCIALISTS WON A SECOND TERM, BUT WITH A REDUCED MAJORITY

A TOUGH PROGRAMME WAS AGREED WITH THE EC--
Papandreou had campaigned  on a slogan of "better days to come" but that 
was obviously a long term prospect for, as soon as Pasok had its new ma-
ndate, he embarked  on a classic IMF style stabilisation  programme. The 
EC was approached as a more acceptable source of credit and persuaded to 
provide an Ecu 1.75 bn (virtually  the same in dollars  at the 1985 rate 
of  exchange) balance of  payments assistance  loan. The interventionist 
minister  of national economy, Gerassimos  Arsenis, was replaced  by the 
pragmatic former  minister of agriculture, Costas Simitis. Temporary im-
port  controls were applied with  the consent of the EC. The drachma was 
devalued by 15 per cent  and then allowed to slide using the relative u-
nit costs of labour in export  competing countries  in order to maintain 
the advantage gained by  the devaluation. An incomes policy backed up by 
the force of law was applied for  two years producing an 11 per cent re-
duction  in the  real  earnings  of salaried employees. There were cuts, 
though not  so severe, in  agricultural  incomes through manipulation of 
the green drachma.

--AND AMBITIOUS TARGETS WERE SET
In agreement with the EC the  programme set targets for 1987. These were 
to reduce the PSBR to 10 per cent  of GDP; to reduce inflation to 10 per 
cent (by end 1987); and to bring down the current account deficit to $ 1 
bn, a level at which it could  be sustained by autonomous capital inflo-
ws, thus obviating the need for new  foreign  borrowing. Monetary policy 
was designed  to reduce the rate of increase in bank credit and interest 
rates were raised  to produce positive real rates on deposits and loans. 
The government began to  sell Treasury bills and bonds outside the bank-
ing system.

ONLY ONE OF THREE 1987 TARGETS WAS MET--
The stabilisation programme had a significant effect on the external ac-
count. The  current account  deficit  declined steadily until in 1988 it 
bottomed out at $ 957 mn, or 1.8 per cent of GDP, at which level it was, 
as had been planned, covered by non-debt capital inflows. Outstanding e-
xternal debt declined from 46.9 per cent of GDP in 1985 to 38.9 per cent 
in 1989. However, results were much less good  on the domestic front. By 
end 1987 inflation had  fallen only to 15.7 per cent, which the authori-
ties unconvincingly blamed on the  introduction of value added tax (VAT) 
and other exogenous factors.

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Gr

PS: Again I try to keep the facts and throw away the political connotations.