ECONOMY
Greece adopted the euro as its new common currency in January 2002. The adoption of the euro provided Greece (formerly a high inflation risk country under the drachma) with access to competitive loan rates and also to low rates of the Eurobond market. This led to a dramatic increase in consumer spending which gave a significant boost to economic growth. This credit also led to a more relaxed fiscal policy starting in 2002, which, combined with expenditures associated with the preparation of the Athens 2004 Olympics, resulted in excessive deficits and debt in 2003 and 2004. The government deficit in 2004 is now estimated by the Greek government to have reached 6.6% of GDP. As a result of lower post-Olympic spending and tight public spending, the government deficit in 2006 was 2.6% of GDP, with a debt to GDP ratio of 104.3%. The ND administration has pledged to the European Commission to achieve a balanced budget by the year 2010.
The Greek economy grew by 4.2% in 2006 and similar growth rates are projected for 2007. These growth rates resulted in a drop in unemployment (to 9.2% in 2006, down from 10.4% in 2004), although it is still significantly higher among women and people under 27. Unfortunately, foreign direct investment (FDI) inflow has also dropped, and efforts to revive it have been only partially successful. At the same time, Greek investment in Southeast Europe has increased, leading to a net FDI outflow in some years.
On September 22, 2006 Minister of Finance Alogoskoufis announced a major upward revision of Greece's GDP by 26%. This large revision resulted from the first fundamental revision of Greek economic statistics since 1988. However, Eurostat issued its final assessment of Greece’s proposed revision process in October 2007, revising GDP growth downward to 9.4%.
Services make up the largest and fastest-growing sector of the Greek economy. About 15 million tourists are estimated to have visited Greece in 2006, with net revenues of about $11.4 billion. Remittances from transport (mainly shipping) are growing, and actually exceeded tourism receipts in 2005 and 2006 to about $14.3 billion. Receipts from tourism and transport have covered a significant portion of Greece's large trade deficit. Industrial activity has shown a mixed performance, with certain sectors such as the food industry and high-tech/telecommunications showing healthy increases, while textiles have declined. Agriculture employs about 12% of the work force and is still characterized by small farms and low capital investment, despite significant support from the EU in structural funds and subsidies. Traditionally a seafaring nation, the Greek-owned merchant fleet totaled 3,700 ships in February 2007, 8.5% of the world merchant fleet and 16.5% of world tonnage.
European
Union (EU) Membership
Greece has realigned its economy as part of an extended transition to full EU membership that began in 1981. Greece last assumed the rotating EU presidency in the first half of 2003. Greek businesses continue to adjust to competition from EU firms, and the government has liberalized its economic and commercial regulations and practices.
Greece has been a major net beneficiary of the EU budget; in 2005, EU transfers
accounted for 3.2% of GDP and are estimated to have been approximately 2.6% of
GDP in 2006. From 1994-99, about $20 billion in EU structural funds and Greek
national financing were spent on projects to modernize and develop Greece's
transportation network in time for the Olympics in 2004. The centerpiece was the
construction of the new international airport near Athens, which opened in March
2001 soon after the launch of the new Athens subway system.
EU transfers to Greece continued with approximately $24 billion in structural funds for the period 2000-2006. Unfortunately, bureaucratic obstacles have led to significant delays in Greece’s absorbing these funds, leading to the real possibility that Greece may have to return a significant portion of them to the EU. The same level of EU funding, $24 billion, has been allocated for Greece for 2007-2013. These funds contribute significantly to Greece's current accounts balance and further reduce the state budget deficit. EU funds will continue to finance major public works and economic development projects, upgrade competitiveness and human resources, improve living conditions, and address disparities between poorer and more developed regions of the country.
U.S.-Greece
Trade
In 2006, the U.S. trade surplus with Greece was about $0.58 billion. There are no significant non-tariff barriers to American exports. The United States accounted for 3% of Greece's total imports in 2006, which reached $51.4 billion. The top U.S. exports remain defense articles, although American business activity is expected to grow in the tourism development, medical, construction, food processing, and packaging and franchising sectors. U.S. companies are involved in Greece's ongoing privatization efforts; further deregulation of Greece's energy sector and the country's central location as a transportation hub for Europe may offer additional opportunities in electricity, gas, refinery, and related sectors.
Economy (2006)
GDP: $245 billion.*
Per capita GDP: $22,000.*
Growth rate: 4.2%.
Inflation rate: 3.2%.
Unemployment rate: 9.2%.
Natural resources: Bauxite, lignite, magnesite, oil, marble.
Agriculture (5.4% of GDP): Products--sugar beets, wheat, maize, tomatoes, olives, olive oil, grapes, raisins, wine, oranges, peaches, tobacco, cotton, livestock, dairy products.
Manufacturing (21.3% of GDP): Types--processed foods, shoes, textiles, metals, chemicals, electrical equipment, cement, glass, transport equipment, petroleum products, construction, electrical power.
Services (73.3% of GDP): Transportation, tourism, communications, trade, banking, public administration, defense.
Trade: Exports--$16.15 billion: manufactured goods, food and beverages, petroleum products, cement, chemicals. Major markets--Germany, Italy, France, U.S., U.K. Imports--$51.44 billion: basic manufactures, food and animals, crude oil, chemicals, machinery, transport equipment. Major suppliers--Germany, Italy, France, Japan, Netherlands, U.S.
* Greece is about to revise upward its GDP by 9.6%. This revision resulted from the first fundamental revision of Greek economic statistics since 1988. The European Union (EU) approved the increase on October 30, 2007 but actual figures have not been released yet.
