Economic Growth in Greece: Past Performance and Future Prospects
This Paper examines the past growth performance of the Greek economy and examines the outlook for future growth in light of the macroeconomic stabilization that was achieved over the last half of the 1990s and following Greece's admission to the Euro currency zone. The Greek economy performed very poorly over the quarter century from 1970 to 1995, during which it was the poorest country in the European Union. We develop a set of growth accounts that attribute part of the deteriorating performance to a falloff in capital formation, but the most dramatic factor is a sharp deterioration in multi-factor productivity, or the efficiency of the economy. Part of the explanation lies with the collapse of macroeconomic policy that took the form of large fiscal deficits and very high rates of inflation; but the Greek economy also fares poorly in other dimensions of its economic institutions, such as competitiveness of its tradable goods sectors, a highly constrained labor market, and a reputation as an unattractive market for foreign capital. Over the last half of the 1990s, Greece undertook a successful program to restore fiscal and monetary stability – by the end of 2000, it had qualified for admission to the Euro currency system. The restoration of rational macroeconomic policies also led to an improvement in economic growth to the extent that Greece matched the performance of the rest of the EU over the 1995-2000 period. It also appears that these growth rates are sustainable and consistent with current rates of capital accumulation. The next step would be for Greece to attain an accelerated path of growth that would allow it to catch up with the rest of EU in future years, following perhaps the experience of Ireland. We conclude, however, that Greece still lacks a strategy to achieve a further acceleration of growth. It lacks a strong export sector comparable to that of Ireland; and, while it continues to be an unattractive destination for foreign direct investment, domestic rates of saving are insufficient to finance higher rates of capital investment. It needs to institute a faster past of reform of domestic economic institutions if it hopes to promote innovation and entrepreneurship.
|Date of creation:||Jun 2001|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kollintzas, Tryphon & Vassilatos, Vanghelis, 1996. "A Stochastic Dynamic General Equilibrium Model for Greece," CEPR Discussion Papers 1518, C.E.P.R. Discussion Papers.
- Stanley Fischer, 1993.
"The Role of Macroeconomic Factors in Growth,"
NBER Working Papers
4565, National Bureau of Economic Research, Inc.
- Dimitri G. Demekas & Zenon Kontolemis, 1996. "Unemployment in Greece; A Survey of the Issues," IMF Working Papers 96/91, International Monetary Fund.
- Jeffrey Sachs & Andrew Warner, 1995.
"Economic Reform and the Progress of Global Integration,"
Harvard Institute of Economic Research Working Papers
1733, Harvard - Institute of Economic Research.
- Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
- Eichengreen, Barry, 1994. "Institutions and Economic Growth: Europe After World War II," CEPR Discussion Papers 973, C.E.P.R. Discussion Papers.
- Barro, Robert J. & Lee, Jong-Wha, 1994. "Sources of economic growth," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 1-46, June.
- Kollintzas, Tryphon & Vassilatos, Vanghelis, 2000. "A small open economy model with transaction costs in foreign capital," European Economic Review, Elsevier, vol. 44(8), pages 1515-1541, August.
- Tsakalotos, Euclid, 1998. "The Political Economy of Social Democratic Economic Policies: The Pasok Experiment in Greece," Oxford Review of Economic Policy, Oxford University Press, vol. 14(1), pages 114-38, Spring.
- Susan M. Collins & Barry P. Bosworth, 1996. "Economic Growth in East Asia: Accumulation versus Assimilation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 135-204.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2852. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.