Greek Economy after 1995
In the 1990s the Greek economy has entered a transformation phase after a decade-long stagnation. Short-term restrictions on capital transfers had been finally lifted. The economy started reshaping in compliance with the EU standards, which had many advantages:
- Ability to use the common currency.
- Ability to attract financing from outside.
- Expand the tourist business.
Given that Greece was an EU member state and thus had to comply with and adhere to the European Union law increased Greece’s credibility in international investing. During the said period the loan rates were substantially reduced for Greece, which allowed the country to easier repay the its external debt.
It is important to remember now, that looking back it can be claimed that the entry of Greece into the Eurozone (2001) was premature. Already in 2004, the Greek government has officially admitted to have altered the reports and that the country had not gotten rid of its deep financial problems.
One of the reasons for the Greek economic crisis that followed, was insufficient tax levies – employees tended to understate their earnings. However, entering the Eurozone and the ability to attract foreign financing, enabled the country to turn a blind eye to many problems.
In 2011 the Greece’s the external debt-to-GDP ratio was projected to reach 140%, and the budget deficit was at 12.7% at the time when the EU acceptable deficit was 3%. According to the experts of the Foundation for Economic and Industrial Research (IOBE) it was those tendencies that resulted in a deep social crisis. By 2012 the unemployment rate exceeded 25%.
In 2015 Greece’s economy went into a crash: for the first time in the country’s history it was unable to repay its external debt. The indebtedness was at EUR 1.6 billion. The Greek products and services turned out to be uncompetitive on the EU market due to the lower productivity of Greece compared to the rest of the EU state.
The country returned to rather modest growth rates of 1.5% in 2017. In 2018 and 2019 the GDP growth was at 1.9%.
In 2020 the Greek economy was substantially hit by the COVID-19 crisis. A GDP decrease of 9.7% is expected, which is a record number among the EU states. The unemployment rates were expected to go up substantially during the period when the lockdown measures were in place. However, according to the forecast the negative consequences are to eliminated by the beginning of 2021 and, despite the risks, the Greek economy is expected to show growth at 5.6%.