The probability of Greece joining EMU from the beginning remains quite high in the long-run but impossible for 1999. There is little doubt that Greece has been the last man in the 100 yard dash for the brass ring (EMU), this nation has made remarkable progress on the economic front. The political election of Costas Simitis as leader of the Pasok party and his sweeping victory in the September 1996 general election has brought a renewed fiscal policy to the nation. Simitis is very pro-European and sees EMU as both economically and politically a winner for his country. Politically, Greece looks to EMU as just another feather in its cap vs Turkey. Economically, Greece looks to EMU as a means of bringing capital and maturity to its industry and financial markets.
Greece has two goals. First, is securing its bid for the Olympics in Athens for 2004 as a symbol of embarking on a new era. Second, is its goal to become more closely integrated with the rest of the EU. Clearly, the economic policy in Greece is now focused at ensuring its second goal of full EMU membership. Its target is to make the second cut for membership. The government of Greece has launched a strick austerity program in its 1997 budget with the aim of sharply reducing its budget deficit as well as inflation. Keeping to this path, Greece should make the second round of membership.
The current government in Greece will not face a parliamentary election until September 2000. This will allow plenty of time for the government to carry out its long-term goals. We may also see the Greek drachma join the ERM in 1998 as a means to convince Brussels of its committment to EMU as a whole.
|Budget Deficit / GDP||9.1||7.9||6.2|
|Debt / GDP||111.8||110.6||107.3|
|10Y Bond Yields||N/A||N/A||N/A|
© Princeton Economic Institute