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Greece — An Oikonomia To Watch Out For

What economic challenges does Greece face in the years ahead?

August 17, 2004

What economic challenges does Greece face in the years ahead?

With the 2004 Olympic Games underway in Athens, the world’s eyes are on Greece. Beyond the usual focus on the country’s rich history and vast cultural offerings, our Globalist Factsheet zeroes in on the Greek economy — and examines the challenges the nation faces in charting its future course.

What is the key sector for the Greek economy?

Tourism is Greece's most important industry. However, tourism in Greece has stagnated at around 12-13 million visitors yearly, as European tourists head for cheaper sun-and-sea destinations in Turkey and Bulgaria.

(Financial Times)

Are the 2004 Olympic Games in Athens taking a toll on the government budget?

In 2003, Greece's budget deficit was projected to total 1.9% of GDP. Instead it reached 3.2%, mainly due to higher outlays for the 2004 Olympic Games and a burst of pre-election spending by the Socialist government.


How does this affect Greece as a member of the EU?

Greece's 2003 budget deficit breached the 3% of GDP limit set by the EU's stability and growth pact for the first time.


Does Greece attract a lot of foreign investment?

Greece has lagged behind the new EU member-states of central Europe over the past decade in attracting FDI, with annual inflows averaging less than €1 billion.

(Financial Times)

Is Greece a major recipient of transfer payments?

Portugal and Greece have traditionally been the largest recipients of EU transfer payments — collecting amounts equivalent to 3.3% and 3% of GDP, respectively, between 1994 and 1999.


What is a major future liability for the Greek government?

By 2050, total public pension and health spending in Greece — where retirement begins at 55 — is expected to amount to 44% of GDP.

(Center for Strategic and International Studies)

Does Greece spend a lot on defense?

In 2002, Greece spent 4.4% of its GDP on defense — the second-highest spending level of any NATO member, behind Turkey’s 5%. The United States ranks third, with 3.3%.


Is the Middle East a big concern for the country?

As of October 2003, 81% of Europeans think that the EU should play an important role in the Middle East. The highest support for an active role came from Greece (90%) and Italy (89%).

How many people live in Greece?

As of 2004, the Greek population totals 11 million people. This is about the same as the population of the U.S. state of Ohio, as of the 2000 census.

(Financial Times, US Census Bureau)

Are there many foreigners living in Greece?

As of 2000, Greece has the lowest population percentage of non-nationals in the EU, at 1.6%. Luxembourg has the highest percentage — at 35%.

(European Union)

What distinction did Greece lose with the adoption of the euro?

Before the introduction of the euro, the Greek drachma was Europe's oldest currency — about 2,650 years old in 2000.

(Associated Press)

How wealthy is Greece?

Greece's 2004 total GDP is projected to amount to $199.5 billion. Per capita GDP would be $18,700. By comparison, U.S. GDP stands at $10.98 trillion, while U.S. per capita GDP is $37,800.

(Economist Intelligence Unit)

How does this compare with other EU member-states?

Ireland joined the EU in 1973 and Greece joined in 1981. Between 1981 and 2001, the Irish per capita GDP grew from 62% to 121% of the EU average. During the same period, per capita GDP in Greece was practically stagnant at around 69% of the EU average.


Who is Greece's main trading partner?

In 2003, the two countries that held the largest share of Greece's total world trade were Germany, with 12.6% of exports and 13.9% of imports, and Italy — with 10.5% of exports and 12.0% of imports.

(Economist Intelligence Unit)

So what is Greece's trade deficit?

Greece's trade deficit is expected to reach $32.1 billion in 2004 — and $36.1 billion in 2005.

(Economist Intelligence Unit)

How large is the country’s national debt?

As of 2002, Greece's government debt is equivalent to 106% of GDP — highest in the EU after Italy, with 110%.

(European Commission)

How does inflation in Greece compare with inflation in the rest of the EU?

In May 2004, Greece's inflation rate was the highest in the eurozone — at 2.9%.

(Financial Times)