The government succeeded in 2000 in reducing budget deficits and inflation, allowing Greece to join the Economic and Monetary Union (EMU) on January 1, 2001. Greece, along with 11 out of its 14 European Union (EU) partners, adopted the euro as its new common currency in January 2002. The euro was expected to boost trade, help dismantle the last remaining market barriers within the EU, and stimulate production. However, a more relaxed fiscal policy since 2002 and higher expenditures associated with the preparation of the Athens 2004 Olympics resulted in higher deficits and debt in 2003 and 2004. The government deficit in 2004 is estimated to have reached 5.3 percent of GDP and the debt 112 percent of GDP. The new administration has pledged to reduce the government debt to 2.8 percent of GDP in 2005 and to tighten fiscal finances.

The Greek economy was expected to grow by 3.7 percent in 2004 and continue relatively higher growth rates in 2005 and beyond. High growth rates resulted in a drop in unemployment although it is still high among younger persons. Foreign investment also has dropped, while efforts to revive it have been only partially successful. Greek investment in Southeast Europe has increased.

Services make up the largest and fastest-growing sector of the Greek economy. About 12 million tourists visited Greece in 2003 with net revenues of about 7.4 billion euros. Remittances from transport (mainly shipping) are growing at fast rates and in 2004 have been exceeding tourism receipts. Industrial activity has a mixed performance with certain sectors such as the food industry and high-tech/telecommunications showing healthy increases. Textiles are more affected by international competition. Agriculture employs about 12 percent 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 3,355 ships in May 2003, 9.3 percent of world merchant fleet and 18.3 percent of gross 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 net beneficiary of the EU budget; in 2003, EU transfers accounted for 2.8 percent of GDP and may have exceeded 3 percent of GDP in 2004. From 1994-99, about $20 billion in EU structural funds 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, under the third Community Support Framework Program, are to phase out over the next decade. The last of some $24 billion in structural funds will be disbursed by 2006. 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. A new support program may be implemented in the future.

U.S.-Greece Trade
In 2003, the U.S. trade surplus with Greece was about $1.9 billion. There are no significant non-tariff barriers to American exports. The United States accounted for 5.6 percent of Greece’s imports in 2003, which reached $44.7 billion. The top U.S. exports remain defense contracts, 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.