Background Notes: Greece
PA/PC
Source: Office of Public Communication, Bureau of Public
Affairs
Date: Dec 15, 199012/15/90
Category: Country Data
Region: Europe
Country: Greece
Subject: Cultural Exchange, Resource Management,
Military Affairs, History, International Organizations,
Trade/Economics
[TEXT]
Official Name: Hellenic Republic
PROFILE
Geography
Area: 131,957 sq. km. (51,146 sq. mi.) including islands; roughly the
size of Alabama. Cities: Capital-(greater) Athens (3 million).
Other cities-Thessaloniki (705,000), Patras (154,600), Iraklion
(111,000). Terrain: Largely mountainous interior, with coastal
plains; many islands. Climate: Temperate.
People
Nationality: Noun and adjective-Greek(s). Population: 10 million
(1990 est.). Ethnic Groups: Greek 98%, other 2%. Religions: Greek
Orthodox 97%, Muslim 2%, Other 1%. Language: Greek. Education:
Years compulsory-9. Literacy-men 96%, women 89%. Health (1984):
Infant mortality rate-13.8/1,000. Life expectancy-men 72 yrs.,
women 75 yrs. Work force (1988): Agriculture-29%. Industry-
27%. Services- 43%.
Government
Type: Presidential parliamentary republic. Independence: 1827.
Constitution: June 1975, amended March 1986. Branches:
Executive-president (chief of state), elected May 1990 for 5 years;
prime minister (head of government). Legislative-unicameral
parliament (Vouli) elected April 1990; parliamentary system with 4
year (maximum) term. Judicial- supreme court (Areios Pagos).
Major Political parties: New Democracy (ND), Panhellenic Socialist
Movement (PASOK), Left Alliance (Synaspismos)-coalition of
communist and leftist parties, principally the Communist Party of
Greece (KKE) and the Greek Left (EAR). Suffrage: Universal, 18 and
over. Administrative Subdivisions: 51 prefectures (nomi), 13
regional districts (periferiarchies). Central Government Budget
(1988 projected): $25.3 billion. Defense (1988 projected):
approximately 11% of central government budget, 5% of GDP.)
Flag: Four white and five blue alternating horizontal stripes, with
a white cross on the upper staff corner.
Economy
GDP: $53.8 billion (1989). Annual Growth Rate: -0.5% (1987); 2.4%
(1988); 2.3% (1989) Inflation (1989): 14.8%. Natural Resources:
bauxite, lignite, magnesite, oil. Agriculture (12.8% of GDP, 1989):
Products: grains, fruits (especially olives, olive oil, and raisins),
vegetables, wine, tobacco, cotton, livestock, dairy products.
Industry (including mining, electricity and construction):
Manufactured goods (30% of GDP, 1989)-processed foods, shoes,
textiles, metals, chemicals, electrical equipment, cement, glass,
transport equipment, petroleum products, construction, electrical
power; Services (57% of GDP, 1989)-transportation,
communications, trade, banking, public administration, defense.
Trade: Exports (1989)-$6 billion: textiles, metal products, cement,
chemicals, pharmaceuticals. Major Markets (1988)-EC 64.2%, Middle
East and North Africa 8.2%, USSR and Eastern Europe 4.3%, US 6.3%.
Imports (1989)-$15 billion: petroleum, machinery, transport
equipment, chemicals, meat and animals. Major Suppliers (1988) -
EC 65.5%, Middle East and North Africa 4.2%, USSR and Eastern
Europe 5.1%, US 4% (taken from Greek customs statistics, which
exclude military equipment imports). Exchange Rate: 150 drachmas
= $1 US (1990). US Economic and Security Assistance (1946-1989):
$9.3 billion.
Membership in International Organizations
UN, EC, NATO, OECD, INTELSAT, Council of Europe.
PEOPLE
In ancient times Greece was a mosaic of ethnically similar
small city-states. During the migrations and invasions of the
Byzantine and Ottoman periods (4th-19th centuries AD), Greece's
ethnic composition lost its homogeneity. Since independence
(1827) and the exchange of populations with Turkey in 1923,
however, Greece has reforged a national identity whose roots date
back to the 13th century BC. Greece's pride in these Hellenic roots
is reflected in its official name, Hellas or the Hellenic Republic; the
name "Greece" derives from the Latin name. Greek society retains
its traditional Mediterranean values of family, education, and
personal honor (philotimo), despite the changes wrought by
urbanization and industrialization.
From earliest times, Greeks have migrated across the country
and across the Mediterranean, eventually creating Greek-speaking
communities all over the globe. Emigration has been on such a
scale that, by one count, there are more than 3 million people of
Greek heritage in the United States alone. Over the past two
decades, however, migration within Greece from rural to urban
centers has been more extensive than emigration abroad. The 1961
census showed an urban population of 43% compared to a rural and
semiurban population of 57%. By 1971, the urban population had
grown to 53% and by 1981 to 58%. About one-third of Greece's total
population lives in the greater Athens area.
Education is highly esteemed in Greece, not only because it
transmits culture and knowledge but also because it contributes to
social and cultural mobility.
Orthodox Christianity is the established religion. The Greek
Orthodox Church is self-governing under the spiritual guidance of
the Ecumenical Patriarch, resident in Istanbul, Turkey. During the
centuries of Ottoman domination, the church preserved the Greek
language, values, and national identity and became an important
rallying point in the struggle for independence. The church is under
the protection and partial control of the state, which pays the
clergy's salaries.
The Muslim minority, concentrated in western Thrace, was
given legal status by provisions of the Treaty of Lausanne in 1923
and is Greece's only officially recognized minority .
The Greek language dates back at least 3,500 years, and
modern Greek preserves many features of its classical predecessor.
In the 19th century, after Greece's war of independence, an effort to
rid the language of Turkish and Arabic borrowings and to make it
close again to the language of Homer's Odyssey and Iliad, led to a
version known as Katharevousa. However, this never became the
everyday language of most Greeks, and in 1976, it was abolished as
the language of high school instruction and of the government.
Today, spoken Greek is generally termed Demotiki; a more recent
reform movement has given rise to Nea Demotiki, the version that is
now considered standard Greek for everyday usage and for
contemporary literature.
HISTORY
The eastern Mediterranean is one of the "cradles of
civilization." Greece was inhabited as early as the Paleolithic
period, and by BC 3000 had become home, in the Cycladic Islands, to
a culture whose art remains evocative. Early in the second
millennium BC, the island of Crete nurtured the sophisticated
maritime empire of the Minoans, evidence of whose trade stretches
from Egypt to Sicily. The Minoans were challenged and eventually
supplanted by mainland Mycenaeans, who spoke a dialect of Greek.
Homer's Iliad and Odyssey, composed probably around BC 800, drew
on memories of the Mycenaeans, whose civilization collapsed around
BC 1100, shortly after the Trojan war. This collapse left Greece,
except the fortified citadel of Athens, open to migrating Dorian
tribes from the north.
During the next few hundred years of political instability, the
Greek polis or city-state came into existence. The polis included
the city and its surrounding territory, its institutions, its way of
life, and the unique values of its citizens. When the cities sent
their excess population to found colonies around the eastern and
western Mediterranean and in the Black Sea, the colonies remained
linked to the mother city by common values and traditions. Despite
their differences and frequent conflicts, the separate city-states
shared the epics of Homer and other poetry; the Olympic and other
games; and the same mythology, religion, and language which
unified the Greek world. They were conscious of their common
identity and called non-Greeks "barbarians."
Eventually two city-states emerged to dominate Greece-the
Ionian city of Athens, a democracy and a sea power, and the Dorian
city of Sparta, an oligarchy, a land power, and a militaristic
society. In the fifth century BC, Persian invasions united the cities
briefly, mainly under the military leadership of Athens. The
subsequent "Golden Age" (BC 446-431) of Pericles, an Athenian
leader, reflected an explosion of cultural and intellectual
achievements which has had a profound influence on Western
civilization.
The conflicting ambitions of Athens and Sparta led to the
Peloponnesian wars (BC 431-404), which Athens lost. The war
caused suffering throughout Greece but did not immediately
diminish Athenian cultural achievements. A weakened Greece later
fell under the domination of the Macedonians. Alexander the Great,
whose tutor was the great philosopher Aristotle, spread Greek
culture as he marched east to conquer the world, but he also
adopted much from the Persian Empire he defeated. The fusion of
Greek and Persian cultures created the Hellenistic civilization of
Asia Minor, which later was an important influence in the culture of
the Roman Empire and on Christianity and subsequent Western
thought.
Rome conquered Greece in BC 146 and eventually ruled over
the entire Hellenistic world. As Rome's power declined, one of its
emperors, Constantine, split the empire by establishing his Greek-
speaking capital, later called Constantinople, at the site of the
ancient Greek city of Byzantium in AD 330.
Although Rome was overrun by migrating tribes and the
western part of the empire fragmented in the fifth century AD, the
eastern part flourished as the Byzantine Empire. Greek in language
and culture, the empire was Roman in law and administration. The
people called themselves Romans and tended to set aside the
ancient Greek culture because it was pagan. Christianity was the
official religion, and the empire was seen as ecumenical, embracing
all Christians. By the 11th century, the Latin-speaking and the
Greek-speaking churches split in the Great Schism, which still
continues. Attacks by fellow Christians during the Crusades and
increasing pressure from Central Asian peoples weakened the
Byzantine Empire. It collapsed finally with the fall of
Constantinople to the Ottoman Turks in 1453. The patriarch of
Constantinople (subsequently renamed Istanbul), the capital of the
Ottoman Empire, then became both the head of the Orthodox Church
and the temporal leader of all Greek and many Orthodox subjects of
the Sultan.
The Greek war of independence began in 1821, and the country
obtained independence in 1827. Under the tutelage of England,
France, and Russia, a monarchy was established with a Bavarian
prince, Otto, named king in 1833. He was deposed 30 years later,
and the European powers chose a prince of the Danish House of
Glucksberg as his successor. He became George I, King of the
Hellenes.
The Megali Idea (Great Idea), the vision of uniting all Greeks
of the declining Ottoman Empire within the newly independent Greek
State, exerted a strong influence on Greek political consciousness.
At independence, Greece had an area of 47,515 square kilometers
(18,346 sq. mi.), and its northern boundary extended from the Gulf
of Volos to the Gulf of Arta. The Ionian Islands were added in 1864;
Thessaly and part of Epirus in 1881; Macedonia, Crete, Epirus, and
the Aegean Islands in 1913; western Thrace in 1918; and the
Dodecanese Islands in 1947.
Greece entered World War I in 1917 on the side of the Allies
and at the war's conclusion, took part in the Allied occupation of
Turkey, where many Greeks still lived. In 1922, the Greek army
marched from its base in Smyrna, now Izmir, toward Ankara but
was forced to withdraw. At the end of the war with the exchange of
populations, more than 1.3. million Greek refugees from Turkey
poured into Greece, posing enormous problems for the Greek
economy and society.
A continuing feature of Greek politics, particularly between
the two World Wars, was the struggle for power between
monarchists and republicans. Greece was proclaimed a republic in
1924, but George II returned to the throne in 1935, and a plebiscite
in 1946 reconfirmed the monarchy. It was finally abolished by
referendum on December 8, 1974, when, by a two-thirds vote, the
Greeks supported the establishment of a republic.
Greece's entry into World War II was precipitated by the
Italian invasion on October 28, 1940. That date is celebrated in
Greece by the remembrance of the one-word reply-ochi (no)-given
by the prime minister to a series of demands made by Mussolini.
Despite Italian superiority in numbers and equipment, determined
Greek defenders drove the invaders back into Albania. Hitler was
forced to divert German troops to protect his southern flank and
attacked Greece in early April 1941. By the end of May, the Germans
had overrun most of the country, although Greek resistance was
never entirely suppressed. German forces withdrew in October
1944.
With the German withdrawal, the principal Greek resistance
movement, which was controlled by the communists, sought to take
control of the country and undertook a siege of the British forces in
Athens during the winter of 1944-45. When the siege was defeated,
an unstable coalition government was formed. Continuing tensions
led to the dissolution of that government and the outbreak of Civil
War in 1946. First the United Kingdom, and later the United States,
gave extensive military and economic aid to the Greek government.
Communist successes in 1947-48 enabled them to move freely over
much of mainland Greece, but with extensive reorganization and
American material support, the Greek national army under Marshal
Papagos eventually was able to gain ascendancy. Yugoslavia closed
its borders to the insurgent forces in 1949 after Marshal Tito of
Yugoslavia broke with Stalin and the Soviet Union. Hostilities
ceased in the fall of 1949 with some 80,000 Greeks killed.
Twenty-five thousand more were either voluntarily or forcibly
evacuated by the Greek communists to Eastern Bloc countries, and
there were 700,000 refugees.
Greece sought, after the Civil War, to join the Western
democratic alliance. In 1952, Greece joined the North Atlantic
Treaty Organization (NATO). From 1952 to late 1963, Greece was
governed by conservative parties (The Greek Rally of Marshal
Papagos and its successor, the National Radical Union (ERE) of
Constantine Karamanlis). In 1963, the Center Union Party of George
Papandreou won the election and governed until July 1965. It was
followed by a succession of unstable coalition governments.
On April 21, 1967, just before scheduled elections, a group of
colonels led by Col. George Papadopoulos seized power. Civil
liberties were suppressed, special military courts established, and
political parties dissolved. Several thousand opponents were
imprisoned or exiled to remote Greek islands. Papadopoulos'
associate, Gen. Dimitrios Ioannides, took power in November 1973.
Ioannides' decision in July 1974 to attempt to overthrow
Archbishop Makarios, the President of Cyprus, and install a client
regime on Cyprus brought Greece to the brink of war with Turkey,
which, in response to the coup, militarily intervened and occupied
almost 40 percent of the island.
Senior Greek military officers then withdrew their support
from the junta. Leading citizens persuaded Karamanlis to return
from exile in France to establish a government of national unity
until elections could be held. Karamanlis' newly organized party,
New Democracy (ND), won elections held in November 1974, and he
became prime minister.
Following the 1974 referendum which resulted in the
rejection of the monarchy, a new constitution was approved by
parliament on June 19, 1975, and parliament elected Constantine
Tsatsos President of the Republic. In the parliamentary elections
of 1977, New Democracy again won a majority of seats. In May
1980, Prime Minister Karamanlis was elected to succeed Tsatsos as
president. George Rallis was then chosen party leader and
succeeded Karamanlis as prime minister.
In January 1981, Greece became the 10th member of the
European Community. In parliamentary elections, held in October
1981, Greece elected its first socialist government when the
Panhellenic Socialist Party (PASOK), led by Andreas Papandreou,
won 172 of 300 seats with 48% of the popular vote.
On March 9, 1985, Prime Minister Papandreou announced that
PASOK would not support President Karamanlis for a second term
and nominated Supreme Court Justice Christos Sartzetakis. On
March 29, 1985, Sartzetakis was elected President by the Greek
Parliament, receiving the minimum 180 votes required on the third
ballot.
Greece witnessed two rounds of parliamentary elections in
1989. In June, New Democracy won 146 of the 300 seats - not
enough to form a government. The centrist-conservative party
joined forces with the newly-formed coalition of communist and
leftist parties called the Left Alliance to form an interim coalition
government under Prime Minister Tzannis Tzannetakis (ND). The
Tzannetakis government's mandate was limited to a program of
national "catharsis," or cleansing. The focus was parliamentary
investigations into crimes allegedly committed by ministers of the
previous government, including former Prime Minister Papandreou,
himself. Following months of hearings, parliament voted to lift the
parliamentary immunity of most of the ministers incriminated,
including Papandreou, and the Tzannetakis government resigned,
turning the country over to an interim government in preparation for
new Parliamentary elections in November.
The November elections were, if anything, even more
inconclusive, with ND and PASOK (with Papandreou at the helm) both
picking up additional seats at the expense of the Left Alliance. This
time ND won 46% of the vote but still came up three seats short of
a parliamentary majority. The stalemate led to the formation of a
short-term, all-party coalition government tasked with addressing
the growing crisis in the Greek economy under Prime Minister
Xenophon Zolotas, an internationally-respected economist. The
pressures of economic reform proved too much for the fragile
coalition; the party leaders withdrew their support in February
1990, and elections were held on April 8.
New Democracy won 150 seats in the April 1990 election.
With the cooperation of the single deputy elected from the centrist
DIANA party, a New Democracy government headed by ND leader
Constantine Mitsotakis won a vote of confidence in Parliament. The
DIANA deputy subsequently changed his affiliation to ND, and a
special Greek electoral court awarded a contested seat originally
claimed by PASOK to ND, bringing ND's total to 152 seats.
GOVERNMENT AND POLITICAL CONDITIONS
The 1975 constitution, which describes Greece as a
"presidential parliamentary republic," is similar to the 1952
constitution but has more extensive and precise guarantees of civil
liberties and vests the powers of the head of state in a president
elected by parliament and advised by the Council of the Republic.
On balance, the Greek governmental structure is similar to
that found in most Western European countries and has been
described as a compromise between the French and German models.
As in most of Western Europe, the prime minister and parliament
play central roles in the political process, but the Greek president
also performs certain governmental functions in addition to
ceremonial duties. The extent of the president's influence in the
political process depends to a large degree on personal qualities and
leadership.
Presidential Powers Elected by parliament to a 5-year term,
the president can be reelected once. The president has the power to
declare war and to conclude agreements of peace, alliance, and
participation in international organizations; a three-fifths
parliamentary majority is required to ratify such agreements or
treaties. The president can also exercise certain emergency
powers, which must be countersigned by the appropriate minister.
On March 7, 1986, parliament amended 11 articles of the
constitution, limiting many of the president's political powers. The
president may no longer dissolve parliament, dismiss the
government, suspend certain articles of the constitution, or declare
a state of siege. To call a referendum, he must obtain approval
from parliament. Restricting presidential authority has given more
power to the parliament and prime minister. Prime Minister
Papandreou's majority party (PASOK) supported the amendments.
Parliament
Parliamentary deputies are elected by direct, secret ballot for
a maximum of 4 years, but elections can be called earlier.
Greece uses a complex, reinforced proportional electoral
system. That system has discouraged splinter parties and made a
parliamentary majority possible even if the leading party fell short
of 51% of the popular vote. However, the constitution makes it
possible for Parliament to re-write the electoral law virtually at
will. Prior to the June 1989 elections, the PASOK-majority
parliament wrote a new electoral law that took a big step toward
simple proportional representation, giving more power to the
smaller parties and making it more difficult for any one party to
win a majority in Parliament. In November 1990, parliament revised
the electoral law again, lowering the percentage of the popular vote
needed to win an absolute majority in parliament.
Political Parties in the Greek Parliament
(April 1990)
Party Seats
New Democracy (ND) 152
Panhellenic Socialist Party(PASOK) 124
Left Alliance 21
Muslim Independent (GUVEN) 2
Ecologists/Alternatives 1
Total 300
Local Administration
Greece is divided into 51 prefectures (nomi), each headed by a
prefect (nomarch) appointed by the minister of the interior; 13
regional governments (periferiarchis) were established in 1987,
headed by regional governors (periferiarchs), appointed by the
minister of the interior. Although municipalities and villages have
elected officials, they do not have an adequate independent tax base
and must depend upon the central government for a large part of
their financial needs and are subject to numerous central
government controls.
Principal Government Officials
President Constantine Karamanlis
Prime Minister Constantine Mitsotakis
Foreign Minister Andonis Samaras
Ambassador to the United States - Christos Zacharakis
Ambassador to the United Nations - Antonios Exarchos
Greece maintains an embassy in the United States at 2221
Massachusetts Avenue NW, Washington, DC 20008 [tel. (202) 667-
3168]. There are consulates general in San Francisco, Chicago, and
New York, and consulates in New Orleans, Boston, and Atlanta.
ECONOMY
The Greek economy began modernizing in the late 19th and
early 20th centuries with the adoption of social and industrial
legislation and protective tariffs, along with the creation of the
first industrial enterprises larger than artisan shops. Industry at
the turn of the century was based primarily on food processing,
shipbuilding, textiles, and simple consumer products. Greek
economic progress was severely affected from the 1920s to the
1950s by an influx of refugees from Asia Minor, the global
depression, Axis occupation, and civil war. Recovery began in 1953
with a drastic currency devaluation and reduction in government
spending which brought greater price stability and increased
exports. From 1955 to 1963, under Prime Minister Karamanlis,
Greece's gross domestic product (GDP) almost doubled. Greece
achieved high rates of growth in the late 1960s and early 1970s,
which also saw some major foreign investments in Greece.
Since the 1970s, however, Greece has suffered a decline in its
rate of GDP growth of output, ratio of investment to GDP, and
productivity of investment. Between 1963 and 1988:
-- Real GDP growth fell from 10% to less than 4% per year;
-- Investment as a share of GDP fell from 27% to 16%; and
-- The productivity of investment (inverse of incremental
capital output ratio) fell from an average of 0.36 to .08 in the
1980s.
There were several reasons for this. Beginning in the mid-
1970s, real labor costs and oil prices rose. In 1981, falling
protective barriers as Greece entered the European Community (EC)
hurt company profitability and private investment. Government
policies also created structural supply-side problems which
hampered development. The government elected in 1981 at first
pursued expansionary policies, which in the face of supply-side
constraints, caused inflation and balance-of-payments problems
rather than growth in output or employment. Between 1980 and
1985:
-- Net public-sector borrowing requirement (PSBR) on a cash
basis rose from 8% to 18% of GDP;
-- The current account deficit went from 5.5% to 10% of GDP;
and
-- Inflation accelerated from an annual average of 13%
percent during the 1970s to over 20% percent between 1981 and
1985.
Non-debt capital inflows also fell and external debt increased
from 15% to 48% of GDP. This economic performance compared
poorly with the rest of the EC.
Growing public sector deficits were financed by direct
borrowing. This was either domestic, crowding out the private
sector, or in foreign markets, adding to the country's debt position.
By mid-1985, the government was faced with rising inflation, a
ballooning public sector deficit, and growing balance-of-payments
problems.
Greece turned to the EC for help. In October 1985, supported
by an ECU 1.75 billion loan from the EC, the government
implemented a 2-year "stabilization" program with limited success.
Incomes policy bore the brunt of the effort, and real wages fell by
13% in 1986-87. PSBR was cut from 18% of GDP in 1985 to 13% in
1987. Tighter monetary policy cut the growth of bank credit,
pushed the public sector to borrow more from non-bank sources, and
gradually established positive real interest rates on deposits and
loans. The current account deficit fell from $3.3 billion in 1985 to
$1.2 billion in 1987, and non-debt capital inflows (plus the EC loan)
almost entirely financed the deficit, halting the growth of external
debt.
Inflation remained a problem, and GDP growth remained
sluggish. Inflation fell from 25% in 1985 to 16% in 1987, well
above the target of 12%, and very high compared to EC norms. Real
GDP growth lagged and was less than 1% during 1986 and 1987.
Nonetheless, by December 1987, a good start had been made.
Profits, private investment, and non-debt capital inflows all
increased; net external borrowing ceased; and real interest rates
were positive. External factors favored these improvements.
However, the good results did not last long, mainly because
the program did not address underlying structural problems. Public
sector inefficiencies and excessive spending continued to strain the
economy. And, in 1988 the government relaxed incomes and
financial policies.
The results were unfortunate. Real wages grew by 5%, twice
the target rate. PSBR hit 16 percent of GDP due to high public
spending and revenue shortfalls. Government borrowing was above
target and, by the end of 1988, total public sector debt exceeded
100% of GDP. The money supply grew by 23%, and the drachma
appreciated in real terms as exchange rate policy was used to
dampen inflation. In the short term, this expansionary policy
brought growth. Domestic demand soared and real GDP grew by
4.3%. Total investment increased by 9.3% in real terms, with public
investment up 1.6% and private by 12% (although investment was
low by historical standards).
But over the longer term, the economy was to suffer
significantly. Strong inflationary pressures remained during 1988.
Unit labor costs rose more than the GDP deflator, eroding profit
margins. Based on relative labor costs, the drachma appreciated by
8.5%, hurting competitiveness. The current account deficit fell to
2% of GDP between 1987 and 1988, but this improvement was due
entirely to lower world oil prices. The non-oil trade deficit as a
percentage of GDP reverted to its pre-1985 peak, and the current
account deficit, excluding oil, widened by 0.6% of GDP.
Greece continues to rely on foreign borrowing to finance its
balance-of-payments deficit. Total external debt was $21.5 billion
by the end of 1989, and may top $23.5 billion by the end of 1990.
This is 40% and 42% of GDP respectively. Greece faces a heavy
repayment burden over the next 5 years.
The decrease in consumption caused by the stabilization
program limited the rate of economic growth to 1.4% in 1986. In
order to encourage third country investment, the Bank of Greece in
July 1986 significantly liberalized repatriation regulations for
dividends and profits for all new investment in "productive"
activities made by US and other non-EC investors. However, EC
investors still receive more favorable treatment.
The Greek economy is characterized by a strong services
sector (56% of GDP) and a relatively large, inefficient agricultural
sector (12% of GDP) which represents 26% of the labor force.
Principal agricultural products are olive oil, fruits and vegetables,
cereals, tobacco, and wines. Agricultural output increased by 1.5%
in 1989 but is expected to decline in 1990 due to adverse weather
conditions. The manufacturing, mining, electricity, and
construction sector (30% of GDP) represents 20% of the labor force
and accounts for 45% of Greece's exports-primarily textiles,
cement, basic metals, petrochemicals and pharmaceuticals.
Manufacturing output rose by 2% in 1989, and is expected to show a
small increase in 1990. Construction registered a 10% increase in
1990. About half of the labor force is self-employed.
EC Membership
Greece is being forced to gradually align itself with EC
economic and commercial practices during an extended transition
period that began in 1981 following an 18-year period of associate
membership. Greece has been granted derogations from certain
aspects of the 1992 single-market program, which means delays in
full liberalization until at least 1995.
EC membership is affecting all aspects of the Greek economy.
Small Greek businesses will have to adjust to the strong
competition of large EC firms, while the government will need to
liberalize its economic and commercial practices. Also, the Greek
agricultural sector has had to adjust to the lower intervention price
set by the EC for Mediterranean products. Overall, however, Greece
has been a net beneficiary of the EC budget. Net payments to Greece
increased from $550 million by the end of 1982 to $1.4 billion in
1986 and to a $2.5 billion in 1989. The European Investment Bank
has provided development financing of approximately $300 million
annually. Together, these funds contribute significantly to Greece's
current account balance, reduce the state budget deficit, and
provide resources for investment-primarily in the public sector.
The EC's integrated Mediterranean programs (IMP), announced
in 1985, in part to meet Greek objections to the entry of Spain and
Portugal into the EC, will increase the flow of development funds to
less developed regions of the community, including approximately
$1.4 billion in grants for Greece over 7 years. Currently, Greece
cannot fully draw on available EC structural funds, which require
matching, because of a shortage of public funds.
Energy Petroleum is Greece's largest single import. Based on
import statistics for the last 5 years (1984-89), Greece imports an
average of about 10 million tons of crude oil per year.
About 75% of imported crude is processed by the two state-
owned refineries: Aspropyrgos and EKO, and the remaining 25% by
the 2 privately owned refineries: Motoroil and Petrola (mainly
export-oriented). The 4 Greek refineries produced about 16 million
tons of petroleum products in 1988, of which about 2 million tons
were exported.
Greece's main suppliers of crude are Saudi Arabia, Libya, the
Soviet Union, and Kuwait. Greece began pumping oil from a modest
oil field off the island of Thassos in the northern Aegean Sea in
1981 and is exploring and developing oil reserves found in the
Ionian Sea. In 1988, Greece produced 1 billion tons of crude oil
from its own fields.
Agreements on future purchases of natural gas are being
negotiated with the Soviet Union and Algeria. The Soviet natural
gas project will require the construction of a pipeline to be
completed in 10 years at a cost of about $1 billion. Algerian
liquefied natural gas could be used in the Athens region by 1992.
Greece also plans to expand its use of hydroelectric power and
lignite burning in power plants. Lignite, a soft, coal-like fuel
widely available in Greece, provides about three-quarters of the
country's electricity.
Tourism
Tourism is a major source of foreign exchange earnings. More
than 8.4 million tourists visited Greece in 1989, injecting more
than $2 billion into the Greek economy. US tourists (315,000 in
1989) covered about 4% of total tourist arrivals. Although US
tourism increased in the last 3 years, it is still far behind the 1979
levels (600,000 arrivals from the US).
Commerce
Greece's location, maritime tradition, proximity to the Middle
East and continuing unrest in that area have attracted regional
marketing offices to Athens. The Greek government provides
incentives to foreign enterprises conducting business exclusively
outside of Greece (so-called "Law 89 companies"). Greece remains a
net importer, in part because of its petroleum needs, but exports
are significant, constituting about 11.5% of GNP. In 1989, Greece
imported $15 billion worth of goods, while it exported $6 billion.
Leading exports were textiles, metal products, cement, chemicals,
petroleum products and pharmaceuticals.
More than 60% of Greece's trade is with other EC countries.
EC membership has obliged Greece to eliminate or adjust many of
its tariffs and quotas, making Greek businesses compete more
directly with their EC counterparts.
The Middle East (including North Africa) is an important
trading partner for Greece, due to Greece's reliance on foreign
petroleum. In 1986 14% of its imports came from Middle Eastern
oil-producing nations which purchased 11.7% of Greek exports.
Greek firms continue to be involved in major projects in the Middle
East. However, depressed oil prices have reduced Greece's exports
to the Middle East.
In 1989, the United States supplied about 4% of Greece's non-
military imports, led by machinery and transport equipment, coal,
tobacco, corn, soybeans, fur skins, and iron and steel scrap, and
purchased about 6% of its exports, with tobacco, petroleum
products, antiques, iron and steel products, and fur apparel the
major items. Shipping Greece is traditionally a seafaring nation and
has built a successful shipping industry due to its geographic
location and the entrepreneurial ability of its shipowners.
In the 1980s, Greek shipowners began to abandon their
national flag in favor of flags of convenience to cut costs and to
avoid rigid government policies. The Greek flag fleet shrank from
3,896 ships displacing 42.5 million gross tons in 1981 to 2,002
ships and 20.6 million gross tons in February 1990. The Greek fleet
thus dropped from first to fifth in the world league table.
Greek shipping does not play a central role in the domestic
economy in that it trades internationally and is only marginally
taxed on ship size and not on income generated. Nonetheless, it
provides employment, and brings in invisible earnings which help
Greece's balance-of-payments problems.
Greece's membership gives the EC 15% of the world's tonnage.
The Greek fleet is the largest in the EC, with a third of the
community's vessels and about 5% of the world's total tonnage.
FOREIGN RELATIONS
In addition to belonging to the European Economic Community,
Greece is a member of NATO and, thus is a defense partner of the
United States. Historically, Greece's foreign policy has focused on
the eastern Mediterranean, particularly relations with Turkey,
Cyprus, and the Balkans.
Greece, Turkey, and Cyprus The 1974 coup against Cypriot
President Makarios, inspired by the Greek military junta in Athens,
and the subsequent Turkish military intervention in Cyprus, led to
the junta's downfall, the creation of a large Cypriot refugee
population, and a divided island. The Greek Cypriot community
elects the government of the Republic of Cyprus, which is
recognized by most other countries; only Turkey recognizes the
regime in the Turkish-occupied territory north of the UN-controlled
buffer zone.
The UN Secretary General has a mandate from the Security
Council to use his "good offices" to help the Greek and Turkish
Cypriot communities reach a mutually beneficial negotiated
settlement to the Cyprus problem.
The Republic of Cyprus has received strong support from
Greece in international fora. Greece has a military contingent on
Cyprus, and Greek officers fill some key positions in the Greek
Cypriot national guard. Greece and Turkey enjoyed good relations in
the 1930s, but relations began to deteriorate in the late 1950s,
sparked by the Cyprus independence struggle. Other issues dividing
Greece and Turkey center on the Aegean, involving delineation of the
continental shelf, territorial waters, territorial airspace, air
traffic control, NATO command and control arrangements, and
military forces in the area. Greek and Turkish officials held
meetings in the 1970s to discuss differences on Aegean questions,
but Greece discontinued these discussions in the fall of 1981. In
1983, Greece and Turkey held talks on trade and tourism, but these
were suspended by Greece when Turkey recognized the Turkish-
Cypriot declaration of independence of November 15, 1983. After a
dangerous dispute in the Aegean in March 1987 concerning oil-
drilling rights, the prime ministers of Greece and Turkey exchanged
messages exploring the possibility of resolving the dispute over the
continental shelf. Greece argues for an International Court of
Justice decision. Turkey proposes bilateral political discussions.
In early 1988 the Turkish and Greek prime ministers met at Davos
in Switzerland and later in Brussels and agreed on various measures
to reduce bilateral tensions and encourage cooperation. The
Mitsotakis government has initiated a revitalization of the Greek-
Turkish dialogue.
Central and Eastern Europe Greece maintains full diplomatic,
political, and economic relations with its eastern European
neighbors. Efforts to promote multilateral Balkan cooperation and
understanding began in the mid-1970s, and the Papandreou
government supported a Balkan nuclear-free zone in these talks.
Greece generally has had good relations with Yugoslavia since the
early 1950s. Diplomatic relations with Bulgaria were restored in
1965, after a 24-year break, when Bulgaria renounced its claim to
Greek Thrace and Macedonia, an obstacle to Greek-Bulgarian
cooperation since World War I. Diplomatic relations were restored
with Albania in 1971, but the Greek government did not lift the
declared state of war with Albania until September 1987. In early
1990, relations between Greece and Albania were strained by
reports of mistreatment of the ethnic Greek minority in Albania and
an incident in which Albanian police reportedly entered the Greek
embassy in Tirana and forcibly removed an asylum seeker.
Greek governments in recent years have pursued improvements
in Greek-Soviet relations. Soviet Prime Minister Tikhonov's 1983
visit to Greece reciprocated an official visit by then Prime Minister
Karamanlis to Moscow in 1979. Prime Minister Papandreou visited
the Soviet Union in February 1985, but a reciprocal visit by Soviet
President Gorbachev has yet to take place. Trade with Central and
Eastern Europe and the Soviet Union accounted for about 4.3% of
Greek exports and 5% of its imports in 1989. The Tikhonov visit
concluded with the signing of a 10-year economic and technical
cooperation agreement, including Soviet assistance in financing
and building a $500 million alumina plant in Greece. The Soviet
Union will purchase the plant's entire planned annual production of
600,000 tons for a period of 10 years. The plant is scheduled to be
in operation by 1992. In June 1987 the Soviet Union and Greece
agreed in principle to the construction of a $1 billion gas pipeline
through which the Soviets would supply 80% of Greece's natural gas
needs. The two countries also signed a shipping protocol agreement
in May 1987.
Middle East Policy
Greece has a special interest in the Middle East because of its
geographic position and its economic and historic ties to the area.
Greece maintained relations with Israel at a level just below that
of full diplomatic representation since 1948, until May 1990, when
full recognition was extended. In December 1981, the Greek
government raised the status of the office of the Palestine
Liberation Organization (PLO) in Athens to a similar level. Greece
cooperated with the United States and other countries in the PLO
evacuation from Beirut in 1982 and from Tripoli in 1983.
DEFENSE
The Greek armed forces number about 185,000 active duty
personnel, of which 142,000 serve in the army, 19,500 in the navy,
and 23,500 in the air force. The army includes 1 armored division,
1 mechanized division, 11 infantry divisions, 1
parachute/commando division, and a variety of smaller specialized
formations. The navy has 10 submarines, 14 destroyers, 7 frigates,
27 fast attack craft, and other vessels. There are almost 300
combat aircraft in the air force. All Greek males must serve
approximately 2 years of military service, depending on the branch.
The United States has had 4 major and 12 secondary defense
facilities in Greece which serve important missions, including
strategic airlift, training, naval support for the US Sixth Fleet,
reconnaissance, storage of reserve materials, and communications.
Some 3,700 US servicemen are stationed at these facilities,
primarily at Hellenikon Air Base in Athens, the Nea Makri
Communications Station at Marathon, and Souda Air Base and the
Iraklion Communications Station on the island of Crete. As part of
a worldwide structural readjustment, in early 1990 the US
announced plans to withdraw from Nea Makri in 1990 and to close
Hellenikon in 1991.
Greece joined NATO in 1952. Bordering on the Warsaw Pact
and strategically located along the air and the sea lanes of the
eastern Mediterranean, Greece plays a key role in the defense of the
alliance's southern flank. Following the 1974 Cyprus crisis, the
Greek government, in protest, withdrew from NATO's military wing
but remained a member of the alliance. In October 1980, an
arrangement with NATO provided for Greece's reentry into the
alliance's military structure. Nevertheless, Greek-Turkish
differences led Athens to withdraw from NATO exercises in the
Aegean.
US-GREEK RELATIONS
The United States and Greece have longstanding historical,
political, and cultural ties based on a common heritage and shared
values. Following World War II, when Greece was threatened by the
communist-led civil war, the United States proclaimed the Truman
doctrine and began a period of substantial financial and military
aid: more than $8.5 billion in economic and security assistance
since 1946. Economic programs were phased out by 1962, but
military assistance has continued. In FY 1987, Greece was the fifth
largest recipient of US security assistance, receiving $343 million
in foreign military sales credits.
Relations between the United States and Greece were
strained at times during the Papandreou/PASOK years. As Prime
Minister, however, Papandreou signed a new Defense and Economic
Cooperation Agreement with the United States in 1983 allowing for
the continued operation of US bases in Greece and was negotiating
toward a new one when talks were recessed in May 1989 for Greek
elections. Prime Minister Mitsotakis, shortly after taking office in
April 1990, told parliament that his government would attach
"particular importance to the normalization of relations with the
United States." He added that the conclusion of a new defense
agreement would be mutually beneficial. US-Greek
negotiators signed a new mutual defense cooperation agreement in
July. This entered into force in November 1990.
Principal US Officials
Ambassador-Michael G. Sotirhos
Deputy Chief of Mission-James A. Williams
Chief, Military Advisory Group-BG Edmond Solymosy
Counselor for Political Affairs-Samuel C. Fromowitz
Counselor for Political Military Affairs-Laurel M. Shea
Counselor for Economic Affairs-J. Michael Cleverley
Counselor for Commercial Affairs-Jerry K. Mitchell
Counselor for Consular Affairs-Danny Root
Counselor for Administrative Affairs-Peter Flynn
Counselor for Public Affairs-Arthur Guiliano
Regional Security Officer-Art Manuel
Defense Attache-Stanley Kozlowski
Labor Affairs Officer-John L. Klekas
Consul General, Thessaloniki-Larry C. Thompson
The US Embassy is located at: 91 Vasillisis Sophias Avenue,
Athens 101 60 (tel. 721-2951). The Consulate General is at: 59
Leoforos Nikis (Nikis Avenue), Thessaloniki (tel. 266-121).
TRAVEL NOTES
Climate and clothing: Lightweight clothing May-September;
woolens October-April. Customs: Greek visas are required of
holders of official and diplomatic US passports, but not of visitors
holding US tourist passports and intending to stay less than 2
months. Visitors wishing to extend their stay must submit an
application 20 days before the expiration of the 2-month period. No
special inoculations are required, but health requirements change.
Travelers should check the latest information.
Telecommunications: Telephone service within Athens is
satisfactory, and calls to the US may be made easily. Athens is 7
standard time zones ahead of the eastern US.
Transportation: Streets and highways in Greece are hard-surfaced;
smaller roads are sometimes rough and ungraded. Tourists wishing
to drive must have an international driver's license. The
international car insurance card is valid if Greece is listed on the
card. Intercity and local public transportation is adequate,
inexpensive, and crowded at rush hours. Taxis are numerous in
Athens, but because they are relatively inexpensive they are
difficult to find during rush hours.
Published by the United States Department of State--Bureau
of Public Affairs --Office of Public Communication -- Washington,
DC -- December 1990 -- Editor: Peter A. Knecht. Department of
State Publication 8198. Background Notes Series -- This material
is in the public domain and may be reprinted without permission;
citation of this source is appreciated. For sale by the
Superintendent of Documents, US Government Printing Office,
Washington, DC 20402.(###)