Return to: Index of "1994 Country Reports on Economic Practice and Trade Reports" ||
Index of "Economic and Business Issues" || Electronic Research Collections Index || ERC Homepage



U.S. DEPARTMENT OF STATE
GREECE: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                              GREECE

                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)


                                      1992      1993     1994 1/

Income, Production and Employment:

Real GDP (1988 prices) 2/             62.6      62.2      62.9
Real GDP Growth (pct.)                 0.8      -0.5       1.1
GDP (at current prices) 2/            84.6      80.6       N/A
By Sector:
  Agriculture                          9.2       8.2       N/A
  Energy/Water                         2.2       2.0       N/A
  Mining                               0.7       0.6       N/A
  Manufacturing                       11.5      10.0       N/A
  Construction                         6.5       6.1       N/A
  Rents                               12.3      12.7       N/A
  Financial Services                  16.0      15.5       N/A
  Other Services                      11.0      10.8       N/A
  Government/Health/Education         14.0      13.9       N/A
  Statistical Discrepancies            1.2       0.8       N/A
  Net Exports of Goods & Services     -9.6      -9.0      -9.7
Real Per Capita GDP
  (1988 prices/USD)                6,087.0   6,005.0   6,041.0
Labor Force (000s)                 4,034.3   4,118.4   4,143.1
Unemployment Rate (pct.)               8.7       9.7      10.0

Money and Prices:  (annual percentage growth)

Money Supply (M3/end period) 3/       14.4      15.0      10.0
Base Interest Rate 4/                 29.0      26.0      26.0
Personal Saving Rate                 18-19      17.0     16-17
Retail Inflation                      15.8      14.4      11.1
Wholesale Inflation                   11.3      11.9       8.5
Consumer Price Index                  15.8      14.5      11.1
Exchange Rate (USD/DRS)
  Official                           190.7     229.3     243.0
  Parallel                             N/A       N/A       N/A

Balance of Payments and Trade:  (millions of USD)

Total Exports (FOB) 5/             6,008.8   5,034.3   5,000.0
  Exports to U.S. 6/                 382.6     377.1      86.2
Total Imports CIF 5/              19,902.0  17,615.5  18,500.0
  Imports from U.S. 6/               848.9     820.5     190.6
Aid from U.S.                          N/A       N/A       N/A
Aid from Other Countries               N/A       N/A       N/A
External Public Debt              22,954.5  26,857.0  28,800.0
Debt Service Payments (paid)       7,974.8   6,987.4   7,000.0
Gold and Foreign Exch. Reserves    5,588.0   8,693.6  13,000.0
Trade Balance 5/                  -13,893.5 -12,581.2 -13,500.0
  Trade Balance with U.S. 6/        -466.3    -443.4    -104.4


N/A--Not available.
1/ 1994 figures are all estimates based on available monthly
data in October 1994.
2/ GDP at factor cost.
3/ M2 not available in Greece.
4/ Figures are actual average annual interest rates, not
changes in them.
5/ Merchandise trade, Bank of Greece data, transaction basis.
6/ Customs data (National Statistical Service of Greece).  1994
figures cover January-March period.



1.  General Policy Framework

    Greece has been a member of the European Union (EU) since
1981 and enjoys a relatively open, free-market economy.  It has
a population of 10.4 million and a work force of about four
million.  The moderate level of development of Greece's basic
infrastructure -- road, rail, telecommunications -- reflects
its middle-income status.  The public sector constitutes 50 to
60 percent of Gross Domestic Product (GDP), a substantial
portion of the total official economy.  Despite the recent
revision on national accounts, which boosted GDP by 20 percent,
some 15 percent of economic activity still remains unrecorded
(parallel economy).  With about 66 percent of GDP deriving from
services (including government services), 23 percent from
industry (13 percent from manufacturing) and 11 percent from
agriculture, Greece imports more than it exports.  In 1993,
Greece had a trade deficit of 12.6 billion dollars on a total
two-way trade of 22.6 billion dollars.  Greece exports
primarily light manufactures and agricultural products, and
imports more sophisticated manufactured goods.  Tourism
receipts, emigrant remittances, shipping, and, increasingly,
transfers from the EU form the core of invisibles earnings. 
Substantial funds from the EU (about 20 billion dollars) are
allocated for major infrastructure projects (road and train
network, ports, airports, bridges etc.) over the next five
years (1994-99).  The Uruguay Round Agreements were ratified in
late 1994.

    The government has expressed the intention to meet the
targets of the Maastricht Treaty for EU Economic and Monetary
Union (EMU).  The new government which took office on October
13, 1993 has pledged that it will continue efforts to lower
inflation and to reduce net borrowing as a percent of GDP from
the present 12.5 percent to 7 percent in 1996 and 0.9 percent
in 1999.  The government is concentrating its efforts on ending
tax evasion and an incomes policy aimed at protecting the real
income of workers.  It also intends to sell minority share
holdings of certain state enterprises and organizations. 
However, international financial organizations believe that new
measures are required to reduce the budget deficit if Greece is
to meet its convergence targets.

    Greece's huge government deficit stems from past debts and
a bloated public sector which has many more civil servants than
an economy the size of Greece's can support.  Greece's social
security program has also been a major drain on public
spending.  Finally, the state owns a number of loss-generating
companies.  The government passed in September 1992 a new bill
on social security with the eventual goal of balancing
expenditures with receipts.  Deficits are financed primarily
through treasury bills.

    The government passed a new tax reform package into law in
April 1994.  The new law makes changes in the income tax system
mainly through the introduction of objective income criteria
for determining the income of small businesses and some 1,300
professions.  A new investment incentives law, introduced in
1994, makes modifications to the incentives regime.  The
emphasis of the new legislation is on the assistance for larger
projects and on the development of new products.  Foreign
investments offering new know-how will get preferential
treatment.  Greek investments throughout the Balkans will be
subsidized.

    Monetary policy is implemented by the Bank of Greece.  The
Bank uses the discount and other interest rates in its
transactions with commercial banks as tools to control the
money supply.  The State continues to retain privileged access
to credit via state-controlled banks and via the tax-free
status accorded to government debt obligations (which includes
the right of Greek residents to purchase government debt
obligations without having to declare their source of income to
the tax authorities).  Treasury bills are issued by the
Ministry of Finance but they are expected to fall within the
monetary program prepared by the Bank of Greece.  The Bank's
policy includes a more active intervention in the secondary
money market.


2.  Exchange Rate Policy

    Greece has followed a relatively "strong drachma" policy
during 1994 as a means of holding down inflation.  The Bank of
Greece maintains a "crowling-peg" system and allows on a
limited depreciation of the drachma against the Deutche Mark. 
In the past year, the drachma has appreciated slightly against
the U.S. Dollar.  The Greek drachma does not yet belong to the
EU's Exchange Rate Mechanism.

    Foreign exchange controls have been progressively relaxed
since 1985.  Medium- and long-term capital movements for EU and
non-EU countries have been fully liberalized.  Remaining
restrictions on short-term capital movements were lifted as of
May 16, 1994.  This move brings Greece in line with EU rules on
free movement of capital.  Some bureaucratic obstacles still
remain, but they are expected to be phased out.


3.  Structural Policies

    Greece's structural policies are largely dictated by the
need to comply with the provisions of the EU Single Market and
the Maastricht Treaty on Economic and Monetary Union.

    Pricing Policies.  The only remaining price controls are on
pharmaceuticals and rents; some rents have been freed. 
However, about one quarter of the goods and services included
in the consumer price index are produced by state-controlled 
companies, and the government retains considerable indirect
control.  Government-set prices and subsidies, e.g., public
transport prices, distort the economy, but they are not
barriers to U.S. exports.

    Tax policies.  New tax legislation passed in April 1993:

-- Increased the corporate tax rate from 35 to 40 percent for
all non-public corporations

-- Increased the top personal income tax rate to 45 percent
from 40 percent for amounts exceeding 62,000 dollars annually.

-- Imposed presumptive taxation on a large number of
professionals on the basis of a number of factors, i.e. the
location and type of business, the number of years in
operation, the imputed rent of the property.

    The new law did not change the value added tax (VAT)
rates:  the lower rate of eight percent is applicable to basic
commodities (mainly food products) and certain services; the
higher rate of 18 percent is applicable to items not included
in the lower rate.  A four percent VAT applies to periodicals
and books.

    Tax laws do not discriminate against foreign or U.S.
products.


4.  External Debt Management Policies

    Greece's public sector debt is forecasted at 113 percent of
GDP in 1994.  A change in national accounts statistical
methodology has recently led to a 23 percent statistical
increase in GDP.  Before such adjustment government debt was as
high as 135.8 percent of reported GDP in 1993.  If one includes
the debt of other public entities, total Greek public sector
debt was measured at 150 to 160 percent of GDP, using the old
system of national accounts.  Foreign debt does not affect
Greece's ability to import U.S. products.

    Servicing of external debt in 1993 (interest and
amortization) was equal to 138.9 percent of exports and 7.8
percent of GDP.  With no new net borrowing, Greece's external
debt service will be around 7.2 billion dollars in 1994.  About
two-thirds of the external debt is denominated in currencies
other than the dollar.

    Greece has regularly serviced its debts and has generally
good relations with commercial banks and international
financial institutions.  It has not had an adjustment program
with the IMF or any program with the World Bank.  In 1985, and
again in 1991, Greece borrowed from the EU.


5.  Significant Barriers to U.S. Exports

    Greece does not have merchandise trade barriers other than
those imposed by the EU.  It maintains, however, specific
barriers on trade in services such as law, accounting,
aviation, tourism and motion pictures:
-- Greece maintains nationality restrictions on a number of
professional and business services, including legal advice and
accounting.  Except for accounting, these restrictions do not
apply to EU citizens.  The U.S. companies can generally
circumvent these barriers by employing EU citizens, the most
prominent example being in auditing.  However, the government
recently passed a law which imposes burdensome qualifications
on non-Greek accountants, virtually excluding non-Greeks from
most accounting activities.  The government has pledged to
withdraw this restriction.

-- Foreign air carriers may not sell ground services for
aircraft to other airlines.  The Greek flag carrier, Olympic,
has a partial monopoly to provide ground services to other
airlines.

--  Greek residents are limited on the amount of foreign
exchange they may spend on personal travel to 2,000 ECUs per
trip (2,300 dollars).

--  Greek film production is subsidized by a 12 percent
admissions tax on all motion pictures.  Moreover, Greek laws
and practices are currently ineffective in protecting
intellectual property rights, including film, software, music
and books (see below).

    Investment Barriers:

-- Both local content and export performance are elements which
are seriously taken into consideration by Greek authorities in
evaluating applications for tax and investment incentives. 
However, they are not legally mandatory prerequisites for
approving investments.

-- U.S. and other non-EU investors receive less advantageous
treatment than domestic or other EU investors in (1) the
mineral sector, where restrictions continue to apply to non-EU
investors, (2) banking, where only 40 percent of the shares of
Greek state banks is open to non-EU residents and (3) land
purchases in border regions.  U.S. banks have been able to
overcome this provision by operating on branches of EU
operations.

    Greek laws and regulations concerning government
procurement ostensibly guarantee nondiscriminatory treatment
for foreign suppliers.  In fact, the Greek Government
procurement favors Greek companies, or in some cases EU
corporations.  Officially, Greece adheres to the EU procurement
policy, and Greece has also recently joined the GATT
procurement code.  Greek willingness to adhere to GATT
government procurement procedures is a positive step.

    Many problems, however, still exist.  Included are
occasional sole sourcing (explained as extensions of previous
contracts), loosely written specifications which are subject to
varying interpretations, and allegiance of tender evaluators to
technologies offered by longtime, traditional suppliers.  The
real impact of Greece's "buy national" policy is felt in the
government's offset policy (mostly for purchases of defense
items) where local content, joint ventures, and other 
technology transfers are stressed.  Occasionally transfer of
technology is required in telecommunications projects.


6.  Export Subsidies Policies

    The Greek government allows exporters to pay tax deductible
commissions and expenses to support exports.  Some agricultural
products receive subsidies from the EU.  Greece, as an EU
member, is also a member of the GATT Subsidies Code.


7.  Protection of U.S. Intellectual Property

    Greece is a member of the Paris Convention for the
Protection of Industrial Property, the European Patent
Organization, the World Intellectual Property Organization, and
the Berne Copyright Convention.  As a member of the EU, the
government intends to harmonize fully its laws with EU
standards.  Current Greek law extends equal protection for
patents and trademarks to foreign and Greek nationals.

    While intellectual property appears to be adequately
protected in the field of patents and trademarks, the same is
not true for copyrights.  Piracy of copyrighted products is
currently widespread in Greece.  Industry estimates are that 30
to 50 percent of video cassette rental transactions involve
pirated product.  Over 100 unlicensed television stations
frequently broadcast American movies and television programs
without authorization or payment of royalties.

    Greece took a step toward addressing this problem by
enacting a new copyright law in February 1993.  This law offers
a high standard of protection for all copyrighted works.  Its
greatly increased penalties may eventually serve as a
deterrent, if properly enforced.  The new law relies heavily
upon a new intellectual property office (OPI) to supervise
implementation.  The legal procedures for the establishment of
this new office were completed in October 1994, but the office
has not started operating yet.  How effective the law is will
depend directly upon how well OPI functions.  Due to the piracy
situation, Greece was placed on the USTR: "Priority Watch List"
under the "Special 301" provision of the 1988 Trade Act, in
November 1994.


8.  Worker Rights

    a.  The Right of Association

    The right of association is set out in the constitution and
in specific legislation passed in 1987 and amended in 1992. 
All Greek workers except the military and police may form or
join unions of their choosing.  In 1993, approximately 30
percent of Greek workers were organized in unions.  Over 4,000
unions are grouped into regional and sectoral Federations and
two umbrella confederations, one for civil servants and one for
private sector employees.  Unions are highly politicized, and
there are party-affiliated factions within the labor
confederations, but they are not controlled by political
parties or the government in their day to day operations.  
Greek unions maintain a variety of international affiliations
and are free to join international federations and
confederations.  Greek labor law prohibits firms from laying
off more than two percent of total personnel per month.  This
restricts the flexibility of firms and the mobility of Greek
labor.  Labor law mandates skeleton staffs during strikes
affecting public services such as electricity, transportation,
communications and banking.  The courts have the power to
declare strikes illegal, although such decisions are seldom
enforced.  Employers do not have the right to lock out workers.

    b.  The Right to Organize and Bargain Collectively

    The right to organize and bargain collectively was
guaranteed in legislation passed in 1955 and amended in
February 1990 to provide for mediation and reconciliation
services prior to compulsory arbitration.  Antiunion
discrimination is prohibited, and complaints of discrimination
against union members or organizers may be referred to the
Labor Inspectorate or to the courts.  However, litigation is
lengthy and expensive, and penalties are seldom severe.  There
are no restrictions on collective bargaining for private
workers.  Social security benefits are legislated by parliament
and are not won through bargaining.  Although civil servants
have no formal system of collective bargaining, they negotiate
their demands with the Ministry to the Prime Minister.

    c.  Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is strictly prohibited by the
Greek constitution and is not practiced.  However, the
government may declare "civil mobilization" of workers in case
of danger to national security or to social and economic life
of the country.

    d.  Minimum Age of Employment of Children

    The minimum age for work in industry is 15 with higher
limits for certain activities.

    e.  Acceptable Conditions of Work

    Minimum standards of occupational health and safety are
provided for by legislation.  Although the Greek General
Confederation of Labor (GSEE) has characterized health and
safety legislation as satisfactory, it has also charged that
enforcement of the legislation is inadequate, citing statistics
indicating a relatively high number of job-related accidents in
Greece.  Inadequate inspection, outdated industrial plants and
equipment, and poor safety training of employees contribute to
the accident rate.

    f.  Rights in Sectors with U.S. Investment

    Although labor management relations and overall working
conditions within foreign business enterprises may be among the
more progressive in Greece, worker rights do not vary according
to the nationality of the company or the sector of the economy.



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                             (1)
Total Manufacturing                                   125
  Food & Kindred Products                   (1)
  Chemicals and Allied Products              50
  Metals, Primary & Fabricated                0
  Machinery, except Electrical                0
  Electric & Electronic Equipment           (1)
  Transportation Equipment                    0
  Other Manufacturing                        29
Wholesale Trade                                        60
Banking                                               (1)
Finance/Insurance/Real Estate                          34
Services                                              (1)
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  424      

(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis

(###)


To the top of this page