-Government focuses on debt reduction, reform and liberalisation-

'EMU entry marks a period of stability and development' Costas Simitis

The smooth transition from drachma to euro at the beginning of this year augurs well for Greece, whose economy is developing at one of the fastest rates in Europe. Prime minister Costas Simitis says the country's entry into the European Union's Economic and Monetary Union (EMU) heralds the start of a new era, characterised by faster growth, full employment, social cohesion and prosperity. "Greece's EMU participation is the beginning of a period of stability and development that will offer creative growth opportunities," he predicts.

With the rate of growth of gross domestic product (GDP) forecast at five per cent for this year, and a purposeful drive to complete economic and institutional reforms, Greeks can look forward to further improvements in their living standards. The country's Institute for Economic and Industrial Research (IOVE), forecasts that Greece could achieve growth of 6.5 to seven per cent, higher than the official estimates. Greece's wider aim is to achieve real convergence with the rest of the EU in every sector. Of the EU countries that wanted to join the EMU two years ago, Greece was disallowed because it was unable to meet any of the five convergence criteria required by the Maastricht Treaty. In June 2000, Greece received the green light from the EU summit in Portugal for its application to join the EMU and on January 1, 2001, it became the 12th member of the euro zone.

Currently, Greece's per capita GDP is about 70 per cent of the EU average. The government tightened the fiscal belt to gain entry into the euro zone and it is unlikely that this will be loosened. Inflation, public debt and structural reform - mainly the privatisation of state-owned assets - and competitiveness within the EMU need to be addressed, say market observers. European Commissioner Pedro Solbes has urged Greece to speed up its structural reforms. "This will help the economy to obtain high rates of income and employment growth," he says. The IOVE has also urged the government to press forward with structural changes. "The main sectors of the Greek economy - agriculture, shipping and tourism - have remained essentially stagnant over the past 20 years or they are developing at a very slow pace," states a report by the think-tank. "There will be no base for a substantial start towards real convergence with Europe if the new sectors, which could play the role of the economy's steam engine, do not emerge," it adds.

A key objective of the government is to reduce the public debt from last year's figure of around 104 per cent of GDP to 90 per cent within four years. Mr Simitis says: "We are aiming for budget surpluses. Starting with a budget surplus of half a percentage point of GDP for 2001, we anticipate that this will reach two points by 2004. The reduction of public debt will allow us to redistribute expenses. By freeing funds from interest payments on public debt we can increase spending on education, health and employment."

Finance and national economy minister Yannos Papantoniou says: "The main challenges for the future are to achieve continuous budget surpluses in the next few years, reduce the public debt, promote structural reforms at a very fast rate in terms of market liberalisation, privatisation and deregulation, substantial reform of the social security system and more flexibility in the labour market. All these are on our agenda and by the end of this year all of these reforms should be instituted." Mr Papantoniou is optimistic that there will be further growth on the Athens stock exchange. "The Greek stock market has experienced substantial growth in the last few years. The daily volume of transactions was two billion drachmas in 1995 and now this is close to 150 billion drachmas.

The trend has also been upwards despite some fairly substantial fluctuations. Last year was not a good year, but still the trend is very positive. And I also think our stock market can play a role in the Balkans." The minister says that while there is considerable entrepreneurship in Greece, the government plans to give a boost to hi-tech start-ups and the so-called new economy businesses. "Greece is generally behind with regard to new technology," he explains. "People like to be their own bosses and we encourage this, especially in new technology. We have set up a fund through which we will subsidise venture-capital investment in hi-tech and the new economy. I believe the faster we enter into new economy businesses, the faster our growth will be in the next few years."

The deputy minister of development, Alekos Kalafatis, points to another factor that has energised the Greek economy. "Greek workers and businessmen have changed their attitudes," he says. "The family-run holding companies once so typical of Greece are being transformed as well-educated and experienced non-family members are brought into management, and there is now more cooperation with the trade unions." Vassilis Rapanos, chairman of the government's council of economic advisers, says: "The Greek economy is in a period of transformation."

In particular, he sees the employment picture changing as the number of agricultural workers diminishes and more women enter the workforce. The large influx of immigrants has also made an impact. About one in 10 of the labour market is jobless. Mr Rapanos hopes the unemployment rate will be reduced to 7.5 per cent by 2004, but he adds: "There are no easy solutions." The Greeks realise that much of their economic prosperity has been the result of EU funding. So, despite the sentimental loss of one of Europe's oldest currencies, most people think that being in the euro zone is best for the country. Euro notes and coins will begin circulating in January 2002 and the drachma will cease to be legal tender two months later.