By Costas Simitis and Yannis Stournaras
During the recent debate in the parliaments of many eurozone member states regarding the approval of the new €130bn loan to Greece, some members questioned whether the country had been ready to participate in the euro at the time of its entry.
In the mid-1990s, Greece made a formidable effort to meet the convergence criteria. It employed all available means: budgetary policy, monetary policy, income policy and extensive privatisation of banks and public enterprises. By any measure of fiscal performance (cash or national accounts), the government deficit fell by 10 percentage points, from 12.5% of GDP in 1993 to 2.5% in 1999, the year whose economic statistics were used by the European Council at Santa Maria da Feira in June 2000 to endorse Greece's eurozone participation.
Greece's performance was also positive with regard to the other nominal convergence criteria (inflation rate, long-term interest rates, public debt and exchange rate). It is worth recalling that the decision endorsing Greece's eurozone admission was made after exhaustive scrutiny of the Greek economy and respective reports by the European Commission, the European Central Bank and the Economic and Financial Committee.
It is also worth noting that, in spite of the tight budgetary and monetary policies, which were essential in order to reduce government deficit and inflation rates, GDP growth rates started to improve.