Economic Policy in Theory and Greek Practice

The objective of this chapter is to explain the contrasts in the performance of the Greek economy between the 1970s and the 1980s and to enquire what role policy changes played in these developments. Between 1950 and 1979 the performance of the Greek economy has been remarkable by any standards, combining very high rates of growth with price stability. Even after the first oil crisis of 1973, the Greek economy showed considerable resilience, continuing to grow at relatively (for the period) high rates while the rest of the industrialized world was passing through an unusually prolonged recession. After the second oil crisis of 1979, the Greek economy suffered a serious setback entering into a period of stagnation, accelerated inflation and early de-industrialisation. It is the purpose of this paper to enquire into the causes of this reversal of Greece’s economic fortunes and to underline the chain of events that brought the country into a vicious circle from which it has not yet extracted itself.