In the decade of the 1960s, the growth of the Greek economy marked a slowdown followed by a gradual recovery. Indeed, after a prolonged period of high growth rates, accompanied by moderate price increases, inflationary pressure intensified in 1964 and 1965, and then decreased starting in 1966, with the return of confidence and the improvement of the public finance situation.
Employment in the business as a whole, after peaking in 1964, had continued to decline until the end of 1965, and after a slight recovery in 1966 it declined again since the autumn of that year. Employment movements in the manufacturing industry were similar, albeit a little more pronounced.
In conjunction with a high growth rate of the gross national product (about 7% at factor cost), the current balance of payments deficit had stabilized in those years and was largely offset by significant capital inflows, including a loan from the European Monetary Fund.
The economic situation became worrying again in 1967, both for the recovery of the negative trend in the balance of payments and for the financing of public investments.
The slowdown in the expansionary trend of the Greek economy, which had begun to manifest itself in the second half of 1966, turned into a recession in 1967. The product of the non-agricultural sectors, which had reached an average of 7% per year from 1960 to 1963 and the About 9% over the next three years, in 1967 it grew by just 4%. The public sector has played a very important role in both the expansion and the recession. Between 1963 and 1965, the deterioration in public saving represented more than 1% of the gross national product.
The measures taken at the end of 1965 to increase revenues and limit the increase in current expenditure had led in 1966 to an increase in public saving corresponding to about 1% of gross national product. The annual rate of growth was still significant (around 9% for non-agricultural products) throughout 1966, but signs of deceleration in private consumption were already beginning to be seen. In 1967, despite good harvests, total gross national product at factor cost and industrial output grew by only 4.2% and 3.3%, respectively, according to OECD data.
From 1970 onwards Greek economic activity was slightly out of phase with the movements of the European economy. The latest accelerated development peaked in 1973; subsequently, the highly restrictive measures applied by the authorities, combined with the Cypriot crisis and its consequences, caused a significant drop in total production in 1974. The civil government, having given economic policy a cautiously expansionary orientation, in the autumn of 1974 succeeded in stimulating the economy, which, in 1975, marked an increase in the gross national product, in real terms, of about 4%. The weakening of the domestic economy coincided with a certain ebb of Greek emigrant workers, and the situation for the labor market significantly worsened after 1973. The rate of inflation, which had clearly exceeded 30% in 1973, declined sharply in 1974, although it remained very high, settling at around 14% in 1976. The usual deficit in the trade balance, significantly increased in 1973 (1404 billion lire), as a consequence of the world recession and the rise in oil prices, it then stabilized (1525.5 billion in 1974). The fact is that Greece has no particular export product: tobacco, the most important item, represents only 8.5% of total exports. as a consequence of the world recession and the rise in oil prices, it then stabilized (1525.5 billion in 1974). The fact is that Greece has no particular export product: tobacco, the most important item, represents only 8.5% of total exports. as a consequence of the world recession and the rise in oil prices, it then stabilized (1525.5 billion in 1974). The fact is that Greece has no particular export product: tobacco, the most important item, represents only 8.5% of total exports.
Imports are two and a half to three times higher than exports. To achieve a balanced budget, Greece strives to become a major exporter of services (such as tourism) and transfers (such as the remittances of the numerous Greek emigrants), as well as a center of large transactions, of investments coming from the foreign countries and sorting of international aid.
Domestic demand increased substantially in 1975 and 1976, residential investment and current public spending on goods and services increased at a particularly rapid pace, but what contributed most to global progress was private consumption. The income per – capita in real terms during this period increased by approximately 4%. The slight increase in agricultural production, which was not affected by short-term fluctuations in demand, was more than satisfactory, thanks in part to the excellent harvests of 1974.
From what has been said, it can therefore be said that Greek economic policy, after the last months of 1974, tended, above all, to correct the question. The persistence of a significant deficit current foreign markets, however, limited the room for maneuver for the relaunch policy; moreover, even though the rate of inflation had declined since 1974, it had always remained so high that the authorities tended to prevent a new acceleration. It should be added that since the end of 1973 the strict provisions on price controls and on wage bargaining by the civil government had been greatly reduced, thus reducing the possibility of direct intervention on prices and incomes. As a consequence of this, the authorities gave a prudently expansionist orientation to economic policy to combat the negative economic situation, favoring the revival of the economy in 1975, both through the monetary and budgetary sectors. L’ increase in minimum wages and the enhancement of agricultural incomes have been placed within the framework of the global recovery program. Having detached the drachma from the US dollar in March 1975 and having implemented a “controlled float”, the Greek authorities have acquired a new instrument of economic policy. The value of the drachma was kept almost constant, in relation to a “basket” (weighted average) of currencies of the main trading partners, until June 1975, then the effective exchange rate dropped, and then stabilized in early 1976. In mid-March 1976 the drachma actually depreciated by about 6% (according to estimates by the secretariat) after the implementation of the controlled float, and 21% after the Washington Accords. It has been calculated that if the drachma remained pegged to the US dollar, its effective exchange rate would rise by about 10% after March 1975.
On the basis of the recovery that began in 1975, in 1976 the gross national product grew by 5%, with a rise in consumer prices of 10%.