DOCUMENT OF INTERNATIONAL MONETARY FUND

AND NOT FOR PUBLIC USE

It

CONTAINS COIFIDENTIAL
INFORMATION

To :

Nembors o f the Executive Board

From:

The Secretary

Subject:

Greece

- 1.963 Article XIV ConcuLtations

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Attached for consideration by the Executive Directors i R t h e

staff report on the 1963 Article X N consultations wlbh Greece, The
recormendations of the staff appear on pages 27-29 of Part I. Background
i n f o r m t i o n on the economy and restrictive system of Greece I s contalrled
in Part I1 of t h e xernorandwn.
This subject w l L be placed an an carly agcnda.

Att:(l)
Other Dietxibution:

Department Heads
Dl vfeion Chiefn

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v DOCUMENT OF I[NTERNATIOWAL MONETARY FUND AND NOT FOR PUBLIC USE

PART I
Staff Report and Recormriendationa--l96~ Consultations
Prepared by Staff Representatives f o r 1963
Consultations with Greece
(Reviewed by the Committee on Article XIV Cousultationa)
Approved by Irving S. Friedman and Ernest Sturc
October 18, 1963

I. Introduction
In accordance with the established procedures for Article X I V Consultations, a staff' team comprising Messrs. Ernest Sturc, W. F. Hughes
and R. J. Familton held diecussions with representatives of Greece i n
Athens from June 24 to July 3, 1965.
The repreaentatives of Greece included:

Mr.

Bank of Greece: Mr. X. Zoolotas, Governor;

J. Pesmazoglu, Deputy
Governor;
A. Kyrkllltsis, Director of Reaearch Department;
A.
Sakellaziou, Director;
E. Eliades, Miss M. Goudis,
E.
PapaChryssanthou,
D. Kalodoukas,
G. Vlachopapadopoulos, Mr. L,
Papadopoulos.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

"Inistry of Coordination: Mr. C. Dousis, Director; Mr. N.

Kyriazides, Deputy Director Generd;
E. Pams, Director,
Thanos, Director; Mr. J. Tzitzis,
H. Papachristopoulos.

M.r C.

Mr.

M.r

Miniatry of Agriculture:

Ministry of Commerce:
&tUaEi

Mr.

Mr. C.

Ministrr of Foreign Affairs:

Ministry of Finance:

Mr.

C. Dragonas.

M.r Them,

Kontogeorgis,Director;

Mr. M.

Maxarakis.

5 , Tracas, Director General.

The head of khe staff team was received by

Minister of Coordination.

Mr.

Karolos Arliotis,

Mr. Costa P. Caranlcas, Alternate Executive Director

attended t h e meetings as an observer.

of the Fund,

Part I of the report swmPsrizss *the discussions and contains the

s a f f recommendations. Background i n f o r m t i o n is contained i n Part 11.

- 2 -

31.

PART 1

F w d helations with Greece

Greeces quota in the Fund i s $60 million and a gold subscription

of $15 million equivalent ta 25 per cent of the quota has been paid.
Greece has not had any exchange transactions with the F h d .
An i n i t i a l
par value of Dr 30 per US$l was agreed with t h e FUad on March 29, 1961.
The exchange rate system i s a unitary one.

The last staff discussfons, for t h e 1961 consultattons, were held

in Athens from January 25.~0, 1962.
The staff report (s~/62/95) was
considered by the Executive Board on June 1, 1962 (EEM/62/24).
The
fouowina decision was t&ken:
1. The Governmen-c of Greece has consulted the Fund under
Article XIV, Section 4, of the Flmd Agreement concerning the
further retention of i t s t r a n s i t i o l d arrarqemenks.
2. D
u
r
i
n
g 1960 and 1961. the gross national product i n real.
terms increased by 4 and U per cent respectively.
In 1960 the
growth was stimulated by Increased goverilnrent eqe,rditures, ospecially on investuents and Increased r a x i p t s from i n n s i b l e a ,
while in 1961 all elements of demand contributed t o the inpressive
economic expansion.
Wages, salaries and farm income were si@.ficantly raised but virtual price stability was maintained in 1961.
Although in the first two year6 the rate Jf investment postulated
i n the 1960 to 1964 developinent program was not achJ.eved, there
was an important reduction in mmploymen.t;, in part because of
large emigration.
A high level of ecmomic activity and a sharp
rise in imports contributed to further substantial improvementin
current revenue of the Government and as current expenditures rnse
less, the resultiug EWplu6 =de a major contribution to t h e final?clng of public investments.
In both years the money supply
rose at a very hiGh rate, partly because there was B contlnued
heavy reliance on central bank financing of agricultural. investnenk and price support operations.
The implementation of the development plan w i l l require
an increased volume of public and private savings,
The Fhnd
believes t h a t to obtain ouch 8 rate of savlngs, It is essential
for the Government to increase the surplus in its current budget
through measures capable of reducing sharply tax evasion and by
restraining current expenditures.
TheHe meaburee;, together with
eteps in the monetary sphere designed to restrain the expansion
in the money supply to the level compatible w i t h the maintenance
of i n t e r r price s t a b i l i t y , should help to strengthen further
confidenre in the national currency.
Thi6, in the Funds v i m ,
i s 8 prerequioite for further balanced development of the economy
and Zor the encouragement of personal savings.
The Fund notes
+he progrew made in the l a s t two years in broadening the capital
market and in reducing reliance of the Agricultural Bank on the
Bank of Greece for the financing JP its lending,
. e Fund believer that in order to strengthen #e effectiveness of monetary
policy, further step0 ir this direction are ur&en-k.
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II J~

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PART I

c'levcloped In r e l a t l v e Isolation.
I n t h e l1g:h-L of these ctevelop~nentsthe
dLscusslons cen'tcrcd on t h e pr1mipa.l. ub,Iectivec 01' the hve-Year Program
far thc Economic D e v e l o p m n t oi' Greece (1960-64)with p a r t i c u l t t r reference to t h e efforts being made t o achieve a higher level. Gf investment,
to secure i t s nonmrlationary financzng, and t o strencthen the balance
02 papncnts.
They were a l s o concerned wlth the posslbLlit1es f o r y r o Cress torrard ezsing exkcrnal r e s t r l c t l o n s and l e s s m m g Greecels depcncience upon bilateral trade and payments agreements.

-5-

PART I

To overcomc acute food s h o r t a p c during t h e ' f o r t i e s and early

'fifties, wheat-growing was encouraged by a system oC price support
payments.
This hab Led t o overproduction a t c o s t s exceeding world
market prices
In t h e l i g h t of t h e obJec tives of t h e a c r i c u l t u r a l
program 1% trou3.d seem that t h e area under trheclt should be reduced.
However, taking both social and poJitical factors i n t o consideratlon,
the most t h e t the Government has f e l t able to do has beell to maultau
\!heat support prices in 1962 and again in 1963 a t t h e levels estabLlshed 111 1961.

lndustrial production rose by 4.7 per ceut 111 1962, somewhat; l e s s

than in 1961. (see P a A I J , Table 10)
Greclr lnd1wtry 1x3s developed on
the basis of the dornestlc mrlcet and, as previously merLiolled, h a beeL
considerablyinfluenced by fluctuatsons ~n a g n c u l t u m l income. Thus,
the fall i n agricultural mxme, although n o t as Lrnportaut as In previous
years. was s t i l l a major factor govcrnug the rate of increase in mdust r i a l production i n 7962. The Greek rcprcscntahves considered t h e f a c t
that industrial praduc ti011 had risen t o be a cignsfxcant dcvelopmsnt, but
they agreed that further detennilzed e f f o r t s had t o bc ma& to Inodcruze
and lmprove exisking ~ n d u r ; t r m lp l a n t s a:ld t o enhance the compctitivcness
of t h e i r products, p d r t l c u l a r l y m t h a viev t o export.
Also, 32; uould
be necessary t o develop new products t o take f u l l advalltagc of t h e p l e n t i fuL Labor supply and the a s s a c m t l o n w i t h the E N . lhporis of lmndic r a f t s and rranufactures lncrea,scd by over one t h i r d in 1362 t o $22.5
millLon but, even so, were equivalent to only 9 per c e u t of t o tal. earn cngs
from vlslble exports

Other factors vhich influenced mdustrLa1 production i n 1952 werc

the lncrease i n i n d u s t r l a l investment, t h e rcJatjvely lngh l e v e l OS'
stocks of f i n l s h e d goods u t the beguming of the year and, in some G'Xtcrrs, an m a b l l l t y 50 expand proctuctlon because p1-an-k wcre already
operating at f u l l capacity.
I n the f u s t flve ~ n o l l t hof
~ Sgcj mrlustrral productlon was &bout 4 per cent above tlie comparable Level i n

1362.

- 6 -

PART I

explamed that t h e increase was caused larpely by higher food prices,

e s p e c m l l y of o h v e 0x1 and potatoes, whlclz had rlmx because of 0. reduciaon in s u p p l l e s .
In addition, mcreanes in some indlr'ect .Lcxcs
in August 1962 had led to higher prices f o r tobacco and beverages.
However, the risine trcnd hail haltcd i n May 1363 anti prices were l i l r c l y
to ease as new s u p p h e s came forward.
The Greek representatives adcizd
that t h e price r h e s attributable to increaoes In indirect %axation had
Led t o clams for hlghez wages.
However, the authorities h ~ fdm n l y
adhered to t h e i r gcneraL p o l i c y that wage increases should be granted
only if justifled by improvements i n prcductivlty,

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PART

I n mid-1362 t h e program :I&S reviGed I n t h e light ~ i 'a c t u a l experience so far and updated to cover the period 19~2-G6in Q perspcctive of the t e n years 1962-71. In tho rcvmion, no changes were wade
in the target for the average annual rate of growth in real national
income o r 1 tllc other basic o'oJcctives.
The program continues too
rest upc the conviction of the Greek authoritaec that the mllitenance
of monetary stablllty 1s a sine qua non f o r the effective mobilization
of domestic s a v i n g s f o r productlve mvestment and thug f o r sustslned
and balanced economlc growth,

-9-

PART I

The Greek repreaentativen affirmed Lhat the basic aim of f i s c a l

policy was t o f a c i l i t a t e economic krowth in conditlons of S t a b i l i t y , i n
accordance with the objectives of the development program and evcry
e f f o r t is made t o keep governmeut current expenditure as l o v as possible.
The out-turn f o r 1962 shows that i n t h e year expenditure was kept close
i o tha budget figure, Current revenue, howver, WRS about 2 per cent
hi&er than budgeted, primarily because the ectlmte was made col1serv&t i v e l y b u t a l s o because in t h e course of the year the Government illtenThe Creek representatives
s i f i e d its campaign Lo combat tax evasson.
considered that a rise of almost 10 per cent i n 1.962 i n the revenue
from direct taxation represented a good achlevernent, but; they agreed
that tax evasion was s t i l l widespread.
As a rcs3&l.t
o r the increase i n revenue %he current budget surplus,
a t Dr l,5511 million, was Ih. 554 d l l i o n 1arC;cr tllan had been estmated.
This vas of irnportant a w i s t z n c e i n mecting thc rcquiremnento of the 111vestment budget, which provided for an outlay of Dr 6,000 mlll lon and
resulted in actual expendlture of Dr 5,853 mllllon, almost 16 per cent,
more than i n 1961,
Tlus is evldence of the determined c f f o r t being
made by theGoverment t o promote economic developmenl.
The Greek
representatives lnaintasneci t h a t the expendlture through tllc lnvestmcnt
budget In 1962 was financed from noninflationary swrces.
In adilltion
t o the current budget m r p l m (cJf Dr 1,554 ml'llion), the Gowrrment; had
at its disposal revenue from S t a t e Investments (963b million), thc
proceeds of Treasury b l l l and bond issues (Ds 2,029 l u l l l o n ) , funds
mounting t o Dr 640 m l l i o n channeled through p u b l ~ cc n t i t l c s (1.e.
'local ppernmentc and s o c i a l msurancc organLzahons), and the comterp a r t of transfers from abroad and f o r e q n credI Ls and Loans (
Lh:
$9
nlJ lLJ.011) 0

The Qfeek Yepregentatives agreed with t h e staff that t o complete

t h e flscal picture account should also be taken of Ccntrai Ea& advances
t o fmance aGrI.cultum1 price S U L J p G r t operations and some incc~ntivepayments not met from t h e budget.
I n 1362 such advances, which are an
ex-pensionary Influence on t h e economy, increased by DL- 837 rnilllon
(details are glvelz J n P a r t 11, Table 3 5 ) .

.
I

10

PART 1

charges.
On t h e specific qmstion of the subsidy paid to the S t a t e
r a i l m y o , It was explained t h a t t h e sum budgcted for 1365, Dr 470 mill i o n , while Dr 14 million hl&er than that,pmd i n 13G2, would have
bean even larger but for the mJor effort recently made to uprove the
railways administration and f i m c e s

Investment budget expendzture I s estimted at Dr 6,250 million,

nearly 7 per c e n t rume than actual expenditure i n 1362.
The Increase
is associated with development; outloys f o r agriculture and l m d Improvement and communications.
The budget aesin provzcies for investment expend. ',we t o be financed from noninflationary aources--thc c u r r e n t
budget surplus, bhe proceeds from domestic borrowing against Treasury
bills and bonds ( a Dr 1,500 million bond issue vas succesblully flozted
i n March 1963) and the counterpart of f o r e i g n loans a n d c r c d i t o and
transfers from abroad.
However, the Gtaff pointed c u t thab a b m t half
of the investment outlays budgeted for 196) m r c to 'be fimnccd from the
proceeds of foreign loans and grants, the f u l l amount 0.C which had not
yet been Gecured in negotsationc v i t h the Conuortium.
Tiicy tnqmred
whether revenue from domestic sources could not be mrreawxI*
The
Greek representatives c o n a i d c e d t h a t improved a h i n ~ n - l x a t i o nm u l d produce an Increase In revenue from Clircct t;auuaI;.wii and thls was a h e n d y
reflected i n t h e 196) estimates, b u t an increase i n l n d l r c c t t r a x a t ; l o n
would be undeslrable s l n c e Lt v ~ u l dlead to pressure for vage mcrcascs
and affect c o s t s and prlces.
Tney stated Llmt s h w l d toLe.1 budget
revenue seem h k e l y t o f a l l short of the expenillture cstlmates, c h e
authorities were f u l l y prepared tu reduce mnvociment, ouLlayrs in order
t o ensure budgetary balance.

- x1 -

'e

PART I

cases trhera accruals of savings were i u s u f f i c i e n t to match t h e i r out-

lays on current eqenses.

In such instances and, in f a c t , f o r most
of the smaller in;tltutlons, a s e r l e s of ama1e;amat.mn.s would be helpfLL.
A tnorough review of the issuea raised by the exictence o i
nmerous, separate tnsurancc and pension funds and of the "third party''
taxes vh%Al help t o finance them, F L', needed i n order both t o mgrove
the social services they rendcr and t o utlli7,e more p-oductlvely thc
savings accruing j-n t h e i r accounts (see Part 11, p. 54).

Mone tary pol icy

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t h e i r campaign to encomage Gavings, cspocially in t h e form of bank deThey have also endeavored t o encourage a switch to time deposits
and have attempted t o stimulate investnentin long-lecm szcurltics.
CorLsiderable progress has been made.
Savings dcposits v i t h the conxnwcial
banks Etud other f i m n c 1 2 1 institutions rose by abollt Ih, 2.6 billLon or by
20 per cenC and t-lme deposits by D r 2.0 b i l l i o n o r by l j j p e r ccnC i n
lg623 i n t h e same y e r i o d soue Dr 2.0 b l l l l o n had been d r a m from t h e
c a p i k l market mainly tlirotlgh bond isaues.
The rLLsmg Crcnd I n savinas
and tune deposits hac; continued in 1965.
posits.

b.

The capital rnarlwt

- 13 -

PART

t o achieve a measure of Buccess in expanding the market.

Security
issues totaled Dr 2,153 million as against Dr 879 million i n 1361 and
progress was made in increasing the proporkion of prjvate ~ ~ s u e swhich
,
amomtea t o w 643 &=ion in 1962 as against ~r 139 million i n 1.961.
On the other hand, t h e bulk of Lhe prlvate share issues were by banks;
new securities from other private sources remained at a 1011level.
In
March 1963 the Gcvernmnt flosted a bond issue of Dr 1,500 million,
following an issue of Dr 990 million i n April 1962; i t s oversubscript i o n illustrates the growing capacity of t h e market.
Development of the market through more share issues by private
concerns has been hampered by the reluctance 0' family-wried enterprises
t o W e e q u i ~ ,nit debenture issuer> and t o d i s d o s e f u l l details of
their f i n a n c i a l position, by the rcla-kively low dividends paid, and by
the tax structure which x&es fixed-interest loans more a t t r a c t i v e than
equity issues as a source 0' zapital funds. Many entrepreneurs have
therefore relied on the conqercial bank6 and some a r e heavily indebted,
As a result unit costs of production are adversely affected.
C.

Credit policy

Within t h e over-all aim of mintaining domestlc price stability,

the authorities sought bo insure that adequate crcdkt was avallable for
working capital, for the financing of exports and f a r desirable private
investment, They sought t o prevent the use o f c r e d i t for speculative
or inessential purposes, The formulation of policy measures has continued t o be the r e s p o m l b i l i t y of the Currency Committee whose membership comprises the Governor of t h e Bank of Greece and the Mmisters of
Coordiriation, Finance, Agriculture, Industry and Commerce
Hitherto,
as part of i t s functions the Committee has l a i d down detailed regulations
governing the use of comerciaJ. bank resources, a practice which stems
from e a r l i e r years when consolidation of the economy was the major objective. After
a recent review of the functions of the Committee. i t
is pmposed t o Bite the bunking system both more freedom and more responsibxlity in its lendingoperations; the Committee would no longer
be concerned with the detailecl adminmtration of selective controls but
would formulate general rules t o be applied by the comerciaL banks and
would retain i t s supervisory rcle.
The Greek representatives agreed
that a standing corrmittee such aa %his consisting of all the Ministera
concerned with economic affairs, was an effective means. of inswing
that monetary pollcy harmonized with broad monomic policies, Also
it vas a valuable forum f o r a re6ular exchange of view on monetary
matters and the currerit economic cituation.

I n a d d i t i o n t o the dlrcct regulation of the commercial banlcs' utx

of their resources and direct controlo over deposlt and lending rates
of interest, the monetary authorities mintain i n d i r e c t control through
the use of variable reserve requiremecbs.
In 1962 and t h e f i r s t half
of 1963 no changes were made i n the compulsory reserve requLrements;

- 3.4 -

PART J:

these remained at 8 per cent of the banksT private sight and savings
deposlts pl;Lxi additional percentagesduring the period between December
and February when liquidity is seasonally high.
Similarly, there ha6
been no change in the requirement that the three largest banks should
devote %ha e q u i v d e n t of 15 pe3- cent of t h e i r deposlks to %he granting
of specified types of medium- and long-term loans.
Changes were made,
hotlever, i n the rules govcrning 'the commercial bankst investments in
governmen? securittes, in oyder to influence the struct1xr.e of theAr
l i q u i d a s s e t s and, ao previously mentioned, in the selective controls
over bank c r e d i t .
These latter changes were =de to simplify the controla and at 'the ~ a m etime Lo encourage the e q a n s d o u of production and
of exports
The interest rate structure is complex (see Pcrt 11, Table 211)

There is a relatively wide spread between the banks' deposit and lending
rates amounting t o 4 per cent, if the highest raten for each are compared.
There 10 a l s o considerable dLffez:entiat.jon between the lendfng rates for
v a r i o u s types of transactions.
Present rates (excludmg commissions)
range from 5-5 per cent f o r the export trade and tobacco to 10 per cent
for domestic and import trading, The Greek representatives considered
that this differentlation on lendme rates had been useful.
However,
t h e auIAori-bies now aimed at reducmg the spread but tlus w o a d neccssarily be a gradual process s i n c e internal trading a n d importing were
profitable and a r e l a t i v e l y high rate was needed to prevent a diversion
of resources fron the export sector.
I n add-ttion, a lower rate on
c r e h t for handicrafts was considered a usetul encuuraC;emenb to t h e
development of t h a t sector, which the authoritzcs favored on general
economic and p o l i t i c a l grounds.
The R a n k of Greece s rediscount rate
was reduced from 6 per cent t~ 5 3/4 per c e n t &P from April. 1.963 and
commercial bank lending rates also were lowered.

Greek representatlves stated that the authorlties vere concerned to improve t h e financial p o s i t i o n of the Agricultural. Bank.
At ihe end of
1962 loano outstanding mounted t o & h o o t I)r 9.9 b i l l i o n cf vhich the
hank had provided only Dr 3.0 billion, or j0 per cent, from i t s own resources (see Part 11, Table 26).
The bank was haldicapped i n i t s
efforts t o attract more dcpoaits p a r t l y because 1% operated 111 r u r a l
meas where savings were relatively low.
Also, it had concelrtrated
more on d i a t r i b u t i n g credit than on collecting a a v i n p .
'Phe bank has been B u J o r instr~cmentIn t h e un-plerncntation UP t h e
Goverrmlzt Is agricultural progrm with i t s extensive brcnch network
being used f o r the provision ot advisory and extension services.
Its
operations have been asslcted by central bank finance at a nolmnal rate
of interest, but the grant;~ncof Long-term loans t o farmers at, 2 per
cent p r annum adversely affects Its ability to mcet current expend3
twes from income. Z l ~ estaff buggested that the bank couid develop
its relations wtth fanners by buildinc on its afivlnory role and extend
its range of banlcing servlces by encashing remittanccb from abroad
which, a% present, it is not authorized to do.
By these means It would
bo%h develop its banlnng functions and strengthen its financial position*

Reviewing the p o s i t i o n o t t h e other financml m s t l t u t i o n s , the

Greek representatives said t h a t t h e Industrial Development Corporation
had almost completed its preparatory work on basic recealch. into industry.
The IDC, which i s esscntlalkJ a channel f o r inducmg foreign and
Local industrial ists Lo rmdertalcc , o i n t operations, had now reached the
EtaGe vhere risks could justifiably be talrcn.
!be Ecouomx l)ewclopmcsnt
Financing Organizatlou cont-inued t o be an Important so~n-ceof lonG-tcr:n
industrial f ~ n a n c e , i n 1962 loans approvcd alnoullted t o Ix. 505 milllolz,
Dr 7 million less t h m ~n 1961 bccncmc of a all. Ln l o a n s t o finauce the
purchase of transport equipment for t h e tourict industry.
1,~ms
t o industtry and f o r other c a p l t a l expenditurer; i n tourlsm (e.G., h o t e l s ) both
increased ~n 1962.

a+.
In 1962 Imports rose by $76.0 mi ILion
d

result of l a q e r purchaceo abyoad

t o $663.1 miU.mn, mainly as

of' capital ~ o o d sand raw matcrmls

I n response to the requirements of the devclopmcnt prugram, Exports,

on tho o t h e r h a d , increased by only $(. 7 1 n i l L i m zlc $242.6 m i l l i o n , at
vhich l e v e l they were no higher t h a n i n 1358. The trade deficit rose
accorclincly t o $418.5 mtUxon compared with $450.2 mlll ron Sn 1961.
The small mcrcase i n
nearly :p13 million I n
foreign buyerr; during
tivec acreed t h a t the

t o t a l exports T I ~ lnainly
S
attributable t o a f u l l of
tobacco receipts caused by delays in purchases by
t h e l a a t quarter of ~ $ 2 .
The Greek reprecentaellpork perforinancc in 1962 vafi not encouragLnG.

They said that the steady annual increases in the trade d e f l c r t were an
unsatisfactory feature of the balance of payments.
Over recent years
8ome progress had been made in changing the composition of exports (see
Part 11, Table i 9 ) but this had done no more than preven-t; an a c t u a l decline.
tlith agricultural comroditles s t 3 11 predominating, there had
been no sign as yet of a sustained end nubsCantia1 increase in exports.
To achieve such an increasc, it would be necessary f o r Greece Lo export
more i n d u s t z i a l goods.
So far, the various incentxves offered t o cxporters haa yielded only smll returns.
The Greek repre3entaLjvt:s
said t h a t it took time for exporters to Secorne accpaluted wLth the
preferential. credit facilities and tax allowances but, I n o m impartant,
the EtdJustmcnt from p r o d u c n g f o r a p r n t c r t e r t donlestlc mcar%etto produciug for competitive markets abrord was not an easy one to make.
&cause of a rise in the surplus from net invisible trancactions,
the h C l . e Q E e d trade d e f j c i t in 1962 was n o t f u l l y rcfl-ectcd in n larger
d e f l c i t an (l;oods end services acccunt;
this amounted to $122.8 mill i o n in 1762 ocmparcd w-i-bh $96.8 million in 1.961. In 1962, m h l y as
a result of marked increases in receipts from emgrants' transfers and
from wages and oalaries of Greek na-tionals worlrinG abroad, and a further
upsuing In earnmg,c from tourism, the net surplus Prom invisfbles ro6e
t o $295.7 mallion compared with 45253.4 million i n tno previous year
(see Part 11, Table 40)
b

( 2 ) The n e t surplus .from m v z s i b l e trancactions 1s estimked at

$295 mill~on--virtusliythe same as the surpluo in 1962.
In view of
the c v b s t m t z a l increase in 1362, t h e staff inquired wllc-lher somc
further improvemenk could 110.1; be expected in 1964.
The Creek representativec concxderccl thak t h e amount af emigrants' transfers w o U d be
about the same as in 1762, that Zurther rises i n receipts I'rom t o u n s m
and from remlt-tmces crf m g e c and salaries were probable, but %hat unl e s s the ditC'irultlea in intcrna-houal shipping were solved, earnings
from t h a k source would show l i t t l e increace.
Therefore, because of
the larger trade d e f i c i t , the n e t d e f i c i t on goods and oervicer; a c c o w t
is expected to be $160 rnjllion, or about $5' million more than L n 1962;

- 17 -

PART I

( 3 ) The estimated deficit of $160 million on goods and Gemices

$16.8 million on account of o f f i c j a l c a p i t a l out-

account is ulcreased by

flow and reduced by $74 million f o r the estimated net private capttal jnflow. This leaves $102.8 million ao the amount the Greck authorities
estimate as necessary to prcvcnt 8, l o ~ sof monetary rcscrvcs 111 1963.
Negotiations with the Ccnoortium established ullder OECI) auspices

in July 1962 have so far resulted in offers of at,,arstance amounting to

a t o t a l of $67.4 million.
The Grcek represeutatives cons ~dercdthat
t h e pl*oEpects were good f o r obtaining thc rmla3nlng $ j s b k rnllhon required O I L the basia of the abuve eslllaates.
Comprehensive data for Greece's a c t u a l bctla!lce of paylnenh ~n 1963
are riot available beyond May.
H o w " , t,;ade figures f o r tile first
seven month6 of the year suggest t h a t the actual trade deftcit, m y not
be as large a s had been fcrecaat. Imports in January-July 1963 amounted
t o $382.4 mll'lion and exports to h149.5 nlillion cornpared wlth $$+g.h m i l lion and $126.6 mlllion, respectively, in t h e corrPsponding period i n 1962.
Exports th\ls rose by $22.9 million iu the first seven months while in the
e a t b a t e s the increasc for the year as a whole was put at $22.4 million.
C.

Cayital. transactions

In 1962 the n c t i n f l o w or prlvatc c a p i t a l jncreascct sharply to $loo, 4

million compared w i t h :j>5.6 million i n 1963
About h a l f the increace was
caused by FL rise in foreq-p supgSLers credits and rather 1-ess thau half
by an enlarzcd flow of 1onc-tcrm ctlpltttl.
Thc n c t inflow from o f f i c i a l
long-tern capital. and t r a n s f e r & amcu~lted l o $75.9 million in 1962 compared with $79.2 m d l l ~ o nduring the ~ ~ P V Z O U year.
G
The t o t a l capital
i n f l o v therefore arrlounted t o :$176.2mdllon, $41.5 n u l l l o n more than in
1961 and $ 5 ~ 5. mj l l i o n i n excem of t h e d e f i c i t on goods and services
account.
The Grcek rcpresentatLves explained that the e~lCi~uaLc
of $74
million for the net private capital inflow in 1963 relatcd only t o longt e l a capital; it had been assumed that no increase would occur .In suppliers' c r e d i t s f o r thc year a6 a whole.
A t t h e end of 1962 the totaL
value c?f supplf err;' c r e d i t s o u t s t ~ n d l n gwas $146.'( million. The authorities were concerned .tu m s w e t h a t the U G ~o f such c r e h t s vas not excessive.

At t h e cnd of 1961 gold nnd forcsgn cxchange reserves smounLod t o

$250.5 mlllioll compared w i t h $170.1 millLon at the end of 1958. I n 1962
they were further mcreaeed by Qh19.k million t o $269.9 m i l l i o n ana have
since risen t o $284.7 million at the end of June 1.962. The mcreaw i n
1162 was achieved after gold sovereicns t o a valuc of $28.8 million had
been tranoferrzd t o a special fund t o be used for interventions i n Lhc
domcstlc Gold sovereign market.
'kc Grcek represcntativcs explained
that the covereigno transferred had been acquired by purchases in thc

- 18 -

PAFiT I

domestlc market over scveru years.

Gold soqerelgns were still Import a n t in the Greek monetary system and a suddens steep r i s e in t h e n price
could dzGturb confidence and cause a chain rcactllon on other l x i c e s and

Therefore, to help preserve monetary s t a b i l i t y 1% vas desirable

that the authorities Ghould be a b l e t o intervene in the m r k e t c The
b a s i c purpose o f the fund I J ~ St o enable them t o s t a b i l i z e gold sov-%'u%n
prices, especially during crJtlcal periods of political or u - k e r n a t i o n d
uncertainty.
The Greek representatives agreed with the staff t n e t t h e
reserve p n c i t i o n was reasonably stranggoin June 1903 t i e rcservcs were
equivdent to about f i v e months 1 papnents for m p o r t s ,

Wages,

A uoteworthy developmenl in 1962 wets the agreement for t h e settlement of Greece's prewar dollar debt Lo U.S. bondholders, de t a i l s of' which
are glvcn i n Part 11, pp. 68-70.
Tke staff t a m inquired whe t h c r t h e
Greek reprcserltativcs were i n a p o s l t i o n Lo report 011 progress made $11
negotfaLions to e f f e c t a setLlemen1; of the r e v a i n m g prcmr debt with
other foreltfn holders.
The Greek representatkves stated that, t h p n
au'thorltles were f t t l l y amwe of the importance of solvln& this problem.
However, a rerort on progress toward a sol,utJm wad not pot;r;lble f o r tlic
time b e h g

Tile Grcclr rcpresentatjvec s l a t e d %hatit was t o o so011 t o attempt an

assessment of the 3 m y r a c t of the a s s o c i a t i o n qyeclnent on the domestic
The f a c t t h a t thc neGotlations were successfully cornplcted,
economy.
however, had r;timulatcd investmcnl during the second h a l f o f 1362.
Also,
c e r t a i n adjustments had been made 111 the restrictive sysecm ana wiLh regard to credit policy and 1nt;crea-L rakes (see Part TI, pp. ' 7 p 7 6 )a

AG regards the i m p l i c a t m n s UP t h e agreement for futuro policy, the

Greek authorities s t a t e d that the drzve to expand cxpor'to and the lrducemc11-L~offered to exporters both arosc l'rou the nccd to adapt prdduction
to European demand.
There had been an increase i n t h e number of European

- 19

PART 5

firms establiehed in Greece, b u t t o take full advantage of these OppOr-

tunities, an improvement i n technical and vocational training faciiities

Altogether, the Greek authorities were confident t h a t they
had chosen the correct pol,icy.
They appreciated t h a t negotiations
would not aLwctys proceed smoothly and that problems of national in*rest
d g h t make the implementation of the agreement d i f f i c u l t from time t o
time.
However, t h e i r main concern was that domeatic factors and a t d m
tudes should not i n h i b i t progress toward integration.
was v i t a l .

7. The r e s t r i c t i v e system

U n t i l July 1962 imports from the United Arab Republic were subsidized by the Bank of Greece
I n order t o finance t h i s subsidy, surchazges were levied on the proceedo of Greek exports t o and on invisible
receipts from the United Arab Republic.
This system, which l e d t o 8
number of effective rates, which differed from parity by more t h a n 1 per
cent, was abolished by a new bilateral payments agrcemcnt cigned in June
1962. A l l transactions betwcen Greece and the United Arab Republic are
now s e t t l e d a t o f f i c i a l rates within the permitted mar~insthrowh a
clearing account denominated bn U.S. dollars.
a.

Restrictions on tmde and payments

In order t o assist the development program, imports of many cateIn

gories Of machifiery may now be effected without p r i o r approval.
additlcn, thcrc have been some minor transfers of commodities among the
various import l i s t s .
The period of payment f o r tune drafts has beer1
lengthened. With the entry i n t o force of the association agreelnent
mth the EEC t a r i f f d u t i e s have been lowered by 5 pcr cent for manufsctures and 10 per cent for agricultural products;
also the Greek authorities modified advance import depoPitrequirements.
The import l i s t F-200,
i t e m 011 which required an advance deposit of 280 per cent, vas abolished
and advance inlport d e p m l t s on commodities scheduled i n l i s t s F-50 and
F-100, amountmc t o 70 per cent and 140 per cent, respectively, of the
VaJue of the goods, were each reduced by 10 pcr cent irrespective of t h e
sou1'ce uf Supplv.
The Greek representatives pomted o u t tha2. vhile t h e
association agreement required Greece t o reduce advance depoGits on u n port5 from ZEC countries, t h e extension of this measure t o all cowtries
had been undcrtaken t o avoid any element of discrimination.
'Ifhere have been few changes i n the system of control. over invisible
p'j;ymentc, although the personal allowance f o r tourism hac been raised
from $2.50 t o $200 for two journeys i n each year.
The Greek representatives believed t h a t the limits placed 011 invisible transactions under
the present licensing procedures did not restrict the use of foreign
exchange t o any noteworthy extent.
b.

Payments relations under t h e EMA agreement

bilateral payments syctem between Greece and some other rcembers

of the EMA was abolished on April 1, 1$j. Sincethenthecentralized
accounts maintained at the respective central banks had been closed.
%e

- 20 -

PART 1

Transactions with these EMA countries are now -wried out d i r e c t l y by

the Greek commerc sl banks without intervention by the Bank of Greece
and consequently m & s have been given permission t o hold foreign exc h a g e b a l a c e s [ nd t o engage i n d e a l i n g s i n foreign exchange with
their correopoadcnts abroad.
Two W countries, Portugal and Turkey,
remain outside t h i s new arraugement and transactions with these countries
are s t i l l CRrried on throughcentralized accounts. As regards Spain,
the f h c i l i t y provided t o Greek banks t o t r a n m c t business through Conv e r t i b l e currency accounts maintained with correspondents i n Spain is
supplemented by the existence of an a c c o u t i n t h e name of tlx Dank Of
Greece at t h e I n s t i t u t o Espanol de Moneda Extranjera.
C.

Bilateral trade and payments eyl,recm,ents

Greece maintains bilateral trade trnd payments with five Fund manhers (Finland, Yugoslavia, Israel, Brazil and the United Arab Republic)
and with several Soviet bloc countries,
A s u b s t a n t i a l volume of t r a d e

is transacted withln the framewwlc of theseagreements;

i n 1962 imports
from bilateral. pmtners amounted t o 15.6 per cent of a l l imports while
exports t o bilateral. countries accounted for nearly j3 per cent of all
exports
I n reply t o the staff Warn's inquj ry as t o hotr t h e Government
ensured t h a t quotas were fully met, the Greek represcnt,atives s a i d t h a t
the a u t h o r i t i e s had no potrer t o force importers t o buy particular commodities from designatedsources,
Tae agreements thcnlselvcs opecif ied
o n l y t h a t Greek imnporters would buy 5.I' the mrlcet i n t h e partner CoUntry
were competitive,
However, a distincticnshouldbe mile between p r i v a t e
and Governmental imports.
Governmental imgorts arnouclteii perhaps t o 10
p e r cent of t o t a l imports and for rcaGons of trade and paymentG policy,
the Mlnjs-Lry of Trade vas empotrered t o buy from b i l a t e r a l countries even
The Government intended
thouch theca sources might not be competitlve.
Lo retain this r i g h t i n order t o avoid weakening its hand i n bilateral
negotiations, though i t would be used sparingly.
With respect t o exports, most commodities were free of quantitative r e s t r i c t i o n s , but
quotas were maintained for a few items, partly to ensure adequate supp l i e s of raw materials for the local. h a n d i c r a f t i n d u s t r i e s But a l s o t o
cnsure t h a t exports t o the bilateral. p a r t n e r s Irere l i m i t e d t o the amounts
specified i n the quotas,
The s t a f f p o i n t e d out, that the emphasis on b i l a t e r a l trade retarded
efforts t o develop exports t o t h e nmrkets of westcm Europe and w o A d
tend t o delay the mprovenletlt in productivity.
l%~rthzmore,lt had
been reported that the commodities covered by b i l a t e r a l agreements were
increasing in number and now included products which could be sold
readily i n world markets.
They added that balances in favor o f Greece
on b i l a t e r d payments agrement6 accounts (see Appendix 11, Table 56)
had r i s e n by $7, 5 million in 1962 and, according t o provisional figures,
there had been a further increase of $6.7 million in 4d11ef i r s t p a r t e r
o f 136).
The l a t e s t i n c r e a s e r e s u l t e d largely from t r a s a c t l m s with
Eastern European countriea and it seemed iniprobable t h a t t h i s subcLantis1
building up of bllaterd balances would further the aimG of Greek cconomic policy.

-21-

PART I

(1) Bilateral. agreements with Fund members

In view of the need t o strengthen exports by producing
nore comodities a t interuationally competitive prices, the staff 'team
6UggeSted that there was less economic Justification than in p a s t yems
f o r the maintenance of most of the b i l a t e r d agreements v i t h i n d l v i d u d
Fund members,
In particular, there appeared t o be no case for coIltinuai3
t o trade with Finland on B bilateral basis.
In reply the Greek representatlves said that, with the clearing account balance beinc s e t t l e d a t
fouraonthly intervals, trade with Finland was already p r a c t i c a l l y 011 a
free exchange basis.
Thc agreemellt had been retained, however, because
it enabled Greece t o secure more favorable treatment f o r c e r t a i n products
(especfally oranges i'dr which Finland had an open quota) than would otherwise have beenthe c a m ,
lfithout a bilateral quota, Greek exporters of
o r w e s w i g h t well. be unable to compete.
(Since t h e discussions ended
it has been reported that the agreement has been extended f o r one year,
I.*er, to May 51, 1964,)

Turnme t o the agreement v i t h Yugoslavia the staff' referred t o the

report an the 1961 consultations discJscions (see ~ ~ / 6 2 / 5 5 , Part 1,
page 21)
' b e y pointed o u t t h a t since 1961 a number of Fund members
had terminated bilateral agreements with YuGoslavia,
The Greek representatives replied t h a t it was still t h e ~ rview t h a t the ilnyort policy
of p r a c t l c a l l y all Yugoslax trading organizations was con.trolled by t h e
State and t h a t 1% was necessary, therefore, t o mlntain bllatcral arrangements t o ensure t h a t Yugoslavia imported Creek produck.
The maln cornmodity e q o r t e d by Greece was cotton and here it vas relevant t o note
t h a t most other countries supplying cotton t o Suzoslavla also had biLateral paynents agreements with her.
The other principal export vas
fresh f r u i t and the Greek representataves b e l x v e d that sales of f r u i t
c m l d not be effected without an agreement,
Hotlever, quota negotiations
were t o take place i n September or October 196j, and i f 8 at that time,
there were lndjcations of Yugoslav willingness t o abolish the agreement
then the Greek authorities would bear the staff's views in mind.

As regards t h e agreement with Brazil, t h o Greek represcrltat~vesexplained tkat exports t o that country compris?d mainly olives mid olive
o i l f w which Spain was t h e i r mill competitor.
Brazilians who irqorted
from bilateral t r a r l ~ n gcountr ~ e were
s
allowed t o takc advantage of an
exchange r a t e differential vhich a t present amounted t o 10 per cent.
As Spain lmintained a b i l a t e r a l paylnents agreement w i t h Brazll, 1% was
necessary that Greece should do t h e same.
(Subsecjuent t o t h e d i s cussions, the staff has been informed of the termination of the agreement between S p a u and Brazil, )

The Greek authorities had found the United Arab Republic authorities willing t o simplify the payments system when they neLotistcd a nev
agreement i n June 1962. However, they had no doubt; that an a,reemcnt
was necessary because the foreign trade of' t h e United Arab Hepublic is
s t i l l l a r p l y controlled by the Govcrnrrent and because they also had t o
take account of the problem of arranging for the r c p a t r i a t l o n of the
funds of Greek citizen0 formrly resident in the UDited Arab Repblic.

- 22 qi1atera.l

PART I

trade and payments relations w5th nonmembers

As regards bilateral agreements wlth the s t a t e t r a d i n g

countries, t h c G t a f f again referred to the arguments p u t forward i n the
course of l
ae years consultations discussions (see ~ ~ f 6 2 / 2 5Par<
,
1,
page 21)
Tlley pointed o u t t n a t on the basis of the 1962 figures, Some
l.0 per c e n t of all Greek imports came from the Soviet bloc c o u n t r i e s and
that some 22 per cent of all exports were directed toward those countries.
Moreover, i n c e r t a i n Instances compliance wit11 quotas in years of a poor
crop w a n t that a r e l a t i v e l y high proportion of t o t a l exports of particucommodities w m t , t ot h e s e countries,
I n 1962, for example, %hey
accounted for 40 per cent ofs u l t a n a exportsand
per cent of cotton
eQorts.
The s t a f f suggested t h a t when b i l a t e r a l t r a d e a t t a i n e d prop o r t i o n s such as these, it vas ncces6;ary t o c o n s i d e r all the m p l i cations f o r the domestlc economy and f o r the furtherance of the development programs obJertives.
Trade with vesterr1 c o u n t r l c s produced a
valuable by-product i n the form of c l o s e businesG r e l a t i o n s trhich, in
time, might materially help m d u s t r i d . develapruent.
In reply the Greek
representatives pulnted o u t %hat trade with the Soviet bloc, as a prop o r t i o n of ~ 0 k . trade,
l
had been relatLvely stable f o r about flVe years.
E z e p t for exports of oranges and other f r u i t s , c o m o d l t i e s were sold
under the same competitive condLt-Lons as in o t h e r marlccto.
This was
the case wilA respect both to c o t t o n and tobacco which t o g e t h e r accounted
for 50 per c e n t of total exports and also t o rosin, t u r p e n t i n e , hides
and skins, and rnmerals.
The whole of the expodable surplus of c o t t o n
could be sold LII debtcrn E:llropem c o u n t r i e s , buk t h e l n c l u s i o u O S c o l ~ o d i t i e s such as cotton, mina.-aLc, and h i d e s and s k i n s ~n the l i s t of Greek
exports vas a necessary concomitant of s r r l e s of o t h e r comodltms, esp e c l a l l y oranges md other fruit.
It was d o u b t f u l whether a3_tcrnativc
rna1-lcets f o r oranges and other f r u t exmted; ~n any event these commodities could not be sold a t s a t i s r a c t o r y prsces eLsewhere, p a r t l y
because of t r a n s p o r t a t i o n dxCficultiec and p a r t l y owing Lo q u a l l C y
consldcrations.
There vas no intentdon of. increasing the share of
bilateral trade I n Greeces t o t a l trade.

!The Greek authorlties

n a t i o n a g a l n s t any form of
of o t h e r c o u n t r i e s ,
They
t h a t a number of countaxes,
against the Greek flag and

skated t h a t t h e y did not practlce discrirmt r a n s p o r t a t i o n in .the o w c r s h l p of u a t z u n a l s

furnished the staff w~thinrorla-t;~on
show~ng
mainly S n L a t m America, dLscrlmmated
i n favor of t h e i r own n a t s o n d shipping lines.

IV.

StaCf Appraisal

Despite a f a l l i n a e r i c l d t u r a l income mainly owing t o a yoor ollve

crop, grosG national income 111 real. terms rose by almost 3 per cent In
1362, crjmpared with an Increase of 4 per c e n t i n 1960, t h e previous poor
year 111 the b i e n n i a l o l i v e cycle,
The growth rate achieved zn 1962 was

- 23 -

PART 1:

only half the annual. t a r g e t of 6 per cent aimed at in the development

program but, taking %he years 1961 and 1962 together, the average annual
increase vas 7.5 per cent-asatisfactory
over-all performalce, In
both 1961 and 1962 i n d u s t r i d production rose by about 5 per cent, and
the marlred increase i n i n d u s t r i d investment in 1962 a f t e r the dlsappointing levels of the two preceding years, gives prolnise of a higher
rate of increase i n t h e future.
Making a13 ~wancef o r the good harvest
and r i s i n g i n d u t r i a l droduction it secm Likely that the 6 per cent
rate of grow%h will be exceeded i n 1963.

The eraphas1.s now placed O A Larger-scale acricul-tural and infras t r u c t u r a l p r q e c t s which, i n the cL\\lrseof t h e next fell years trill
absorb a substantial. par% of' publlc sector savings, seem j u s t i i z e d
at t h i a
of economic development,
ConstructLon of these f a c x l i ties should help t o provrde a basis for productlvc l n v e s t m n t by %he
rest o f the economy, i .e., by fammrs, artisans, and i u J u o Lriallsts
Hovever, the f u l l benefits of this p o l m y 11111not be secured 1S &e
public sector aboorbs t o o hiah a proportion of iwvestible nxourccs,
thus inhibiting, fur l a c k of funds, directly productive private sector
invcstment

I n recent years consulerable progress has been macle :n technical

and voca-honal trarning, in p a r t x u l a r , much has been dcnc to Improve
the efffcc tlvaness of a g r z c u l t u r a l extcnsi onscrncc::.
The tralnmg o f
manpomr f o r zndustry 1s now of great importance, not only t o meet a
potenLia1 BhortnGe ur skrlJed workers,
Tho availabillty of good

training facilitieG in Greece would encourage foreu-g industry t o s e t t l e

there; training would also enhance the prospects u f thuse Greek vorkcrc
who scelr temporary euployment elsewhere in Europe.

PART

The firm commitment of the Greek Government to finance a11 lts

developmut expenditures from n o n i n f l a t i o m p sources is t o be V e l comed.
In implementing this policy, the size of the current budget
6UrplUS is of great m o r t m c e .
The surplus achieved In 1962 exceeded
the original estimates by s o w 50 per cent and covered over a q.IarLcr
of t o t a l outlays financed through the development budget.
It i o regrettable t h a t t h i s progress has not been maintained.
The suvplus t h m
year is l i k e l y t o be smaller, whx'le investment elrpencliturec m e expected
t o rise by about 7 per cent.
A reviev of current expenditures has revealed l i t t l e scope for their reduction, except
as regards subsidy payIIlentS; in fact, some expenditure items, e. Q. on educatioll, may have $0
be increased i n view of uhe developmnt needs of the economy.
Thus,
an increased budget surplus can be &Gained o n l y throw& higher revenue.
Total revenue has increased markedly in recent yeam but the yield from
d i r e c t taxes has failed t o keep pace with t h e increase in gross national.
income.
The Gtaff believes that more could be done t o reduce tax
evasion and to increaGe the efficiency of tcs c o l l c c t m &
Tax evasion
has pervasive e f f e c t s on development, much broader i n scoi-e t h m i t s
negative impact on government ;.e;renue.
Therefore, the staff regards
t h i s as an urgent problem.
li 1s realized t h a t i t s solutlon will entail a thorough tax reform, foi- o n l y within t h e framework of such an
operation Mill it be possible t o strengthen masures agsmst evasion
b t h are required
while closu3g the loopholes i n the present system.
i f the authorities are t o secure General acceptance of the tax sys.tem
as socially equl-t;able and economically GclUnd.

With the important exception 4 e:rpurt earnings, the bctlance of

gaymcnts performance i n 1962 may be regarded RS satisfactory--net receipts from mvisibles expanded, the rise i n imports t m ~associated
with the requirements of the development program, ana c a p i k l . inflow
enabled lnonetary reserves to be built dt, t o a relatzvely comfclrtable
level. There has been some divcrsxfLcation of exports since 1956,
b u t the tcjW. has remained v i r t u a l l y static, despite t h e offer of considerable xnclucemcnts to exporters, In the staff's vmv, this 1s t h 2
most serious shortcoming In the development e f f o r t 3 ; ~d a k .
TdiLng
i n t o considerahon the present structure of Graclr exports, various rea t r i c t i v e measures imposed by other countries have been, no doubk, a
l i n i t i n g a c t o r , b u t more important has been the slowness in modernizlng and developing e x i s t i n g enteqxises and In mproving the q u L i t y
and conpetitivenccs of many Greek products.
Tho aulhorxties are 6mre
that the achievement of t h e over-all obJectives of the developmeut plan
w i l l greatly depend on expanding production, e s p e c i a l l y indu;itrial production f o r export.
They have l a i d heavy stress on the c q o r t sector.
The ar;soclatxon with the hXC! now prar;euts new opportmitles.
It remaim t o be qcen how successful Grecce will be i n u t i l l z t ~ ~khcse
g
outl e t s f o r its p r o d u t s ,
The channeling of a l a r g e volumc of exports
t o b i l a k r d markets neceesarlly reduces the pressure t o find markets
elsewhere and thus must be regarded QS a ilisincentlve to hnpruvement.

Greater integraJ,lonof the Greek economy with the world economy would
represent a ponitj.vd factor i n the decisions of private foreign investors
On %he o.ther haud, the elaergence of the Greek economy from
i t s relative isolation and i t s exposurs to increased compe%ition from
abroad, may e n t a i l more rapid obsolescence of existing capital equipment and therefore a greater investment effort than has been foreseen.
It is fortunate that a Consortium has been established under the auspices of the OECD to assist Greece.
The existence of the Consortium
provides forelgn investors with an assurance that there t r i l l be cont i n u i t y in development p o l i c i e s : at the same tune the Greek au.thorit i e s a r e enabled t o persevere with their plans.
No f m a l data a r e
ave,ilable concernin[ 6ae amount of ex+.,ernalassistance secured throwh
the Consortium i n 1953.

The staff notes that progress toward easing restrictions on trade

and payments in 1962 has been limited, partly as a result o f the uncert a i n t y surrounding the aasoclation agreement with tho EXC.
The cnanges
WWcqUent upon this agreement, however, are to be welcomed especially
as these have been extended on a nondiscrimmatory basrc.
Nevertheless,
the s h f f considers that the licenstng system applied both t o imports and
invisible p+yments ramins u r u ~ e c e s s a r ~ lcomplex
y
m c i should be simplified.
Also, t h e travel allowance could be increased t o the level obtaining i n most other OECD cmntries.
The presellt l e v e l of morletary
reeerves Jus%Lfmca bolder approach to the dismantling, oi the restrlct i v e system.
Little further progress has beell made in lessening rcliarlce on
b l l a-bcralicm.
As indicated above, the Greek authorltles maintain t h a t
t h e bilateral payments ageementb with Soviet area countries provide
axporl o u t l e t s whxh wouZd n o t otherwlsc be available.
The staff
umkrslands this v j e w b u t believes 1
C
. is important t o ensure that t h e
r e l a t i v e share of t h m trade in exports of c e r t a m comodities does
n o t create price and production condztions tenrhng t o reduce the
pressure on producers to improve the competitiveness of Greek products
in o-blner markets.
Othertnse t h e drive to increase e x p o r t s might be
impaired alzd thereby also t h e over-all developnmrb goals as 1rcll as
the obJective of: stren@hcning the balance of payments.
As re&:ards
the blla%cral agreements with Fund members the Greek a u t h o r l t L e s could
take more decisive a c t l o n to ePimirmte them, in pa;r;.Licular $hose w L t h
Finland, Yugoslavia and Brazil

PART I

V. Recommendations
The following d r d 3 decision I s submitted f o r conoideration by the
ExecutLve Board:
1. The Government of Greece has consulted t h e Fund under Article XLV,

Section 4, of the Fund Agreement concerning the further r ~ t e r M o nof its

transitional arrangements.
2.

During 1962 gross n s t i o n a l income in real terms iacreaeed by

3 per cert, despite a fall of nearly 6 per cent in gross agricultural

income owing t o the b i e n n i a l cycle i n the olive crop and to adverse
weather conditions,Increasedoutlays

on fixed investmen%, especially

by the private sector, further growth in earnings from t o u r i m and

shipping, aG vel1 as increases in emigrants' remitbances were t h e main

factors contributing t o the r i s e in gross nat1omC jncom.

Unemploy-

ment and rural overpopulation continued t o present a major problem,

but t h e situation wag alleviated t o some extent by a further increase
i n emigration which, including workers leaving t o t a k e up temporary

employment i n western Europe, amounted t o 110,000 people i n 1962.

Prices rose sharply i n the last quarter of 1962 l a r g e l y because of reduced supplies of maJor f o o d s t u f f s , b u t

1963.

the rising trend h a l t e d In May

Dospite impressive gains in caving a1d tune deposits, mcmey

supply again rose by about 15 p e r cent, mainly because of an

il

,rcase

in government outlays, t h e continued expansion of credir; t o t h e private

sector and a rise i n f o r e i g n exchange holdings.

money supply continued in the first half of

1963.

The r i s i n g %rend in
Current budget

revunue in 1962 wan higher t h a n estimated m d appreciably larger than

I'

"

:c

- 28 -

i n 1961.

PAR'P

Current expendituse also rose, but t o a smaller extent, and

the r e s u l t a n t ourplus made an important contribution t o the financing

of public invest,ment, whlch was some 16 per cent greater than in 1961.

3.

1964,

In the courae of 1962 the Five-Year Development Prowam 1960-

was updated

to cover the years 1962-1966.

including the achievement of a

I t s baoico'bJectives,

per cent average annuzd. rate of growth

in W e gross n a t i o n a l product, remained unchanged.

W i l l

To achieve %hem i t

be necessary to increase the volume of irYwtment especiaLly i n

industry.

It is expected that reEources f o r $his purpose will be pro-

vided through increased domestic savings m u the inflow of foreign capi-

*aJ. from

private and governmental sources.

The Fund agrees that these

resources f o r development COUL

Lest be obtained by malntaming Inonetary
s t a b i l i b y r a d thereby strengthening domestic and foreign confidence in

t h e national currency.
rate of gro-h

For this purpose measures designed

.t;o

lower the

in money supply, especially by further reduclng central

bank financing of the credit operatzons of the Agricultural Bank and the

Government supply account would be helpful..

The simpllf i c a t i o n of

c r e d i t controla and t h e strengthening of the capital market v o u l d cont r i b u t e Lo increased savings.

The find believes that every erforl;

should be made t o raise current budgetary revenue by approl>riatemeasures,

especially 'by a continued drive againsl, tax evasion.

The d e f i c i t i n the balance of payments on e;ootls and services

account increased f r u n : $9'7 m i U i o n in 1961 t o $123 millioll in 1962,

because o f a sharp increace i n imports associated with the developmen%

effort.

Capital. inflow, especially from p r i v a t e sources, was Larger

than i n 1961 arid enabled %he a u t h o r i t i e a both to augrnel1-t %he monekary

- 29 -

PART

reserves and t o establish a s p e c i d gold sovereign fund for intervention

I n August 1963 monekry reserves amounted

In the domestic gola urmket.

to about $282 mlUion, $15 million higher than the level i n August 1962.

In recent

years Greece has mad.$ great progress in

from invisibletransactions,
SO

raisirq its earnings

eapecially from tourism.

HDwever, exports

far have not reaponded satisfactorily t o the inducemento offered by

the authoritieBa

The l b d believes that the achlavement of t h e develop-

ment goals of Greece woulr! be greatly assisted by better export performance and urges the authorities t o increase t h e i r e f f o r t i n this regard,

5. Since %lielast consultations some progress has been made in

lesscnsng restzictions.

A8

direct consequencea of the entry into force

of the association a.gL3ement with t h e EEC i n November 1962, advance import

deposits were eased and the centralized system of bilateral. payments ar-

rangements

wLth

was unified as

the EMA countrzes termmted.

The exchange rate system

a result of the negotiation of a new trade and payments

agreement with the United Arab Republic.

!Fhe system of import control

remains eom$licated, however, and the Fund believes t h a t Its oimplificatun

is both practicable and desirable.
lateral p~~y~nents
agreementc;

Greece cWJ. relies heavily on b i -

the Fund considers that %lie charlnellog of

a 8ubStantiQl proportionof c q o r t s t o bilateral counbrics reduces the

effectiveness of t h e measure6 taken t o expand exports t o more conqetitive
marksix and impedes the objective of cLoGer inteEration of the Greek

economy v i t h western Europe,

liance

011

The Fund urges Greece

reduce

Lts

re-

bilateralism and especially t o Lake early action t o termnate

the remaining a&pmmstG with

members,

6. I n concluding the 1963 consultations, the

DmtG t o

to

l?und hac no other corn-

make on the tranttitional. arrangements maintained by Greece,

ci

PART I1

Prepared by the Ehropean DepEtrtment and

the Exchange Res4xictlontl 3Depar-nt

October 18, 1963

Contents

-.

1, National income and production

:i

am

b.
c

&'06S

KlLtiO&

inCOnnS

Agricultural production
Industrial production

5
9
16

2, Prices, wages and employment

a. Prices
b. Wages and employment

3. Development program
4.

Money and credit

EL.Developments since 1961
b, Monetary and c r e d i t policy
c . Financing imtltutiom
de Capital market

5.

Public finance
a , Introduction
b. 1962 budget
C.
1963 budget
d. Incentive payments and subsidies
e, 8Socia;Linsurance

6. M a n c e of payments

.
b.

Introduction
Exterrml trade
c . Services and private transfers
d. Capital transfers
e. Regional pattern of external trade
f . External dsbt
g. Gold and foreign exchange reserves

c,

21

46
46
47
52

53
54
57

5'7

50

62

62
63
68
70

Contents

7. Aosociation
8.

w i t h the European Economic CommuUty (mC)

73

m e restrictive system
a. Tne exchange rates
b. Administration of control
c. Prescriptlon of currency
d. Nonresident accounts
e. Imports and import paynents
f. Pc~ylnent~l
for invisibles
e. Exports and export proceecla
h. C i I p i t d
3.
Paymentt, agreements
J.
Changes in the restriceive system since the

1961 C G n t m t n t i o Appendlx I.
50.

51.
52.

43.
54.
45.

32

Statistical Tables
Gross National Income
Areas in Main Crops
Classlfication of Credit t o the Private Sector
Deposits wlth the Monetary System
Emigration of Greek C i t i z e n s from Greece
Employment In Industry

Appendix If. Bila.t;eral Trade and Payments Agreements

Balances on Bilateral Payments Agreements as at
December 31, 1961 and December 31, 1.962

92

Appendlx 111. Monetary Measurea in 1962

93

89

- 1 -

PA3T I1

After increasing by almost 12 per cent in 1961 mainly as a result

of an exceptional harvest, real gross national fncomc rose by 2.9 per
cent i n 1962. 'phe average annual. increaec for the two year6 WE8 '7.5
per cent compared t o the target of 6 per cent aimeb at i n the Five-Year
Program f o r the Economic Development of Greece.
Gross fixecl investment
in real t e r n rose by 13.4 per cent i n 1962 and vas equivalent t o 24 per
cent of moss national income.
LarGely because of a marked fall i n the olive crop otlring t o the blennial cycle, but also because of adverse weather conditions, agricult u r a l prodkction was less ~n 1962 than i n 1961 and grocs a g r i c a t u r a
income fa31 by nearly 6 per cent i n real term.
However, production of
some commodities, notably tobacco, c*urmntsand mltanae, expanded in
1962 in line wlth the objective8 of the a g r i c u l t u r a l program. The program aims at expanding production and alterlng its composition with mare
emphasis on animal products, cotton, f r u i t and vegetables aud r e l a t i v e l y
less on cereals. Industrial production expanded by 4.'( per ceBt in
l962--a slightly lower rate t h m In 1961--and a r i s e in Indust=iaL invectxnent was accompanied by an exgandirq output of capital ~ o f r d e , In
1962 and early 1463 the construction o r several large i n d u s t r i a l plants
began. These includcd a t i r e factory, f e r t i i i z e r plants and an iron and
6teel plant.
Construction a c t i v l t x further emanded i n lg6?.

The d i f f i c u l t i e s i n irrternational shipping since XprL 1962 have

considerably affec-tecl Greece which ranks fifth among the marltlfle ilatiOnEi,
Gross forclgn exchantz earnmgo from shipping rose by o n l y $6.6 nlillion
t n $108.7 million In 1962 and no increase 1s anticipated i n 1965.
At
the end of 1962, 17 per cent of the Greek nerchant marine was d l e and
the number of unemployed s e m n was much higher than c. year earlier.

In t h e fourth quarter of 1.962 the remarkable price stabiliky of

previouG years temporarily ended and betileen Septem'oer 1362 and A p r l l
1363 the general ConGumer's p r i c e index rose by 4 per cent. EIovever,
the price increases vere mainly cavsed by Gpecisl Sactora, I n p a r t m u lar a shortage o f ollve oil and of potatoes, and as nev supplies cane
romard they halted jn May and dcclmed sli&rtl.y in J m e 1963. A !.esaer
factor, which caused increases i n tobacco and bevero,Les I prices) was the
imposition of hlgher i n d i r e c t taxes 211 July 1962.
Unemployment and r u r a l overpopulation continued t o be m ~ o problems
r
in 1962
I n d w t r i a l employnlent remained constant.
The p o s i t i o n was
alleviated to some extent by a further r m e in emqrat-ion. In 1962,
some 110,000 persons emigrated cornpared with 85,000 i n 1-961. The high
rate of emigration contjnued in the early rnonthc of LgG 3 . A large
proportion of the emigrants i n 1962 tlere wrlrers who wut to the
Federal Republic of Germany,

- 2 -

PART 11

In t~ia-1962the development progrm (1960-64) vas revised and updated t o cover the y e w s 1962-66 n a perspective of the ten-year period

1962-71.

The r e v i s i o n took account of the experience of t h c previous

The program
aims broadly at achieving a r a p i d increase In the s t m d a r d of l i v i n g
and a progressive diminution i n t h e Gependence of the Greek ecoilonw on
foreign hsaistmce.
It seeks t o achleva an average annual increase of
6 per cent i n real income and reduced Lmemployment.
The program places
relatively heavy r e l i a n c e on t h e p r i v a t e sector to expand m c l u s t r i u l invectrnent and output, public Investment being l a r g e l y concerned t r i t h the
provision of %he necessary i n f r a s t r u c t u r e .
T o t a l investment over t h e
five-year period 1962-66 (at 1961 prxces) is forecabe at Dr L4a billion-public, Dr 52 billion, private, Dr &3 b i l l i o n , and Increased inven.t;ories, D r 8 b i l l i o n .
To finance t h i s t o t a l , domestic savings are forecusk to provide Dr 124 b i l l i o n , leaving Dr 24 b i l l i o n as t h e estimated
d e f i c i t on goods and services.
To mobilize extcrnal a w i s t a l i c c in
Support of the Greek developnenl program a Consortlurn was s e t up i n
1962 under the aegis of the OECD.
two years but the baslc objectives remained unchanged.

Ma~rilybecause of an expansLon of c r e d i t to the Govcrment and to

the prlvctte scctor and a rise i n Greece's monetary recerves, t h e money
supply rose by Dr 2.7 b i l l i o n or by 15 per c e n t in 1962. This I~QE the
same rate of Increase as in 1361 and, a~ in the previous year, exceeded
the rate of lllcrcace i n rcal nat1ona.l incomc.
Of the t o t a l i11croasc,
D-r. 2.2 b i l l m a vas in notes and coin and Dr 0.4 b l l l l o n Ln s l [ : h t ilcposits.
In 1962 there were substantial increases In sannL,s and tim ciep o s i t s I the Pormner rose by D r 2.6 b i l l l o r 1 o r by 20 per cen'c and the
l a t t e r by Dr 2.4 billion or vel1 over 100 per cent.
These r ~ s l n gtrends
have con-clnued i n 1963,
The growth 111 dcposlts enabled the lnonctary
system to expand, c r e d i t without mpalrinl; I t a liquldity.
C r e d i t to
the non-&overnuent sector w s a by about 17 per c e n t in lgCZ ( m 1961
it had rlsm by 1 3 per cent) chiefly because of increased aclvmces to
the trade and manufacturing sectors.
C r e d l C to t h e Government rose by
Dr 1.8 bi1I.lon or about 13 per c e n t .
Contributing t o this Increase
was a rise OP almost Dr 0.9 b i l l L o n 111 central, bank advances to the
Government to f l m n c c its agrxultural support p r i c e operatlono and
mcen tivc paymnts

Some progress W ~ made

B
i n 1962 in lessening the Agricultural B n l C ' S
dependence upon the c e n t r a l bank for funds,
Partly, t h i s reaulted from
the release to the bark of Dr h-00 mllllon of U.S. counterpart fundts
under an agreement whereby a t o w of Dr 1,827 milllon of such funds are
to be made available over the period 1962.65.
However, of the t o t a l
increase in savlngs dt?poai.t;s A
i 1 1962, the Agricultural &
n
k managed to
attract only G per cent.

There was a marlced rise i n nev security issues i n 1962 mainly

because of a government bond issue for Dr 990 millioii and share issues
by commercial banks.
In April 1962 the company law was amended t o encourage the development of the capital market.
In f i s c a l 1962 a current budget surplus of Dr 1,554 rniilion was
achieved, Dr 554 million more than first estimated.
I n accordance
with previous practice it wa6 used t o finance p a r t of the Government's
investment expenditure of Dr 5,853 msuion ( ~ 5,056
r
million in 1961)
the balance coming fromInvestment revenue, Dr 635 million, domestic
borrowing:, Dr 2,'720 million; and t h c counterpart o f external assistance Dr 949 rnlllion.
In f'iccal 1962 a lower current budbet s u r p l U S ,
Dr 1,150 millloll is forecast because of a larger increase in current
axpendltvre than i n current revenue,
Current expenditure LS estimated
at Dr 1g.h billLon, 0 per cent more than in 1962. IIigher approprla t i o n s f o r subsidies and incentive paymentc and f o r debt service account
for t h e naJor p w t of the increase. Current revcnce 1 s f o r e c a s t t o
rise by ahu21 Dr 1,000 million, chiefly throvgh an increased yield from
indirect taxation,
Dlrect taxation 1s expected t o rlse by only l)r 1.41
million t o Dr j,?j 2 m d l l o n , mcreaaea 111 collections .t;ilroL1$1 efforts
t o lemeii tax evas7-m bemg expected t o more than balmcc the c o s t of
Lax concemiom mcle as from t h c begmning of 1963.

The principal reatuxes of the balance of payments 111 1962 were:

(a) a $68 milllon o r 20 per centincrease m t h e trade def1cl-b (b) a
further rlse i n the net surplus on invisible transactions t o uhich Increares zn receipts from t o w i s m , sn rem1 ttances of wqes and scl1uri.w
by Greek workerr; abroad and i n m i p a n t s ' trangferg partlcCiafly cunt r l b u l e d ; (c) an increased nrlvate capital inflow u c l u d i n ( , a r i s e of
$24.8 milllon jn suppliers' c r e d l t s ; and (d) a r i c e 1.11 Inonctary reserves
of $19.4 million after t h e t r a n s f e r of $2U.8 million 111 c;old sovereigns

- 4 -

PART I1

m e trade deflcit ~n 1962 was $410.5 million compared w i t h $350.2

m i l l i o n in 1961, because exports rose by o n l y $7.7 n i l l i o n whereas
imports rooc by $(Goo m i l l i o n chiefly owing to an increase i n imports
of c a p i t a l goods.
The r e l a t i v e l y poor export performance vas partly
Owing eo a fall in tobncco exportc caused by delayed f o r e i p buying
in the fourth qwrter of 1962,

The only significant chanGeG in Greece'sreglonal p a t t e r n of +rade

were the relative increaGo in trade with the EEC and a r e l a t i v e decline
in trade with the United States.
Trade with countries v i t h which
Greece maintains bilateral arrangements showed little variation.
In
1362 the S o v i e t area supplied 10 per cent of imports (payments basis)
and took ~ ~ 1 sover
t
22 per ccnt of Greece's exports.
However, for some
comoditu?G, n o h b l y olives and c i t r u s and fresh fruits. the proportion
vas much hrgher.
Monetary reserves at the end of 1962 amounted t o $270 m i l l i o n and
were e c u i v a l e n t to over f i v e months payments for imports.
The relatively strong reserve p o s i t i o n enabled the authorities to establish a
special Cold sovereign fund by transferring $26.8 million in sovereigns
from the reserves in 1962.
The fund 1s used for intervention i n the
domeGtx mar1re-t; .t;o prevent sharp fLuct,uatSons 313 the price f o r the
sovereicn.

In 1962 and early 1963 some further progress was made ln easing
r e s t r i c t i o m on trade and payments.
As consequeuces o i the association
agreement with the EEC the syatem of advance import deposits vas simplified and t h e deposits reduced and the centralized b i l a t e r a l payments
arrangementswith most ENl countries were abolished.
A new trade and
payments agreeuaent with the U.A.R. led t o the discontinuance of t h e
system of discounts and premiums so t h a t t h e Greek exchange rate is now
a unitary one.
To assiot the development program imports of many categories of machinery were freed from the need f o r p r i o r approval. and there
were minor transfers of comodities amoug the various import Lists.
There vere also a few changes in the systam of control over invlss'ole payments.
The main one was an increase in the personal allovance for
tourist t r a v e l from $150 t o $200 per journey f o r two journeys in each
year.
Greece has accepted the EEC Code of Liberalization tor l n n s i h l e
transactions but has reserved its posltion with regard to the derogation
clause of Article 7 (a).
I n October 1962 further privfleees (Decree
No. 4256/62) were accorded foreign capital invested under the provisions
of Decree No. 2687/53. These included an increase in the amount of
foreign exchange which might be granted for the repatriation of c a p i t a l
and prof Lts

The bilateral trade and payments arrancements w i t h five Fund members

(Brazil,Finland,Israel,
the U , A , R . , and YugosLavm) and with seveli
Soviet mea countries have been maintained,
Bilateral trade continued
Lo account f o r about one-third of Greece's exports An 1962.
1.

National lncome and production

a. Gross n a t l o m l income

In 1961, malnly as a result of an exceptional harvest, grogs

national Income i n real terms (at 1954 prices) expanded from Dr 73.4
b i l l i o n i n 1960 t o Dr 81.9 biLllon.
The increase of Dr 8.5 b i l l i o n
or about 12 per cent was almost twice the 6 per cent average annual
r a t e of growth ained a t i n the Five-Year Program for the Economic Development o f Greece (see pp. 21-25 ).
As Table l s110m~consmptlon
increased and, excluding Zlransr"ers of ships to the Greek r e g l s t c r and
changes Ln stocks, t o t a l f u e d investment i n 1gc1 In r c u l t e n E 111creased by 1 4 per cent t o Dr 18*1b i l l i o n , compared wltll Dr 15.9 b l l l i o n i n 1960.
The distribution of fixed uwestnm1-b LB s e t o u t ~n
Table 3.
m e large Increase i-? national income was not repeated i n 1362
in 1362 national income expanded, i n real terns, by an e a t s l m t e i l Dr 2.4
b i l l i o n t o Dr 84. j bxllson, or by 2.9 per cent.
At c u r r e n t pr I ceG,

grocs national income was provisLonally er,timated at D r LOO. 6 biLlion

rn 1962, I)r 3.9 biLLion o r 4 p e r cent more than in the prevLouCIJ year.

PART I1

- 6 -

Table 1. Origin and Use of Resources

(excluding ships transferred to the Greek registry)

(In b i l l l o n s of drachmas a t 1954 prices)

1960

xgG1
Provisional

1962

Ea%.

Gross national. income

Plus indirect taxes minus
subsidies
Gross national product (at
market prlces)
Plus net import of goods and
services

'Iota1 available resources&/

Consumption
Private
Public

Total fixed investment

Clmngc in stocks

Total invectment
T o t a l expenditureL/

1/ Oving to rounding, totals do n o t n e c e s m r i l y aGrce w i t h the am1

of the 1.telt1.~
e

I)

The principalreason f o r the lower rate of growth br&s a fall i n agricultural income largely paused by the two-year cycle i n the olive crop.
I n reel temm a g r i c u l t u r a l income f e l l by 5.0 per cent t o Dr 22.8 b i l lion i n 1962. l?le contractiveiufluence on t h e r e s t of t h e econow
wa8 not so marked, however, as to generate reductions i n t h e r e d income of the other sectorc.
The gross r e a l income of the manufacturing
and mining sector rqse by 8 per c e n t i n 1962, and that of t h e servlces
Sector (which Includes net i h C O m e payments by the rest of t h e world) by
5.5 per cent. I n 1963. the canparable increases were 8,g per cent and
9.0 per cent, respectively.
E::cludiug ships transferred t o t h e Greek r e g i s t e r gror;s fixed investment a t 1954 prices rose by D r 2.4 b i l l i o n , or by 13.h per c e n t , t o
Dr 20.5 b i l l i o n i n 1962 a i d vas equivalent t o just over 24 p e r cent of
estimated gross national income, compared to 22 per cent In 1961. Of
the increase of Dr 2.4 b i l l i o n , private flxed investment accounted for
Dr 1.6 I1111ion and public fixed inveatmnt fo.* Dr 0.8 b i l l i o n .
As
shown i n Tcble 3, t h e volume of fixed I r x s t m e n t i n all the main economic
sectors was higher in 1962 than i n the preceding year
I n p&rtiCLd.ar,
inveetncnt in manufacturing and xnining, vas ~;h:1,100 million or 65 per
cent more than In 1961, while investment In dwellings increased by
Dr 400 million, and i n transport and communications by Dr 300 million6
The increase In agricultural fixed investment was Dr 300 mlllion,
equivalent t o 30 per cent, compared u i t h Dr 200 million or 7 per c e n t
i n 1961. Agr~cxLtureaccounted for 16 per c e n t of t o t a l fixed Investment xn 1962 compared v l t h 17 per cenl, i n 1961.

Table 2.

Gross Iiational Income-I/

(In h i U m n s of drachmas at 1954 prices)

1960

1961-

3 962

PART 11:

- 8 -

Table 2. Gross Fixed Irweskmentg

(excluding ships transferred to the Greek registry)

(In b i l l i o n s of drachmas at 1954 prices)

Public
Private

1360

1961

1962

5 .G

6 *5
11.6

13.2

10.3

'Sectors
Agriculture
Dwellhgs
E l e c t r i c i t y , gas, e t c .

Manufacturing and mining

Transportaxion and commncation
Other

7.3

3.3
5.5

2.6
;4.5
1.2
1.4

3-9

2.3

Kind 02 investment

DtteUinGs
Other buildings
Other construction and works

Tranqmt equipment
Other equipment

Totad
Sources.

4.5
2.4
4.7

11.6

12.9

1.9
2.5

2.3

2.3
-

15.9

113.1

Ministry of Coordumtlon, 1Jatione.l Acco: nts of Greece,

1358-61 (Athens) ~ 9 6 3 , and information supplied by t h z Mumter o f

Coordination.
Excluding changes zn stocks

- 9

rm

I1

I n Greece a g r i c u l t u r e plays o, rominent role; it provides employment for over half t h e p o p u l a t i o n , a supplies about 80 ger cent of t o t a l
exports, and accounts for more than 25 per cent of the @oSS m t i o n d
income.
It is, however, a sector with a low per capita income relative
t oo t h e r c;ectors, and v i t h extensive underemployment.
FurtherrJore,
although production i n t h e period 1950-60 eqauded by more than 3.5 per
cent annually (which is t h e t a r g e t ectablished inthe 1960-64 development prugrm for the current decade) and there was a considerable m i gration from the rural areas t o t h e cities and abroad, average product i v i t y , thoukh slowly increasing, has remined low.

The Scope for & rapid growth in aGricultura3. production, given

favorable climatic conditiom, is circumscribed by 8 vera1 factors.
me area under c u t i v a t i o n , about 9.5 d u i o n acres9 is j u s t over a
ClUrter of the total area of Greece, b u t p o s s i b l l i t l e s f o r substant i a l l y enlarging it a r e limited by the ruGged nature Gf much of the
terrain.
I n addition, nost farms are small and fragmented and t h e i r

consolidation in necessarily a Gradual p r o c e s s a d Ahnost 90 per cent

of the one million odii farms are each lecs than 12 acres (50 stremaas)
in area and, on average. a r e s p l i t i n t o s i x separate lots.
Less than
1 per cent 02 a11 farms are each larger than 50 acres. 01 the t o t a l
cultivated area about 50 per cent 1s used t o grow cereals and 30 per
cent t o Grot! other annual c r o p , notably cotton, tobacco and vegetables,
while LO per cent IS in olive groves and the remaining 10 per cent IG
i n vineyards m d orchards.
The lack of i r r i p t i o n facilities 1s a
major problem, made s t i l l more acute by the seasonal. incidence of
rainfall

The obJectives of the Five-Year Program for the Economic Development of Greece 1960-64, as regards agriculture, are t o achieve a steady
(5.5 per cent) annual mcrease in a g r i c u l t u r a l production concurrently
with a change i n its compocition atray from cereals, emphasls is placed
on anlrmlproducts,cotton,
f r u j t and vegetables.
The grogram also
aims at raismg a c r l c u l t u r n l Incomes, a t rerlxmg underenl$Lopnent 1n
tne rural labor force, and a t 1ncreasiuC; exports of a g l c d t u r a l cornmodlties, especially of cottoll, .t;obscco, olives and olive 0x1, irei;b
fruii and &led f r u i t s .

- 2 X ; p m ~ G
8. milkon.

in 1961, according t o the census-fllat year was

Equivalent Lo 3.8 million hrsctares o r 38 m l l z o n etremnaa

One
stremma equals a quarter-acre.
I n the nine-year period I-Y?~-GL, 76l,COO s t r c m s of c c l t a v a t e d
land were r o d x t r i b u t e d i n
1962, an additional j20,OOO strcmums vcre
rediGtributed and[, i n 1963, 1t io estimmlcd t h a t onc rnllllon atremas
will be r c d ~ s t r ~ b u t c d ,

- 10 ,,

PAIn I1

To attain %hem obJectives, the proc~aminvolves not o n l y the contmnuatioa of the improved fanning practices, which contributed t o the
earlier @?ovth In ay;ricultura,l producticn, b u t also more intensive inv e s t w n t zn land reclamation and improvement, i n irrigation and i n anci1Lary f a c i l i t i e s .
For the period 1960-64, pwblic investment i n the
a g r i c u l t u r a l sector 1x18 estimated i n the development progm3.r;; at Ih- 7.9
bilLion, and prlvate investment at Dr 8.1 billion, of which the Agric u l t u r a l BRnk was expected t o finance 'Dr 6.0 billion.
Some 57 per
cent of public investment is t o be for Land reclamation, 20 per cewt for
SmU comvllity proJects, another 20 per cent for the developmnt Of
mountainorm areas, and not q u t e 3 per cent for technical education and
research.
Land improvement ia expected to absorb 22 per cent of kt;okal
primte investment in agriculture, the construction of inscallations and
packing plants 31 per cent, l i v e s t o c k improvement over 25. p e r cent. the
provismn of machinery and equipment ctlraost 20 per cent, and tree plant a t i o n s nearly 4 per ceat,

Trends 111 @yicultural production i n r e c e n t years are smumrized

in Tables 14-6, and Appendix I, %able 51.
While variations in climate
conditions and the biennial cycle in the o l i v e crop affect amual coniparicons, a g r i c u l t u r a l productlon gcneraUy was l e w in X962 than in
1961. In partictdar, productlon of o l ~ v e sand o l l v e o i l , r x e , beans
and cotton was below 1961. On %he other hand, tobacco production was
23 per cent h q h e r In 1362 than l n 1961, in part becau-ee measures were
taken which confined Gamge caused by the blue mould pest to less t b n
I per cent of the crop, while production of currants roseby 18 per cent
and of sul-tanzr; by tj5 per cent.
0utpu.t; of c e r e d c and of fresh and
c i t r u s fruits also increased in 19C2.

- 11 -

Table

4.

PART 11

Agricultural Production

)-"(Inthomands of metric tons)

Fruit and vegetable&

BeWE

Citrus f r u i t
Ctwrants

' Fresh f m i &

Figs (dried)
'

SLd.ta~6

"

Grapes (table)
Potatoes

'i

130

120

469

4-95
85

55

Cotton ( q i n n e d . )

253

t
Oliver

380

"LIS

12

Olive oil
Sugar b e e t 1
Tobacco
Source:
I

Informtion supplied by the Greek authorities

"

"

Table

12

2'LT SI

5 . Livestock Numbers

(wouaando of' head)

315
60
502

Cattle
Buffaloes
Pigs
Sheep

Horses, mules and donkeys

'(1

1,110
67

1,130

65
62s

b22

9,594
4,979

9,650

j.710

623
9,35j
5,064

900

1,056

1,055

1,052

6.90s

Gooats

1,074

11

goo

Sources: National Statistical Service of Greece -S

. t a t i s t i c a l Year
Book of Greece, 1962, and the Ministry of Agriculture, Athens.

Table

6. Production of Livestock and P o d t r y IYoducts

(In thouGandG of' short t o n s )

"

"
-

Source:

The Mmir;try of Agrlculturo, Athens.

t
"

"

"

connnitments.
(Total exports of ollvc o i l f o r the calenilnr y e m 1962
were 8,006 tons. )
It is also announced that t o auLjmeut e x i s t u g stocks,
10,000-20,000 tons of seed o i l would be impor ked.
Earl i e r sn lg@,
& cormnittee (established t u stctdy a propooal t h a t 10.000 tons of olive
oil should be exported annual1y)had repoltcd that t o stockp-~le7B,000
tons i n order to assist in cvenlne out t h e bicnnxul lhwtuations i n
domestic sv?plies, wnbld cost the Goverment a n wtlmated Dr TGJ m i l lion.
It also reported that, because the domeGtic suppcjrt price
(Dr 16.Lj-Dr 18.5 per kilogram) t l a ~Dr 6 per k i l o g r a u above the probable
export price, dn annual er.,>ort of 10,000 t~mT7ouI.d e n t a i l a subsidy
from the Goverlment of approxmatcly Ur 14 millio11 (&67,QOO)

Because o f the c y c l i c a l fall jn the o l ~ v ecrop, gross agricultural

incom, as already mentioned, declined in 1762 by Dr 1.3 b i l l x o n at
current prices, o r by 4.6 per cent, Horrever, accardlry: t o indices
compiled by the I\.plcultural 13a~lr,the pyices received by Sarmers In
1962 rose by 4.6 per cent above those In 1961 trll1le p n c e s p a d by
farmers r o w by 3.5 per cent.
IIencc there wa,c a s m 1 1 improvcmnt,
from 93.9 per c e n t (1956-58 = 100) In 1961 t o 101.0 pcr cent i n 1962,
zn the ratio of prices received by t a m e r s to the prices they paid.
The Government directly ini'luencw the canposition and voLune of
agricultural product~onand the level. of agrl c u l t u r a l Lncolnw by a
variety 02 means -price support p o l i c ic3, incentive paymcntr,, o. s d m idy
on the prlces of Ecrtlllzer and tractors, the m-ovxsion o i seed a t
prices belov cost, t h e extension of c r e d l t on favorable t c r m , and the
imposition of acreage rcatrq c tsonn,
*ice support and Incent3ve payment policies operate 111 respcl, o i the. mador c r o p , as i'o;Ll.ovo:

Table 7 .

Xnter~nediat c

Wheat Suppnrt Prices

4 *20

4.40

kl

- 15 -

PART I1

Cmrants and sultanas : Support p r i c e s opcrate f a r both crops : for

1962 these ranged between Dr 5.75 and Dr 6.60 per k i l o p a m for currants,
depending upon-the quality and the proilucyng area, a& between Dr 6.20
and Dr 6.70 per kilogram f o r siltanas depcndinc upon tke c y n l z t y .
Currant prxces Were t h e same as f o r 1961, while those for suLtsnas were
50 lepta ( z .e. I Dr 0 50) belotr the previous year s
"
"

Olive oil: I n November 1962, the Government announced t h a t the

price t o be paid t o producers of oil ohtailled from the 142-65 l?arvcs%
wouLd renlitln t h e bi3,me tts f o r t h e previous year 'Dr 1 6 4 - ~ r10.5 pcr
kilogram, and would n o t be adJuSLed t o t h c hLgh przces In the i l l t c r national, market caused by reducea suppLiao,
"
I

Livestock and fodder, Greece IC; n o t s e l f - s u p p o r t m g in fodder

crops and an' exyanszon of liveetmck production (and of fodder) 1s u.
maJor obJcctive of agricultural policy.
It is encoura(;cd by p r k e
supports, by Idle provinlon of Agricultural %nlr. loans on favorable
t e r n , by pyrnent of gJ-arantced rnik1irnu.m prices for certain proaucts
and,between 1960 and 1962,by incentlve payments to &rowers of fodder
crops. The incentive gaymerits involved a total of Dr 164 rndllon over
the three-ycar perlod during which the area sown in animal-feed puLocs
expanded frbm 1125,000 acres i n 1960 t o 634 000 acres I n 1962. aayments
Mere discontinued i n 1967, and t h e funds have been dlvertcd. t,)cnco112"aIc:e
milk and meat prcduction.
I n 1963 it is expected that Dr 20 m i l l i u n
w i l l be expended Ln p,y!ucnts t o encourage lmproved animal hubandry,
-hG
Tahle 5 sl~ows,there vcre: increaser, of approxmately 39 pcr ccn t and $0
per cent, reEpccLlvely, In thc numbcra of c a t t l e and slzccp betwecll 1950
and 1962, and Q s m l l e r increase, a b m t '7 per cent, i n the nunlxr of
p ~ ~ s The
. c a t t l e populatmn, J u s t ovcr one mll.l.mn, 15 stili relatively smll, however,
In contrasi, there arc almost f i v e mlllmn
goats aud over one million working anima,ls(hwses, mnul.es and donke,w)
"

16

PART 'GI

Industrial production

(I) Mining and powet

( I n thorlsands of 1net;rlc ton;)

-Sources :

_
I

1Jatlonal G t a t l s t ~ c t t lGervice of Greece, S t a t L s t i c u l Year

Book of Greece, 1962. evxL the M m w t r y of Inductry, Athens,

- 17 -

PART XI

14anufacturing in Greece is characterized bg the 1ctrg:e

nuniber of small undertakings, and the relatively heavy concentration
of activity i n the Athens region, A few cectors, textxler; and clothing,
food procmoing, the chemical arid erg<jueerlng i n d m t r i c o , account for
the major share of total output which, except f o r a small number of items
such a13 t e x t i l e c , is exclusively for t h e domestic market.
Production of
Capital goods is limited bclt iG increasing,
According -bo the 11ew indjcc:: of' industrial production first Published by the Nat~onal S t a t i s t a c a l Service in Aprrl 1962 (cmmarized
i n Table lo), i n d u s t r i a l production gencrelly expanded by 11.7 per c e n t
i n 1962, This rate of g o v t h was lower than i n t h e precediw Lvo
years. Various fac torncnutrlhuted t o thiG development, Btocks ot'
finiehed i n d u s t r i a l products were camparativay high at t h c bcgiwlhy:
of 1962, &olucah? demanJ for Greek i n d u s t r i a l products inci7cased more
slowly than iucome, and many large enterprises had exhausted thew
capacity t o raise output. The i n c r e a m i n i n v c a t w n t I n manufacturing
in 1962 was accompanied by an cxpandinrJ output of c a p i t a l goodtt, which
was 6 per cent above 1961. &cause or" the rllower rate of growth in
p r i v a t e consunptlon i n 1962 colnpared with 1961 (sce Table 1) prodLlctlon
of cousumer ~fooclcwas only 4 per c e n t higher than i n 1951. Particular
cectors ~n trhich output expan&& appreciably in 1y62 as compared v i t h
t h e prevlous year were t e x t i l e s , chcmicais, minerals and meta2lurGy.
In the flrst f i v e lnonths of l g 6 j i n d u s t r m l productLon continued t o p o w
at about t h e fiam ratc a6 i l l 1962.
The u l n ~ n c r e a s etook placo in outp u t of conmuncr goodc, produclion of capltal goods relmmcd about the
saw e

I n 1962 and e a r l y 1963 t h e construction of scveral new m d u s t r i a l

plants W ~ begun,
S
Thcsc Included, in addltlon t o the a'lumnum plant, a
t i r e factory, two ammonia phosphate f c r t - J l l z c r plants, an l r o n and s t e e l
plant, a ncw cotton mlll, arid d cotton-procossing factory. A l s q i n November
1962, an agreoknent was signed bctwc-en t h c Creek Govcrnmcnt and American
i n tprests for t h e establishmcnt o f l n d u s t r l a l pLants cotmatc?d t o c o s t
$110 m i l l j on, The p L m t s comprlsc a petroleum ratirlclry, an zmmonia
~ ~ n n ~ f a c t u pr l~ann tg, steel. work:, and pe Lroshemcal u d u s t r l s s

Judging by t h e value of' permlts issucd f o r private bullding,

constructLon a c t l v l t y f u r t h e r expanded In 1962 whm the value of such
pcrmlts rcachod Dr 4,287 m l l l o r l , Ill* 535 million, or over 14 pcr cent,
higher than I n 1961. IIousing absorbed 28 per c e n t of t o t a l fixed
irlveslmorrt ( a t constant 1954 priccs) In 1961 and, if other forms of
c o n s t r u c t i o n are also taken i n t o account, t h e proportion was almost
42 per cent.

PART I1

Table 10.

Industrial Production

(Ease 1959 = 100)

Total
Consumer goods
Capital goods
By main sectors
Textlles
Foods tuffs
Chemicals
Nanmetalllc
minerals

Source:

118

J 14
131

123
119

139

137

137
101
127

124

119
142

136
146

113
105

119
lC6

125

109

121
92

123

135

139

134

122
120
125

108

116

94

117

129

124
116
148

124
118
141

112
107

118

x26

137

143
118

128
100

117
110

145

136

146

125
111
141

121

105

121

133

111

Data supplled by the Greek a u t h o r l t l e s .

The importance o f t h e merchant nlarlrle ~n the Greek ecolzomy

l n 1962, gross transportation receipts
t o t a l e d $lO8,7 mllllon, compared w l t h earnlngs from exports of 4,242,6
mllllon, At t h e end of 1961, t h e r e were 1,165 s h i p s , w l t h a gross tonnage
o f 6.b m l l l o n tons, registered under t h e G r e e k flag. By t h e end of 1962,
t h e number had risen t o 1,232 and t h e g r o s s tonnage t o 6.8 mzllmn tons.
Greece IS fifth among t h e maritme natltms.
1 s l l l u s t r a t e d by t h e fact t h a t ,

I n response t o various c r e d i t and foreign exchange nmmn-csL' taken

by the Gcverrmcnt t o encourage Grcclc shlpowrlsrs to t r a n s f e r s h r p s t o t h e
Greek reglster, 122 s h l p s t o t a l m g 1.0 r nllhon t o n s were t r a n s f e r r e d in
1961, and 142 s h l p s t o t a l m e 0.8 l n l l l l o n t o n s In 1962
h the f l r s t
three months o f 1363 appllcatzons f o r r e g i s t r a t i o n under t h e Greek f l a g
represented Oh44 n n l l i o n t o n s , compared w l t h 0.26 rmlllon tons ln the
comparable perlod ~n 1962.

z/.

T h e renewed d x f f l c u l t l e s Ln m t , e r n a t l o n a l shlpplng s l n c e April 1962

have considerably affected Greece. T l ~ eGreclc merchant, rnarlnc consrsts
Largely of cargo shlps And t a n k e r s , for whlch the rates have f a l l e n
dlsproportlonatcly, The e f f e c t s have beennccenzuated by t h e heavy rellance
on frclghts between t h i r d c o u n t r l e s 9 s i n c e Grcece's own e x t e r n a l trade i s

4
, 1962, Part

11, p.7 for d e t a i l s ,

Cross figures not a d j u s t c d for vessels lost, scrapped, or sold to
foreigners,

1/ See SM/62/35, May

- 19 -

PART I1

relatively small, lLloreover, Greece's merchant rnarlne u - d u d e s chil g h

proportion of older shlps, A t t h o end of 1962 about h a l f the tonnage
comprised ships a t least 1 5 years o l d , Slnce April 1962, when 74 ships
totalme, 0,27 rrrllllon tons were l a l d up, t h e number of s h l p s mthdrnwn
from servlce progresslvcly lncreaaed u r i t l l by Decevbcr 1962, ZN ships
w l t h a t o t a l g r u m tonnage of 1.1 mlll i o n tol,s, wele i d l e . Of this t o t a l ,
whlch represented about 17 per cent of GreeceOs t o t a l tonnages ?O were
passenger shxps, 162 were cargo s h l p s (Including tankers) 2nd 12 were other
mlscellanoous ships. Smce Decovber 1962 t h e nmbber of ships l a l d Up has
decllned t o lb7 w l t h a gross tonnage of 0.9 mlli ion as a t April 30, 196%
The rumher cf unemployed seemen also illcreased I n 1962; i n December 1962,
7,165 were unemployed zn Greek ports cornpdrcd with 4,345 a year e a r h e r .

2,

Prices., wages and emnp1o;ynlenL

In r e c e n t years and untrl t h e last quarter of 1962 prices have, overall, been remarkdbly stable. For exarnple, betwecn I958 and 196: general
wholesale prices increased by 5 per c e n t , w h d e between 1760 and 1962,
as Table 11 s13m1s, the lncrease I n ~rholcsalep r l c o s has becn l e s s th&n 1
per cent and I n consumell prxccs about 1.5 pcr cent. Both Indlces rose In
1961 b u t f o r 1962 as a whole, f e l l s h g h Lly. Annual averages obscure,

howeverg t h e qul l e prmounced upturd trend I n b o t h wholesale and c~nsulner

prices which developed I n t h e l a s t quarter of 1962 and p e r s l s t c d 1n t h e first
four months o f 1963. I n Nay 1963, t h c upward trend was h a l t e d ; and by
June t h s wholesale p r l c c Index, a t 160.2 (1952 = 100) was 3 p c ~
c m t h1ghc.r
t h a n ln Soptcmbcr 1962. The lncrcase I n wlmlesnlc prlces 01 I c . ~ p e r cent,
in the 12 months ended Juns 1963 was nlalnly ~ ~ ~ bys heq hde r food p n c e s ,
wllzcl.1 over-all rose by about 8 per cent. The consumer price Index rose by
2.8 per calC betweell June 1962 and June 1953, a l s o ~ n a l n l yowme t o h q < h c r
food p r l c e s , whlch rosc by 3.8 per c e n t 13 Lhc same pcrlod. For example,
bclwccr iurch 1362, and Plarch 1963 { t h e 1a t c s t d a t e f o r u h l c h d a t a arc
a v d l l a b l c ) t h e prlce of brown bread rose from Dr 4.02 t o Dr k.17 per kilogram,
of r u e frotn Urn 5.92 t o Ur 7.88 per kllogrnm, arid of o l l v e 0 1 1 from Dr 18.80
t o L r 25.17 per kilogram, or by a l m o s t 'jb pcr c e n t , l i e t a l l priccs were
f a l r l y s t a b l c In lQ62, except f o r t h e price of Lvbscco ar,d of beverages,
both o f L J ~ ch
J Y ' O S P , owJng t u t h o m p r m t l o n of higher taxes f o r revenue purposes
1 1 1 July 1762. R w t G dl50 mcreased i n rcsyonse t o the gradual h f t m g of
rerlt control.

20

PABT 11

Table XI. Prices

1941
1962

1963
January
February
March
April
May
June

follows

5,. 4
0.5

-""""

"_
l\lut.LonaL Stntirtical Scrvice of Greece, Results of' the
"
""
"

Source.

PopulaLlon and Housinn Censlm or March

-

21

For an altcrnntive claasiflcativn see Appendix I, Table 55.

"

21

P.MT I1

(3) An a l t e r n a t i v e c l a s s i f i c a t t o n by occupational status showed

that 32 per cent of t h e labor force were self-employed, 3 per cent were
employers, 28 per cent were unpaid famlly members 33 per cent salary and
waee-earners, while t h e remainder, about 4 Ber cent, were unclassified,

It is d i f f i c u l t t o gauge t h e p r e c t s e Lxtent of unemployinent and of underemployment i n t h e urban and rural a x a s , However, a Idemorandm on t h e Creek
Economic Development Program, subm:',tted to the CAXD i n June 1962, g0Ve t h e
following as-bimateo:

Manuf ac turing

0.8

l @ O,000

services

I .1

99,000

Total

949,000

13

26

- 22

PART I1

d.

It i s anticipatedthatpublic

consumption wlll expand a t t h e annual

rate of 6 per cent while public savings are expected t o grow by 14.8 per cent
a year; the current budget surplus available f o r investment finance i s estxmated t o f l u c t u a t e between a low o f Dr TOO million 1x1 1963 and 8 peak of
Dr 1,500 million in 1966;
Total exports of goods a r e proJected t o grow a t an annual. rate of
ceut compared with a rate of 2.4 ber c e n t t n the period 1355-61. The
annual rate of increase of exports of foodstuffs and raw materials 1s e s t l mated a t 7 per cent and of uanufactured goods a t 16.8 per cent
Imports,
C.

8 per

on the o t h e r hand, are projected t o increasc by 9.T per cent annually but some
categories, for example, machinery and tmncportatlon, w e expected t o increase
a t annual rates of up t o 15 per cent.
f.
Total foreign earnings from servicesareestimatedto
increase at
nn annual rate of 9.5 per cent with tourism and the merchant marine furnishing
t h e major p a r t of the irxreuse. Earnings from tourism a r e expected t o grow
a t an annual rate of Y{ per cent and gross earnings from transportetion a i
E per cent. On t h e other hand, imports of services are expected t o grov
a t an a m u a l r a t e of nearly 11 per cent with transportation accounting f o r
t h el a r g e s tp a r t
of theincrease.
In recentyearsemigrants'transfers
lmve
shown a r a p i d increase; they reached
$117.2 million i n 1962 compared with
$88.6 million in 1959. Annual exchange receipts from t h t s source w e expected
to contlnue t o rise over the period 1362-GC because of a prodected rlse I n
emigration over the same period.
g.
Although bothpublic and privdtesavings are f o r e c a s t t o u-xsetlse
steadily over t h e f i v e years (see Table 13) s u b s t a n t i a l d e f i c l t s I n the b a l ance of payments on currentaccount are anticspated. For thc pelloci 1-962-66,
they are expectcd t o t o t a l between D r 211 billion and Dr 2'7 b i l l i o n . To
finance t h i s t o t a l d e f i c 3 t , t h e program envlsoges an inflow of about Dl* 10.5
b i l l i o n from private cap1 a 1 and foreign governmental as;lstancc
(e.e., U.S,
AID) leaving Dr 16.5 b i l l l o n , or $550 million, t o be obtained. As f u r t h e r
described below In Section 6 , a Consortlun v a s established In IC162 under the
auspices of t h e OECD and given t h e L ~ s kof moblllzing "an adequate flow of'
foreign resources, p u b h c and private, in cupport of the G18eelcDeveLopmcnt
Plan." The Consortium is an acsoclation of OECD member countries and, a t i t s
first meetingheld on October 5 , 1962, rcpresentdtives of BelCiwn, Cauada,
France, Germany, I t a l y , Luxembourg, the Netherlands,the United S t a t c s , and $he
European Investment Rank attended.Representatives
of t h e Fund attended as
obaervers.In
May 1963, llustrm becme a xncruber of t h e Consortium.

PART I1

%ble 13.

P l b l i c and Private Investment

and the Sources of its FlnaJlcmg

(In billlono of drachmas at 1961 p r i c e s )

Increase in inventories

Total investment

1.2
1-7
-

23.4

27.5

1.4

30.2

2.0
-

52.9

1.7

8.0

34.2

140.0

savings
Public
Prxvate

Total
D e f i c i t on goods and
services account
Total financing

a -4.6

5.8
-

2j.4

30.2

27.2

5.0

-4a

32.9

34.2

"

2!4*0

148.0

..25 -

Table 14.

PART I1

Balance of Payments on Current Account A/

( I n b i l l i o n s of drachmas a t 1961 prices)

Current receipts
Exports
Services
Current t r a n s f e r s from abroad
(net>
T o t a l current receipts

e 00

7.5

7.6

6.3

8.6
9.1

3- 4
3 *7
,o
1:

10.5

20 .o

21.9

21.5

24.6

27 07

4.6

5 08

Current payments
Imports (f.o.b.)
Services
'Petal current payments
D e f i c i t on goods and s e r v i c e s
account

3 00

Source: The Greek Lelegahon t o the OECD, Memorandum on the Greek Developmerit Program, June 1962.
Y

1/
items
2/

Owing to roundin6 totals do not nccessarily agree w l t , h thc s w s of the

b

Actual 1962 figures are s e t out Ln Section 6 , along vlt,h reviscti 1963
estimates.

4.

Money and c r e d i t
a.

Developments s i n c e 1361

In 1962 t h e money supply, which comprises notes and corns in circulation

and sight deposits (excluding government deposits with the Bank 02 Greecc),
expanded by 15 per cent o r ut about t h e same rate as i n 1961, As ohown i n
Tahle 15, .it p e ~ by
r Dr 2.7 billion d w i n g 1962, from Dr l7.c b i l l i o n t o
Dr 20.5 b i l l i o n n t t h e end o f the year
Since December 1962 the money supply
declined aeasonally i n thc f b s t quarter of 1763 but rose by ahnost D r 700
m i l l i o h in May 1963 t o D r 20.5 b-Lllion at which l e v e l it wa5 Dr 3 .O b Llllorl
or 17 per cent above t h e level in May 1962.

!!he tendcncy evident in past years f o r t h e annual rgte of expansion i n

the money supply t o exceed-on occasion by a ~ u b s t a n t i a lmargm--the raie a t
which eross nat1ona.Lincome has increased, continued i n 1961 m d 1962. l n

26

PART I1

1961 gross national income in real terms increased by 12 per cent (see Table 1)
whereas the money supply rose by 14.8 per c e n t ; the 15 per ccnt rise in the
money supply in 1962 compares with an estimated 2.9 p e r cent growth in real
gross n a t i o n a l income.
Table 15

Money Supply and Quas 2-Money

(In b i l l i o n s of drachmas)

Money supply
Notes and c o i n i n
circulation
Sight deposits

Change between

1960

ly61

1962

1963

1961

1962

Dec

Dec

Dec.

May

Dec. and

L'ec.

14.4

2.2
0.4

10.$

12.2

5 .o
5
e'?

14 4
6.1

6.1
-

Time deposits

Owing to rounding, the totals do not; n e c e s s a r i l y agree vith t h e sum of

the items
f
2
Comprising savings and time deposits oi' i n d i v i d u a l s and prlvate ente;-priscs; d e p o s i t s w i t h t h e Bank of Greece are excluded.

- 27 -

PMT I1

/'

C.

Private Sector
1. Credits
2. Securities
j. Savings deposits
L
.
i

Time and blocked

degos its

D.

Forelgn Sector
1. Fore i&n exchange
holdings
2.

E,

Clearing accounts

Other

3.056

1&,870

165

1162

-2 034

-2,652

-759

lC23

-2,060

640

28

PART 11

The main f a c t o r s c o n t r i b u t i n g t o the net lncrcase of llr 2.7 b ~ l l l o nIn

t h e money supply a r e surmasizeil in Table 16. I n order of impor%unce tlhey

were t h e expamion of c r e d l t t o the p r i v a t e sector, an e,rpansion OS c r c d r t t o

the Central Govex-nment, an mcrease Zn forciL,n exchanCc h o l d l n t r , , and the
purchases of s e c u r i t l c s by t h e banks. As Table 16 a1 so s h o ~ r s , however, their
expansionary i n f l u e n c e rras p a r t i a l l y counteractcd by t h e f i n a n c u l operations
of p u b l i c e n t i t i e s , by a contlnua'don of t h e r i s i n g t r e n d , a p p a r c n t I n previous years, i
n s a v m g s d e p o s l t s , and by u n o t e n o r t h y accelersttxon 111 t h e
growth of time tleposlts. These two l a t t e r 7 icms comprlsc I t quasi -Inoncy" which
increased by Dr 4.7 b j l l l o n , or by 3; per cent, l n 1362. The uicrcescs ~n
the money suFply and quas i-money were accomparned hy f c n ~ l ystab1 e ecld 50ver=
e l g n p r i c e s for most or 'Lgr.2 ( s e e Table 17) Horrevcr, the author-lties on occ a s i o n made s u b s t a n t i a l i n t e r v e n t i o n s In the dolnestlc m a l k e b , for example,
at the time of' t h e Cuban crisis and a ~ a i ni n 1963 foL1owlng upon t h e change
of Governmcut. Sight deposits increased by D r 1192 r n l l l l o n or by about 9 per
cent i n lgC2, rrhich reflects the longer-term trend tovdrd ncreaseci use of
commercial banking f a c l l i t l es. However, the mcrcase I n sI,c,,ht cicposits vas
accompanLed by a rise of about 11 p e r c e n t In t h e v e l o c l t y of kheir turnovef.
A masure of v e l o c i t y may i l e obtazncd by divlding Lhe t o h l v a l m of checks
presented for c l e a r l n g over c Given p e r l o d by the morlLhly svel-aLe of sight;
deposlts with the commcl-clal badcs fer the sane period. So c c l c u l a t e d , c h e
veloclty of turnover was 11.5 i n 1961. and 12.7 i
n 1962; t h a t is, 1t; increased
by 10.lF per c a n t In 1-962. lis T a b l e LC3 :belov r c v c a l s , t h c r c have been steauy
increases i n t h e number, total value alld nve1-aGe value of checks present;d
f o r c l e a r i n g over rccent years.

29

PART I1

Table 17. Monthly Free Market Prices of the Gold Soverelgn

(In drachmas)
A
n
n
u
a
l Average of Idonthly Figures

1955
1959

1960
1961
1962

January
February
March
April
*Y

June
July
August

September
October
November
December
Sources : U.S. Ernbassy/U.S. AID, Greece ( u n c l a s s i f l c d nonthly
statistical data), and the Bank of Greece, Athens

Table 18. Checks Prccented for Clearmg

ihmbe r

VUlLl@

Average Valuc

(Dr r m l l l o l ~ s ) &r

l955
1960
1961
1gG2

thousands)

"

30

PART XI

The irlcrcase of Dr 5.3 b i l l i c n r n t o t n l depoaxts in 1962 was a t t r i b u t a b l e

mainly to a riGe r n d e p o s i t s o t h e r than s l & t d e p o s i t s ( s e e 'l'zble 19)
In
particular, savinks deposlts expanded by D r 2.6 b L l . 3 ion or by 20 per c e n t
and tune deposits by Dr 2.4 billion, rrhlch meont they mre t h a n doubled in
one year. The r i s i n g t r e n d m savings and time dcposlts accelerated in t h e
f i r s t f i v e months of 1963.

Of the D r 27.5 billion of t o t a l depocits at t h e end of' 1962, Dr 19.7

b i l l i o n was held w f t h t h e commcrsiul banks and t h e balance, Dr 7.p b i l l i o r l ,
vas with t h e s p c c l a l f i r l a n c i n g i n s t i t u l i o n e , e s p e c i a l l y
the Postal Savings
Bank, which held about Dr 4.0 b i l l i o n i n over 53&,OOO p r i v a t e sevixgs accounts.Deposits
with the commercial banks comprised Dr 18.5 b l l l i o n i n individuals' andpr-ivate i n s t i t u t i o n s ' deposits anc? Dr 1.2 b l l l i o n In t h e deposits of public e n t l t i e s (excludmE those a110 t e d to the comernial. banks
by the central bank.) and of public enterprises
The t o t a l of Ur 19.1 bill i o n was Dr 3.7 miL1ion hiGher than at the end of 1961, largcl-y because of a
Dr 2.0 b i l l i o n increase i n p r l v a t e time deposits and a rise of D r 1.4 b i l l i o n
in p r i v a t e savinas deposits.

The marked increase iu L i m e d e p o s l t s held r d t h the couunercial bank5 and

t h e f i n a n c i a l o r g m i z d t r o n s was partly a l t r l b u t a b l e t o nn u c r e a s e r n jnteyesl
rates i n October 1951 (see below, Table 2b)
Z%e rate ( p e r dnnum) Qn t m e
deposits held by banks, p u b l i c j n s t i t u t l o n s and petroleum colnpanl e r remnlr,cd
unchanged a t 3 per cent, but r a t e s on i n d ~ v l d u asl t clcposlts 'Jere l*a:.ed From
5 t o 5-1/2 per cent Tor 3-6 months, 'rum , j - l / I L -to 6 per cent for 6-1? months,
and from 6 to 6=1/2 per c e n t for a term of morc t l ~ a nI 2 months. Also t h c r a t e s
on redeposits of t h e P o s t a l Savlnrp Bank mth the banks were raised flom ? - j / l &
per cent t o 6 per cent f o r 6-12 months and rrom 6 t o 6-1 /:2 per c c n t for more
than 12 months.
(In February 1963, 8 s f u r t h e r explained beLou, sumb d e p o s l t
r a t e s were reduced by 1/4-1/2 per cent.)

Table Lg.

Deposits other than Sight Deposits wlth Commerclal 13anlrs

and Gpecml Financial I n s t i t : tion&/

(In b l l l i o n s of drachmas)

Corm.
~ 9 6 0 : DCC

Savings

PanlrsZ/ Other
8.1
2.7

Tllkle

corn.

Total
10.8

bnks
1.2

"

Other Total
0.3.
1.3

Blocked and Other

corn.
a?nlrS
Other
Total
2.4
0.3
1.6

Total
Corn.
Eknl~. Other

10.1

4.4

Total

14.5

- 32 Table 20.

Total Credlt Outstandmg to

iion-Government Sec.t;ors

(In m i l l i o n s of drachmas)

PART 1 X

- 33 -

W I T I1

As dlready notcd, t h e increase i n c r e d i t extended 'by t h e conlmercinl bnnlts

in 1962 d l d not Fnlpair t h e i r U q u i d i t y position because of the increase j n
deposits held w i t h the bankc. As shotw i n Table 21, t h e comnerclal banks ~ 1 1 creased their cash balances (by Dl 209 million) and t h e i r f o r e i g n exchange
holdings (by nr 264 million) even thouch their dcposlts vtth t h e Bank of
Greece rose by Dr b 6 mlllfon and t h e i r holdings of Trcaswy blLls were
Dr 312 milllon hlgher, Furthermore, they were able t o augnlcnt t h e i r unvestlnent i n s e c u r i t i e s ) vhtch are mainly s e c u r i t i e s of p r i v a t c firms, by Dr 497
mil/lon. A
t the elkd or Oeccmher 1962, Lhe co~~nner~ciul
banks' h01dulgs of
Treasury b ~ l l swere equivplent t o about LC3 per x w t of t h e t o t a i of' sight and
savings deposits, and t h e n deposits mth t h e Bank of Greece verc cqulvnlent
t o about lc per cent.

In 1962, c e n t r a l bank c r e d i t t o t h e non-r,overrllncnt sector mcreased by

about I)r TOO million i n c o n t z n s t t o a rise of Dr 3.6 b i l l l o n i n 1961, The
manner in which such c r e d i t i s mmde available to t h e nconolry clthe? directly,
or through t h e comrriercial bonks, the Agricultural Ban!<, and t h e Nortgczge
Bank, is i l l u s t r a t c d i n Table 22,

- 34 -

PAJ3T 11

Assets

Cash
Deposits with l?anlc of Greece
Foreign exchange
Treasury bills
Credits
Securitiec
Loans from EDFO funds
Fixed assets
O,ther assets

Total
Lie;bflities
Sight deposits
Savings deposlts
T
L deposq
~
t s g
Blocked deposits

Subtotal deposits
Elnnk of Greece crerhts
EDFO funds

Capital and reserves

Other Imbilitios

Total

1960

1961

1962

-Change between

Dec

DeC.

Dec.

1961 and 1.962

D~C.

DeC

- 35 TabLe 22.

A.

PART I1

Central ISank; Credit Lo the Ion-Government Sector

lgGo

1961

1962

kc.

Dec

DeC

Ba~lkof Greece funds

4 2c

SLtb-total

1,797

3,002

Table 23.

C l a i m s on the Government by the honetary System

Credits and advances

Securities

AdJustment

1/

9, j332

10,023

993'h9

8,105

474

- 37

PART I1

The canzrols over the comercia1 banks coinpr1se comnpvlsory rewrve

rcqulrelnents, under trllich t h e colmercial bnrdrs IUUSi mal ntaln rnznirun
balances a t thc lhnlr of Greece, and a further reqw remen-c t h a t comncxlal
banks invest speclficd percentages of tizclr dcpocits i n Trcasury bll1;
and government bonds.
The Qualitative dlrect controls over the use of bank credit are:
a. The m p o c i t i o n of c e l~i n g s 3n thr cxtcnnlon 01 c r c d l t f o r t h e
Financing of domestic and import trade, and a selective control over
c r e d i t s to other sectors, under which the conuncrcial bal~kscannot f'lnancc
building and othcr l e s s productive actxv3 ties, and mports of non-esscntml

goods;

c. Direct corllrol
on deposits and cllorCed
trhich enables credlt t o
Tied condltlons arc nlei

over thc InLercst lrates Paul by ~11cconlnc;@cialbanks

by them on c r c d l t s , and a s t r u c t u r e oi ratcs,
Le given on more 3'avorablc term provjded spccx(see Table 24 and Appendix I )

both t o ease and simplify trlc controls m d t o encourage further t h e expansion of production and productlvc p r i v a t e investment, and of exports.
The lneasures taken in 196% ( h a t e d I n Appendls Ill) included incenlives
t o exporters i n the form of increased c r e d i t limits and lower rutcs of
interest to be available i' t h e i r exports reached spccifzed tninilnwn percentages of t h e i r t o t a l Gales i n the preceding year. They also included
a u t h o r i t y t o t h e commer*cial banks (and t o the Zcodornic CevelopmcnL
Financing Organlzatlorl) t o grant loans on easier term t o finance f i x e d
Inves-lment or to provide worklnl; c o p l t a l . For example, f o r the establishment or cxpanslon and model-nlzation of industrial, h a n d l c r a f t , m n l n g and
quarrymL e s t a b l u h r c n t s , t h c banks were a u t n o r i z c d t o grant l o m s up to
70 per cent of the total expenditure lnvolved < n any one pyogccl and I n
exceptional cases an even h g h e r p r c c n t a g e , SubJcct to a l i m t oZ
Dr 3OO,OOO i n t h e case of loans t o handlcraft undertakings. In A u g u s t
1962, thls litnlt on long-tern1 loans t o handicraft u-dertaltin&s j o r fixed
i n v e s t x e n t by an m d l u i d u a l firm was rHLscd Prou Ilr 330,000 to DL- GC0,000.

- 33 Ta.bLe 24.

Selected Interest Rate&

(In per cent per annum)

Deposit Interest rates

S1Gh.t; (i divlduals )

Savings 2
up t o Dr 100,000
L)r 100,000-200,000
On three months' n o t w e

Time (individuals)
j - 6 months
6-12 months
12-24 mnths
More than tvo years
Public e n t i t i e s

PART I1

The quite marked reductions in lending rates described above a n d

summarized in Table 24, reflectea the increase i n savtngs depu6its6,
previously refcrred to, which enabled the authol*ities to ease the
r e s t r a i n t on bank lending. The increase in Ccposits also enabled
the authorities to reduce some deposit interesL rates i n February 1963.
The rates for savings deposits were left unchangccl, b u t those on sighb
deposlts were Lovered by one-half of one per cent, v h l l c the raLes on
time deposlts helcl by m d t v i d u a l s for Q p c r ~ o dup to one year vere
reduced by one-quarter of one per ccnt to G per cent.

1G
10
2-2

41

c.

PART I1

YinancinG i n s t i f u t i o n s
(1) Agrj c u l t w a l Hank of Greece

The A g r i c u l t u r a l "Dank, an autonolnous public corporalion

established in 1929, is the major source or' credit t o the r u r a l sector.
AS well a3 functioning as a bank w i t h an extenalvc branch netvork i t
supervises the farm cooperatives and provides acivisory services and
teclmical assistance. The bank extcuds loans t o indrvidual farluers,
agricultural coopcratives and statutory bodies concerned w l t h cultlvation Loans take several forms--shorL-teru c u l d v u i i o n loam e i t h e r
t o individuals a g a i n s t pemonal s e c u r i t y 01- t o cooperativcs which channel
the loans to t h e n meknbers, loans against collateral (produce, agric u l t u r a l machinery) and medium and long-term loans for capj t a l ctsvclop
ment. Also t h e bank may l n i t i a t c the cxpanslon of existlnG i n d u s t r i e s
concerned with agricul?;urr_ ox t h e establishncnb of net7 ones by equrty
p a r t i c i p a t i o n s o r long-term loans.

Table 26. Sources of Financing of

Agrlcul?xral 13anls Loans
( I n millfons of drachmas)

Own funds :

Capital and reserves

414
Ceposits
1,025
U.S. counterpart funds
Other

--

33 2

464

51 5

1,11'7
402
-

594

Or the total of medium- and long-tern loans ontstandinG as a t thc

end of 1962, about Dl* 1,100 n i l l i o n or 30 per cent represented loans made
on prcferential terms, that is for periods of up to 12 years w i t h interes Z
a t the rate of 2 pel: cent per annum. Such loans arc made t o ftnunce
the purchase of animals f o r brecding purposeu, uprovements ln i r r i p t i o n ,
land purchases ar.d other capital development.

Although tile bank pays no Interest on U.G. comtcrpart f m d s t,sed

1t6 operations and only a nomlml 1 per cent on c r e d i t s from
the central bnnlc, t h e Granting of a subutmtlal mount of medlm- and
long-term loans at the 2 per cent rate of interes t , means that %he bank ' 8
income is inadequate to meet i t s operatink: cxpcnscs. Since these expcmcs
include the cost of providing acivisory scrnccu, a t was declded in 1962
to subsidj ze t h e bank from buclzctary appropriations at; Lhc disposal of t h e
M i n i s t r y of Agrtculturo f o r payuents to scpport t h e proeram f o r aCric u l t u r a l developmcnL, up t o a maximun! mount ccpuvnlcnt to 3 per cent of
tile total alnount of netr loans gmntccl on tile abovc! basls m l(JG2. WE
same procedure 'has been applied i n 1963.
t o finance

-44-

l'rnl' x1

finance up to 50 per cent of the cor;& 02 a projecl; and, i n exceptional

circumstances, up to GO pcr cent.

-e

t h e prvvision of technical assistance. It is not authorized t o grunt

loans and may a r e funds available only by acquiring equity capltal.
Its share c a p i t e l of Dr 1,200 ml11on, payable rn Pour arulunl stallmenta, is subscrLbed by the Government (Dr 540 million), the commercial
banks (Dr 408 mill-lon), the Consignation and Loan i('und (b240 m l 7 i on),
and private lndjviiluals (Dr 12 t n i l l i o n )
The 1I)C may supplement Its
resources by the sale of bonds on the Earke.1;. In addition t o studles
on various induslries, Lhe IDC has participated i n the establishment of
t h r e e major industrxes and has entirely fjnmcetl t h e capital OF another
corporation engaced i n processmg marble.

(4)

Others

Recently LTJO prlvntely-omcd investment; banks have bcen

establlshcd, One, the Invco tmcnt 13anlc S . A . was sponsored by +,hp Commercial Eank of Zycece and the Ionian and Popular Cank of Greece w i L h the
support of foreign cormercial banks, and the other, tile lnvesttuenl, Bank
for Industrial Ccvelopment, I ~ sponsored
S
by the llatzonal n;lnk of Greece,
also with t h e supyort, of forelgn banks a Both I1eT.r banks vi11 have s l m l a r
functions-to provide e i t h e r medium- or long-tcm industria7. credzt, t o help
establish new cnterprises, md t o assist In the dc-relopmcnt of the c q ~ c a l ,

market

(In mlllons of Arachmas )

$30

740

To encourage the develo~mentof the c a p i t a l market the company law

was amended (Leg. Decree 4237/1962) i n April 1962 I n order to wlden the
ownership of public companies and safeguard t h e interests of mlnority
shareholders. The amendments i n t e r alia provided for the Issue of new
types of bonds and shares, for example, nonvoting preferrer. stock and
convertible bonds. It also provided that publlc companies established
in t h e f u t u r e must have a minimum share c a p i t a l of Dr 5 million, and t h a t
t h e lowest nominal value of a share should be Dr 100.
I n 1961 the shortage of share issues by public companies and tha
growing interest In the capi-Lal market c o n t r i b u t e d t o a sharp increase
in share prices; it is a l s o reflected in tile rcady s u b s c r i p t i o n of bond
issues by t h e State, the State-owned Public Power Corporation, and varlous
public cornpanles. I n 4pril 1962, the Government offered a bond u a u e
for Dr 990 m i l l l o n and t h i s was followed, in Narch 1.963, by an issue of
Dr 1.5 b i l l i o n whach was oversubscribed, For the f i f t h successive year
t h e Public Power Corporation made a bond issue In 1962, It. comprssed
Dr 500 million in bonds n L h a face value of D r 300, bearing mnberest
a t 6.5 per cent per annum.

In 1962 the volume of Stock Exchange t r a r m w h o n s I n bonds r o m t o

Dr 700 m i l l i o n as against Dr 681 mrllian i n 1961, b u t trnnsacLlons in
sbares f e l l to Dr 269 n i l l i t 1 compared wsth Dr 393 mllllon in 1961,
This reduced volume of txnansactlons was t h e outcome of marked prlce
rises in 1961. The index of market prices of banks* and insllrance cornpa-.
nias 1 shares traded on the Athens Stock Exchange was about 5 per cent
higher on average in 1962 than in 1961 when it had 1Tisen by no less than
64 per c e n t compared w i t h 19601 The con~parableindex for general Ind u s t r i a l shares, a f t e r r l s i n g by about 62 perm cent ln 1961, eased by
about 3 per cent in 1962. In July 1363, t h o index of banks 1 and uxwrance
companies' shares was about 10 per c e n t lower than i n Decevher 1982, vdm.LLe
for tnclustrial. shares the declrne was over 20 per cent.

5.

Public fxnance

a* I n t r o d u c t i o n

In Greece t h e f i s c a l and calendar y e a r s coincide. Conatitutioaally

t h e budget has to be submitted Lo Par1iamn-t two months before the colnmencement of a new fiscal year but, I n practA ce9 It 1 s [;cuerally subniltted i n February or early Plarch. To cover o b l l g a t l ons incurred
during the c l o s i n g months of the preceding year there is p~-ov~..sion
for
a two-month extension of departmental appropriations. Normally, there
is a surplus on t h e c u r r e n t budget which, along r u t h revenue from S t a t e
fnvcstments, internal borrowin[: nlasnlly Lhrough Treasury b i l l and bond
issues, and the drachma equivalent of t h e nroceeds of foreq;n assivtaxe,
finances investment e,xpenditures. Government xnvestlnent expendsturo

accourlts for a ~naJorproportion of total. investment controlled by the

State, so-called " p a r d l e l " investment by the Agricultural Bank, the

Fublic Power Corporation, Teleccmunllcat~onsCompcmy and the EGFO,
accounting for the balance.
As Tables 30 and 31 illustrate, i n d i r c c t tzxation prov-des the
larges-c share of t o t a l tax reverlue--an estimat,ecL Dr 14.1 b l l l l o n o r
nearly 73 Fer cent for fiscal 1963--md r e l ~ L i v e l yheavy relmulce is
placed Gn external assistance t o neet investment expenditure.

+3,000

"1,554

55
JjO
23

"

49

P m I1

1, Direct taxes
Tncorne m x
Property tax
Other

391

I
_

IJ ~rovislonal.

1/

Thwc ~ n c l u d eproceeds or mnI.nting, proceed6 from the sale OP

Eihip, rece j ptG from t h e Rtate Ref m c r y E;nd S t a t e partzc jpation
%he
p r o f i t # of: tho Athens-PLraeus Elcctr.i.c.i.i,y Co.

Table 32.

Current Guc"gctary ExpendlCures

Uef ense

P u b h c securlty
Sducat lcln
Heal-Lh and wclfnrc
A z r u x l t u r c ?/
Subsldies an; mccntlve p a p e n t s :
Consumption
Production 2/

'l'ransportatlon
Pensions
Pub3 xc dCbL
Other and reserves
Total

1,803
1 366

"
"
"
"
"
"
"
"

ment
*
"

I n s t . I,/

Total

rnmt

Ins t !
I

Total

ment

"-".""

52

PrnT 11

- 53 -

PART 11

chdrged provided two conlmcLnes are partlcipatxng; and (b) thc provision
of subsldles t o cover 60 per cent of the .sost of a proJecL9 provlded It
is concerned wlth land improvement, lrrlgatlon or water supply 1n a commune
known t o be wlthout adoouate i m a r c l a l resourccs. Two other contlltlons
are t h a t the cost oP a proJest must not exceed -!r 1"jrnllllon and thni;
the work must be conlplcted I J l t l l m a yeall,

asslstancc, thc 1363 Sudget provldcd i h a t

Dr 1.3 b l l l l o n o f the Government7s investment expmdxture should IIC flnanced by a bond lssuc. In April 1963 it w c x announced t h a t t h e iJr 1.5
b i l l l o n 1363 Zconomlc 5evelopacnt Bond Issue hxl been ovcrsubscrLbod by
rJr 157 nnlllon. There ndd been a vcry h r g c uumber of snlall subscrrptions and consldcrable i n t e r e s t in t h e usuc by Greek nntlonals rcszdent
abroad. "the m t e r e s t r a t e on the h m & is J per cent pcr annun and they
are redeemable over 20 years,

In additlon

t o extcmal

- 54 -

PART SI

a.
b.
Cb

Subtotal

454

-1 3

"

Subtotal

467

Table 35.

m&.

of Greece: Rgri cultulal Support Accounts

I, Government's consumer

~ o o d saccount
1. Paymerlt in drachnms f o r
Wheat
Olive oil
Other prailuc ts
Inccntlve pqynents (changes
in cultivation)
Other pnymen t s

2.

2.
4.

5.

- 57 -

PfBI 11

Table 36. Farmers' Social InsuranceOrganization

Actltai and Estinatcd llevenue and 2cpendlturc f o r 1961-64

Revenue

Personal contributionsI

Budgetary t r a n s f e r s
From property

2/

Total
2xpenditurc

Pensions
m d i c a l carc expenses
Damage conlpcnsation
Administrative expenses

Total
Surplus

-l/
2/
L

'/

Personal contribuLlons havebeen p a ~ dfrom January 1 1962.

:tcvenuc c o l l e c t c a a n d t r m s l e r r e d ,
P a r t o f t h e eq?enscs. The r e s t w l l l be covered by the StaLe b u d p i .

6.
a.

-"I n t r o d u c t l o n

In recent years t h e Greek balance of p p w t s has been characterizcd

by substar~tlnland ir,crcacj np, m n u a l t r a d c l e f l c l t s , s i z a b l e
and growme;
surpluses from m v l s l b l c transactlonsy and mflows of prlvate c a p . t a l
and foreicn c r e d i t s and [,rants sufficiently larce t o pernn~,n e t additions
t o ;old ar.d convcrtlble %rciCn c x h a n g e rcservcs. In t h r e e years, the
tradc deficit has grown from $243 I n i l l i o n in lS59 t o $419 rnllllon In 1962,
becausc of an expansion m imports of 9 22') nKLlion a,afnst an increase 1n
expor4,s of onlJr $21 mLLllon. Greece?s exports are prlmardy a p i c u l t u r a l
proclucta of which tobacco, currants, sultanas
and c o t t o n art. the !lost
important; exports of metals and ore, scmlfinlshed and manufactured
c;oucls account for lt ss than 20 per cont of t o t a l oxports,

- 59 Table 37.

PART 11:

(In m i l l m n s of U.S

. dollars)

Imports c.i.f.
Exports f.0.b.
Trade balm( e

-661.1

a/

Net services and prlvate transfers

Balance on goods, services and
p rtirvaantasecf ce or sw t
Capital transactions (net}
Private
Long-term capital
Commercial bank h a b l l l t l e s (net)
Foreign supplmrs credlts
Barter

capital

-96.8

31.5
-1.8

a60.0

70.7

45. 6
-2.3

35 e 0

74.0

-2.3

100.4
g3 6.0

295.0

313

74.0

40.3

-4.3
3.1

0e ?
79.2

134.8

m
6
J

-16. 2

0.6
m

Sources: International Monetary Fund, Balance of Payments Yearbook,

and t h e Ministry of Coordinataon, Athens.
1/ No sign indicates credit; minus sign indicates debit,
2/ Including nonmonttary gold.
/ For further d e t a i l s see Table
21 1ncludes deposits with banks under Lu2687/53.
Told sovereignsp $26.8 million, transferred t o a special fund.
/ EstAnated deficit; fcrr which financing is being sought from external sources through t h e OECD Consortium,

CI

29s

-720 0

-10 8

Nonconvert3bI.e clearing balances

Total increase

253.4

0.2

Total privcite c a p l t a l
O f f i c i a l c a p i t a l and transfers
U.S. loans and g w n t s 9 net
Drachma deposlts--U.S account
Other
Rep,ratlons and restitutions
T o t a l o f f i c i a l capital and transfers
T o t a l capltal and transfers
d r r o r s and omissions
Changes i n o f f i c i a l and banking
gold and exchange
Bank of Greece gold holdings
Special fund i/
Foreign exchange reserves

3alance of Payments I/

40.

- 60 Table 38.

PART I3

Commodity Camposltlon of Payments for Imports

(In r , i l l i o n s of U.S.

dollars)

"

Agricultural products
Foodstuffs
Fodder and molasses
Live animals

85.3
12.2
2.2

Total

100 0

Raw materials
Consumption
Construction

70.4
70.2

140,6

Total.

Petroleum products and fuels

47 .O

Manufactured consumer goods

173.7

Capltal goods
Machinery and equlFment
Transportation equrpment

77.8
21.9

Total

99.7

561

Total bnport payments

608.2

705.0

Sources: Bank of Greece, Monthl,: S t a t i s t i c a l U u l l e t i n , April 1963;

MinLstry of Coordination, i.thens
"IC

for appruimately half of t h i s Improvement, while exports of fresh and

L i t a s f r u i t s also contributed.
Exports of raw materlals and semxf i n l s h e d goods were $8.3 m i l l i o n more in 1362 than in the previous year,
as a result of larger exports of cot,ton, which amounted t o $39.0 mi13 Lon
compared with $27.4 millux in 1961. E x p o r t prices rose sharply in t h e
f o u r t h quarter of a962 to a Level 9.2 per cant higher than I n the t h l r d
quarter and 4.6 per cent h i g h e r than in the f o u r t h quarter of 1961,

- 61 Table 39.

PART TI

ComodLtJ Composition of Export Receipts

(Jn m ~ l l i o n sof U.S. dollars)

A,

Food and beverages

Cwrants and sultanas
Ol1ves
Oltve oil
Wiues, rnust and beverages
E'reah f r u i t and grapes
Ci trm fruJ t~
Other foodstuff8
Total

B. Tobacco
C.

Rav rnaterials and semifinlshed good6

Cotton
Hides and sluns
ReGina and turpentine
Other

29.2

4.9
0.j

53

20.5

6.1
11.4
2.7

29.5
5.0
1.0
3.0
11.0
9.0

6.9
-

LO. j
8.7
8.8

9.4

60.4

69.5

68.0

80.7

68,o

90.0

2'7.1,

jg. 0

37.0
11.0

8.2

7*6

8.0
7*0

3.9
4- 9
7.6

Total

53.1.

61*4

51.0

Total

17.1

22.5

25.0

242.6

265 .o

rCota1 exports

10.0

5.0

3.0

- 62 C*

-Servxces
.

and p r n ate t r a n s f e r s

I n 1962 t h e surplus from services and private t r a n s f e r s amounted

to $295.7 mllllons $42.3 m l l l x o n more than =n lc)61. As shown in Table 40,
this result vas due to a rise c f $49.8 millron ~n gross r c c e r p t s less
an increase of $7.5 m i l l i o n in gross paymer,ts. C o n t r l b u t x g to the rise
in recezpts were a n 1 ncrease 3n income fyom s n p p n g and from ennGrantsv
transfers, a ccntlnuatron of t h o steady upward t r e n d in carrungs from
tourism and a s u b s t a n t l a l rise In rcmltances to Greece by Greek c ~ t l z x n s
worklng xn other countrlcs. I n 1962 thest: remlltances (mzgos ar.d salaries)
t o t a l e d $24.3 m l l l l o n and were almost twxce as h l g h as ~n 1961. Nct
receipt? from t r a v e l have risen steadily i n recent yea1.s. in 1362,
j98,OOU t o u r l s t s v s l t e d Greece colnpared n l t h almost 4.9,,000 the p r e v m u s
year.
d.

Capital

transfers

I n l.962 t h e total net capital l n f l u w amounted to $176.3 m.Lillon

and exceeded t h e deficit on current account by 5 5 3 . ~mlllion. Flus
$4.3 milllor1 m errors and omissions, t h c net over-all s u r p l u s was,
therefore, $57.8 nnllSon, which was reflected in a rlse o f $19.4 m l l l l o n
111 gold and forelgn exchange reserves, an increase of $9.6 m ~ l l ~ oIn
n
Greecesnonconvertible c l e a r u l g balonccs (see Table 56) and the t r a n s f e r of
$28.8 million w6rth of gold sovereigns t o a s p e c i a l fund,
The total net c a p l t a l rnflow I n 1962 of $176.3 m x l l l o n ccmpriscd
a net $lOo.b m i l l i o n I n priva-le c a p i t a l (of which Greek n a t i o n a l s res3
dent abroad contributed a sqpnfuxmt proportion) and $75.9 m i l lzon In
official c a p i t a l and transfers. Lr. rccont years kho p r l v a t o c a p z t a l i h f l o w
has fluctuated l d r g e l y because of y e a - t o - y e a r v a r l a t m n s In the use
of f o r e i g n supplxcrsl creds_ts,but t h e general t r c n d has been upward.
However, untrl 1962, the net xnflow of prlvate c a p i t a l under the prov l s l o n s of Legislaczve Decree No. 2687 of October 31, 1953, w h m h
accords p r e l c r e n t l a l treatment t o approved forefgn mvestments expcctrxl
t o promote productlon or otherwlsc c o n t r l b u t e to economlc devclopmcnt*,
has not been a slgnirzcant p r o p o r t m n of t h e total. I,I 1961, f o r
exnmpl e, cxcluding fnrclgn funds Eiepos-Ltcd wlth Greek banks, it tunounLad to $7 mLLlon i n a t o t a l private inflow of $55.6 million. However,
i n 1962 it, morc than doubled t o $14
r n ~ l l i o n . Actual investment over
t h e perzod 195L1-62has amounted t o j~7Omillion, equivalent t o about
20 per. cent of t o t a l approvals under j e x e e No. 26G7.

E3.

The use of Sorolgn suppliersq crcdlts lncroased by $31.8 n u l l l o n

zn 1962. iLt, t h e cnd of 1962 they Eurlount,ed to about $1;67 m l l l i o n and
were e q u v a l e n t t o abouL three monthsp payments for pravako imports,
A s already rncntiorlcd, in 1.962 the n e t lnflow of o f f i c i a l , c a p t a l and
transfers amomtcd to $75.9 nil1 ion comparcd w i t h $79.2 lnlllion ;n 1961.
The composition of these t o t a l s L S s a t o u t In Table 4.1.

- 63 Table 40,

PART 11

Services and PrivateTransfers

(In millions of U ,S dollars)

1961

Receipts
Transportatlon ( f r e q h t , fares
shipownersg and semenos remittances, etc.) s net
Emgrants' t r a n s f e r s
Tourism
Insurance
Government s e r v l c e lpi
Interest, dividends and prof i t s
Wages and salarles

go .8
90.3
68.1

1.4
27 b 1

Other
Total recexpts

Payments
Tourism
Insurance
Government services-2/
Interost a d i v Ldends and prof i t s
Other

93.4

24. 4
7.3

318 2

368.0

19.3
3

21.8

7 *4
22.5

64.8
-1-253,4

1963
Est

117 2
7G.O
1.8
24.3

3 4

Balance

1962

6 .?
12.6
13.2

12,4

Total papnents

23.8

3.2

13.0

7.7

26.6

72.3
4-293 7
0

Sources: Bank of Greeceg k o n t h l ~Statlstical Bulletin, A p * i l . 1963;

Mlnlstry of Coordsmtion, 1Lthcns; and Intcrnational Monetary F w d ,
Balance of Payments Ygarbook.
-

l/ lncluding expenditures of foreign

.
L

2/

.
I

lncluding NATO i n f rastructurc

e.

rnEss1mc and NATO infrastructure.

Regional pattern of external trade

(1) General
The r e t i o n a l pattorn of Groocoqs external trade (on n
receipts and payments h a s i s ) is s a t out, i n Table 42# while Table 43
gives additional f i g u r e r f o r trade with countries, p a r t i c u l a r l y in t h e
Soviet Sloc, with which Greece has b i l a t e r a l trade and payments agree-

-64-

PAST 11

ments (set\ Section 8 below). The reglonal pattern reflects the overall characteristics of GrOeceas balance of payments, namely f o r trade
deficits LO be incurred with all t h e lnam areas, Sut especially tha
EEC, t h e United States and the s t e r l i n g areap and f o r ttlese to be reduced cr offset by a surplus on servmes and private domtLons.
Table 41. Offrcial CaFital and Transfers

Inflow
Loans and grants
U,S. grants
U,S. private loans
U S o f f i c i a l loans
Federal Republlc of Germany State loan
European credits

..

31.6

29.8

1
15.2

13.o

24.4

9.3

6.8

Reparations and indemnitms

Austria
Federal Repubhc of Gemany

Italy
Rumanla
U.A,E'I.

funded crodlt balance 1/

0U.t; flow

Repayment of:
IJ 3 loans
European credits
BPU debt
Drachma deposit$

Total outflow

Total net inflow

Source:

"

International Xonetary Fund, L l a n c e of Payments Yearbook,

1/ See page 82-33.

2/ Hepayment of p a r t of asbt a r l s i n g from t h e liquidation of t h e
3u';;opean Payments Union,
21 Changes in U.S. counterparct h n d deposits,
c

- 65 ..

PART I1

I n 1362 Greece earned surpluses trith the United S t a t e s and t h e s t e r l i n g

area of $64.5 million and ,$6O,l. million, rrspac t i v e l y , but incurred a
d e f i c i t of $232 million wlth other OECD countrles. The u o s t s i g n i f i c a n t
changes i n t h e r e g i o n a l p a t t e r n of t r a d e i n 1962 were a r e l a t i v e increase
i n trade with the hbropean Economic Cornunity and a r e l a t i v e d e c l i n e h
the proportions of t o t a l i q o r t s troln, and of t o t a l e,qcrts t c t h e United
States. Trade with t h e Sovj e t area remained at about t h e s m e r e l a t i v e
l e v e l as i n 1961 and, except f o r imports from Yugoslavict ar,? Ftnland,
trade with the other arcm shoved no marked v a r i a t i o n s . llnportn from EK!
countries I n 1962 amounted t o $284 million and were equivalent; t o nearly
47 per cent of t o t a l import payments, compared t o 41 per cent ~n 1961.
Exports t o the EEC countries (se? belaw, Tables 42 and 49) also rose both
absolutely and relatively i n 1962. and were equivalent t o nearly 35 per
cent of t h e total
Among the EZC colmtries t h e Federal Republic of
Germany was the most j r p o r t u n t as a Source of imports and as a market for
Greek exports, followed by France. The d p f i c i t on trade with the UEC
accounted fnY nearly hall t n e total. dPCiclt or $1118.5mnilhun, Trade
with t h e United S t a t c s d e c l m e d i n 1062. Exports amounted t o $75.8
million conlpared with $85.5 l n i l l i o n i n 1961, r e f l e c t i n g lower tobacc9
eXpOrtIs, whileimport payments a l s o Irere less. The decline i.n both exPOXt3 and imports meallt a sharp f a l l l n t h e i r r e l a t i v e shares of t o t a l
trade; from 15.2 per centn
i 1961 irn1)orts from t h e United States f e l l
to the equivalent of 12.5 per cent of t o t a l import payments I n 1962,
while exports to the United States fell from 16.2 per cent i n 1963.t o
11.3 per cent i n 1942.
(2)

Bilateraltrade

Trade with countries w i t h whlch Greece has trade and payments agreements (see Table 43) shotred 1 ~ t t L echange i n 1962, although 8s
a proportion of %he t o t a l , iuport payments d e c l i n e d r e l a t i v e l y In 1962
mainly through a f a l l i n lmports from P ~ g o s l ~ v l a As
. Appendix TI,
Table 56 shows, Greek balances under blLateral payments agrcernents (and
clearrng arrangements) tdproved by $7.5 mill ion i n 1962 and amountcd t o
the equivalent of $9.6 m i l l i o n at t h e end o f 1962
Trade with the Soviet bloc countries, of whlch t h e U,S.S.R. is t h e
most importttnt pollowed by Czechoslovakia, representcd 10 per cent of
Crecces import& and 22 per cent of Greecesexports In 1962. However,
f o r c e r t a i n commodities, especially o l i v e s , c i t m s and f r e s h f r u i t s ,
t h e Sovzetbloc took aboutone-third of t o t a l exports i n 1962. As regards
tobacco, exports t o the Sovlet bloc i n 1962 r m e by $2 millton t o $15.1
million which was equivalent t o 22 per cent of t o t a l recclpts from
.t;obacco erports.
The Soviet bloc is a suppllor of
a g r i c u l t u r a l p r o d u c t s , particularly sugar and meat, accounting f o r $14
u i l l i o n or about onc sixth 01 t o t a l imports of a g r i c u l t u r a l commodities
I n 1962, as well as being a supplier of raw materials, notably tjmbcr,
fuclo and petroleum products, end c a p i t a l equipment. I n 1362, Grecces
jrnports of c a p i t a l equipmcnt amounted t o $135.5 million, of wlllch t h e
Sovl et bloc supplied $8.9 mi LUon or less than 7 per cent.

- 66 -

P m T 11

Table 42. Regional Distribution of w o r t Papents

and Export Receipts
!

(In miuions of U.S. dollare)

1962

Common Market countries

Imports
Exports
Y
I\\

Per cent
of t o t a l

1962
-

Per cent
of total

41.4
31.6

283 8

15.2

75.0
27.4

84.2

United S t a t e s of America

Imports
Exports

16.2

LO 7

61.1

22.3

52.3
-7.5

8terliw Area
Imports

Exports
Other OECO colultriesg

Infiorts
Eqorts

Rest of World
Imports

Exports

To*&

3.5

608.1

imports

Jlotal exports

234.3

242.6
:h1
67.-

Ausi;ria, bnmark, Norway, P o r t q u l , Spain, Sweden, &ritzerland,

Zlurlrey

Bulgaria, Czechoslovakm, East Germany, Hungary

U.S.S.R.

3/

E~CIudesnonmonetary gold, $0.6 million.

Poland, Rumania,

- 67 -

pml!I1

Table 43* Compo~iition of Trade with the Soviet Bloc Countries

(Values in n u l l l o u ~of U.S. dollarc)

"

Import payments
AgricuLtual products
Sugar
Meat
Cheese
Other

16.3

13.4
4.5
6,2
1.5
1.6

Raw materiRlG
Consumers
Construction
Fuels
Solid f u e l e
Petroleum pruductr:
Capztal. equipment

4.2

0.42'( *?

1;1.2

1.2
12.1

6.3

3.1

Export receipts
Foodstui'fs and beverages
Dried fruit
OZlVeG

C~trvsand lresh fruits

Other
Tobacco
Raw matel rale and senifm tshed
goods

Ores and metals

IndustriaL aud handicraft goods
Othell exports

6.6
6.6
-

Other goods

Total imports

8.3

LO. 7

'

61.1

'Lo. 1
20.6
13.0

34. 't
34. 7
12.0

22.2

31.8
11.G
1.j.0
L_

22.1

Table 44.

Sources of Financing t h e Estimated

1963 Balance of Pqnnents Deficit

(In m i l l i o n s of
1.

U.S.

dollars)

Estimated current a c c a ~ n td e f i c i t
Plus o f f i c i a l c a p i t a l oubflaw

74.0

Less net private capital i n f l o v

2.

Amount estdmated as required

3.

Official sector inflows

a. NATO contributtona
b. Credits
(i)
U.S.A.
(ii) European Investment
c.

Bank
Federal Republic of Gcrrnctny
(~ndemnitiea)

"

102.8

23.4
214.0

15 .o
-

To-bal inflow

67.4.
35 * 4

Source:

Ministry of Coordination, ALhens.

On October 3.9, 1362 t h c C l x l n c i l of Pfinisterc approved a n

agreement h
t
r
t
l
the Foreign Bondholders Protective Council, 3nc. of N e w
York, f o r the sottlemcnt of Greece's pwwar dollar bonds. The bop& involved and theL.r Tace value outstandlng w e Greek Government Forty-Year
7 per ten% secured Sinking Fund Go1d B m d s (Rchgee Loan of 1924) $10.3
m i l l i o n ; Greek Government Forty-Year 6 per c e n t secured S i n k i n g Fund Gold
Bonds ( S t z b i l i z a t i o e arii Refugee Loan of' 1928) $16.5 m i l l i o n ; Hellenic
Republic F x t e r n a l S i n k 1g F w d 8 per cent ( l a t e r reduced to 4 per cent)
Gold Bondo of 1925 (Athens Vaterworks Loan)$9.5
million.
The U ~ F . Z features
~
OS the arrangement which covers a five-yew period
but which may become f i n a l at t h e option of t h e Greek Government, 8s
announced in April 1963 whcn the formal offers to bondholders were made,
are the followtng: for each $1,000 of face value, holders are offwed new
bonds t o t a l i n g $1,136 f u r t h e 7 per cent bonds and $1,116.50 for the 6 per

- 69 -

PART XI

cent bonds; holders of the 4 per cent bonds are offered new bonds totaling $1,077.60 and $25 i n cash f o r each bond. The amounts i n excess of
COO are Jn l i e u of past interest. Heginning 111 1963 interest wt.11
be paid semiannually on May 1 ana November 1 on t h e followinG scales:
for t h e 7 per cent bunds, at 2.35 per cent per annum 111 2363> 2.60 pel'
cent per annum j n 13611, 3.90 per cent per a n n l u In 1965 and 3 per cent
per annum in both 19% avd 1967; on the 6 per cent bonds 2 per cent i n
1363, 2.25 per c a l t i n 1964, 2.50 per cent i n 1965, 2.75 per cent in
1966 and j pes cent In '1967; on the 4 pcr cent bonds 1.34 per cent in
1963, 1.50 ?er cent i n 3.964, 1.66 per cert i n 1365, 1.84 per cent i n
1966, and 2 per cent i n 1967, If the arrangement bccomr?~Pi nal, t h e
higher rates for the 6 per cent and 4 p e r cent bonds will bc lmmtained
u n t i l they are r e t j r e d . The r3,ie Lor %he 7 per cent hollds will mcrease
to 3 l./2 per cent i n 1970.

The above settlement; covers $35.8 mllllon of Greece's privately

held, prcwar bonded debt, which i s v a h c d at about $193.8 mi3 l i o n a t
present exchange rates
I n addltfon, t h e prewar &kt includes $23
million or loans granted by forcign governments h r e c t l y to the Greek
State, Scrvicing of Greece's prewar debt was suspcndcd in March 1932
owi,ng t o t h e scvere economic d l f f l c u l t i c s then confronting t h e country.
In 1932 it ~ r a sagreed between t h e Greek Government and thc Bondholders '
Counclls t h a t service should be s~~spendeil
and t h a t , pelding an improvement L n Greece's economic s i t u a t i o n , only a portion of t h e anum1 i n t e r c s t
would be paid. I n 1932-33, t h e proportlon of Lrt,ercst paid was 30 per
cent; in 1933-34, it m s rncduc;3u t o 27. j per cent, after whlch it was
progrcssively raised t o 43 per ccnt In 1~40-bl,when all psty~ncntswere
suspended. The d o l l a r bord issues i n respect of which a scttlernculj
agreement has bwn rcached were among the loans serviced by t h e International Econormc Control Committee u n t i l 1941. Others t n t h l c group
conyisc various Emergency State Loans issued between 1881 a ~ l d1926
ttnd two railway loans is;uc-d i n 1890 and 1902. Other bond loam coinprising Bncrgency State Loans and various Loans f o r prorluctlve purposes
(public works) issued beLwcen 1907 and 1931 were scrviccd by t h e Greek
Government u n t i l 1941.
The prewar loans were issued in various currencies and ~t has been
estimated by t h e Greek a u t h o r i t i e s that about 40 per cent of t h e prewar
bond issucs a r e held by Greek nationals and 60 per cent by private
holders abroad. The scttlclncnt of t h e prewar dollar debt LS expected
m
t c o s t t h e budGet Dr 36.7 million i n 1953 and t o involve the equj valcnt
of $1.2 lntllion in foreign cxchanqe remittances.

- 70 -

P f i n II

- 71 Table

45.

PmT I1

Outstanding Postwar External Debt

as a d December 51, 1962

(In millions of U. S. dollars)

"-

"

Amount

Kind of debt

A. F'ublic
1, U.S.A,
Payable i n U,S. d o l l a r s
Payable i n drachmas

29.0

88.4
11'1 4

2.

67.0
2.6
4.9

Federal Republic of Germany

3. Council of Uurope

4. Other

3. Loans guaranteed by t h e S t a t e
1. U.S.A.
Payable i n U.S. dollcro
Payable i n drachmas

C.
D.

3.4

P u b l ~ ccorporations anti f i n a n c i a l
lnststutlons

l(.l

European Monetary Agreemerlt (EPU

liquidatiol;)

0.1
-

Subtotal

220.5

E. Petroleum %mpanies

E'.

191 9

16.2

Slppllers' credits

""-

"

Sourcz: Idinistry of Finance and the Bank of Greece, Athens.

i'

1, Public debt
a, Payable in foreign
exchange
b. Fayable i n drachmas

8.44

27*%5
2

3.16
4.16

3.55

Total

11 37

7.32

11 99

7.04

S ar refinery
3. d l w a y a loan (1962)
4. ?cMA

0.38

0.20

0.30
0.20
2.50

G.l.5
0*01
0.10

2.20

0.40

2.

5. Purchase of APECO
6. Petroleum
7.
( s e w s in drachmas)
8. PPC lo 39. ED20 loend
Total payable in foreiGn
exchange
T O W payable in drachmas

r/

0.20
0.50

7.w

3.83

"

1o.go
0
1

37

0.20
2.60
2.20

1.~60
0.15
I

13.1 j
3.57

1.oo
0,j o
0,40

0.40

0.15

0.07

4.23
44 56

n3*80

4.14

3.70

5.26

0.10
-

0.15
1.12
1.00

-16.24
3.98

Data supplied by tho Greek authorities.

The new (3eman loan (1962) and the European Investment Bank loan are not included,
For fhe Ache1008 river hydroelectric project.
From the ManufacturerB Hanover T r u o t Co. of New York.

~OWrCe:

&/

2.60
2.20

2.78
4.26

- 73 Table 47

PART i1

Gold and Foreigrr Exchange Reserves

(In millions of U.S. dollars)

End of

Total

Foreign
Exchtlr.ge

Gold

Increase

Monthly 1963
Jan.
FeI!

..

77.3
77.3
77.3

Mar
Apr

M Y

June
July
Sources.

Staternento

270 5

..

193.2
199 2
208.5
208.7

276 5

285 8
28G.O
77.3
77.3
211.5
280.8
71 3
207 4
284.7
77.3
205.2
282.5
I n t e r n a t l o m l Financial Statisticfi, and Balk of Greece,

7. Association

with the European Economic Community (EEc)g

On November 1, 1962 Greece became the first associate member of

the EuropetLn Econornx Community when the agreement, slgned in July 1961
became e f f e c t i v e .
The agreement provldes for the gradual eslablrcWnt
of a full customs union between Greece ami the Comon Marlret, and f O l
specla1 measures, lncludlng fmanclal a s s i s t a n c e , to prr;tcct and help
develop t h e Greek economy.
It also provtdes for t h e harmonlzslion of
economic pollcy be tween Greece and the EEC and, In partwilccr, of Greek
a g r i c u l t u r a l policy within a xnaximwa pormd of 22 years.
To achieve t h e DbJectives of t h e agreement a Council of Assoc tation,
composed of representatives of the Greek Government and the Comisslon
of the EEC, vas established. Decisions of the Ccttncil require unanmlty.

The association is based on a C U G ~ Ounlon

~
which, SubJeCt t o cero
f a i n exceptlous, covers all trade betveen Greece and the EZC aqd providcs f o r the ellmination of 811 tariffs and quantitative r e a t r x k i o n s .
JJ For a fuller (
Part, 11, p p 54-58.

"

74

PAFiT I1

It also provides for Greece's adoption of the conrmon external tariff

of the EEC on marts from third countries. However, customsduties
between Greece and the mC are to be gradually abolished over a transitional 12-year period, which began on November 1, 1962, at t h e end Of
which Greece w i l l become a f u l l member of the Community.
As from *he
effective date of msoc1atlcn the EEC c o u n t r i e s have c u t %heir tariffs
on imports from Greece t o the l e v e l already reached in the reduction of
the Community's internal tariffs, and future internal rcductionc ~ d . 1
also be applled to Greek goods.
The immediate advantage for Greece
was t o obtain a tariff preference of 3 - 2 5 per cent on al:ricultu=l
exports Lo the U C , while n o n a g r i c u l t u r a l products benefited from the
er.isting 40 per cent Internal EEC. tariff reduction.

In return, Greece is to abolish tariffs on imports f'roin the EXc

within tlme l l m i t x established i n the m s o c l a t l o n agreement.

On 9
number of i u d u s t r l a l products manufactured in Greece and representing
about one t h i r d of Greek importc from the Com~*ni-by,the t a r i f f reductions may be spaced over a period of 22 years.
The net e f f e c t of tho
tariff reductions sy 13'72 w i l l be t o abolish t h e Community'L tariffs
on Greek goods and to lover Greece's tariffs on the CommUnlty's Goods
by 20 per cent.

One feature of %he agreement 1s that, in order to ass3c.t; in the

establishment of ~ W J processing i n d u s t r i e s aud t o facilitate the
adaptlon of the Greek economy to association w i t h the EEC, Greece rimy,
during the first 12 years and witlnn prescribed limits, apply iler!
tariffs or increase cxlsting ones a g a i n s t E E C goods.
Svch tariffs
may not exceed 25 per c e n t ad valorem and m u s t be either abolished or
reduced Lo tkAi.jrprevious level w i t h i n nine years and then gradually
removed.
Altkrnatively, w i t h the agreement of t h e Councll of Assoclation, Greece may re-establish quantitative r e s t r i c t i o n s provided the
new quotas are not less than 50 per cent of the respective unports from
the EEC during the preceding year.
These measures m o t be ellmnated
withm 22 years.

xecards the harmonization of Greek am-cultural policy with

t h a t of the Ccrmnuuty, wltlzln a maxlmwn of 22 years, a consultative
As

procedure is Lo be follotred I n t h e formlaation of the Community's p o l l c y ,

t o take accouut of Greek m t c r e s t s regardme such products C?,G t o b n c c 0 . g
So as t3 facilitate Greek exports of tcbtlcco, currants and s ~ ~ l t a n a s ,
fresh f r u i t , wines, olives and turpentine t o %he EEC countries, specml
concessions were granted Lo Greece.
However, as regards cl.trus i'rults,
t a b l e grapes, peaches and wine the Community will be able to apply
A t the fi *stmeeting of the C ~ u n c ~cf
l Posociation, held in B I ' u G G ~ J . ~
on November 12, 15'62, f o l l o v i n g notification by the
of t h o colnnlon
agricultmal policy cn ccrenlc, pork, egg;c, poultry, rmlt and vegetablec, the Greek Government declared i t a readmess to proceed with the
harmonization of its national p o l i c y i n respect of t h e m products.

- 75 .

PART X
I

safeguard clauses reatrlcting imports should they r x e beyond an aGrecd

l e v e l during 'the period before harmonization 1s complete.
The concessions for the major products, tobacco and currants and SulhnaS
included an umnediate reduction i n the Community's tariffs ant1 the
extension t o Greece of certain veto rqhts as regards the forlnulatlon
of future E E C common tariff policies on tlleoe goods.

Other aspects of the association agreement, briefly, are an

follows :
(1) As mentioned earlier, Greece is able t o borrotl ~p to $125
million from the European Investment Bank i n f l v e annual installments
during t h e period 1963-68, t o finance investment proJects desi@ed to
increase the productivity of the Greek ecodomy.
(2) A t the end of the 12-year period the free movemeklt of
workers behrcen Greece and the Comrwnlty vi11 be wt i n t o e f f e c t .
Timetables Mill be set up for the progressive freeing of the r i g h t of
ectctbllshment and the r i g h t t o Gupply servicea.
By J o i n t agreement,
restrictions on c a p i t a l movements are to be eased with a viev t o S'Lirnul a t m g mswtmcnt Ln Greece,

( 3 ) Coordinatlon betweenGreeceand the EEC in other areas,

such as transport and economic and foreign trade pollcy ml1 gradtt3lly
become effective during the 12-year perlad through J o m t concultation
procedures.
Table 48.

&lance

of Payments v i t h EEC Countries, 1962

(In millions of U.S. d o l l a r s )

Goods and servlces

Impol't s
Exportt,
Trade balance

- 76 -

fl

PART I1

(In million6 of U.S. dollars)

0

EZC

Curraata and
Sd.bkla8

Citrus and
f x u it
Olives

9.3

29.2

1962
E!EC as

EEC

Tottal

EF,C as

percent

per cent

of total

of total

32.6

31.8

frf

Olive oil
Wines and
beverages
Cotton

ii

,A

1961
Total.

5.8

7.4

0.6
0.1

0.9
1.0

tapentine

4.4

22.7

40.7

16.4

27.2

10.8

32.2
29.6

29.2

8.0

20.0

15.6
3.1

50.0

234.4

J.9

4.5

1.6

38.9
14.8

27.3

0.9

Tobacco
2b.o
Hides ma skim 3.2
Resius and

19.0
5.1

39.7

1.4

449

20.5

84.2

2112.6

34 7

Minerals and
oreG
Textiles
Oher

Total
,

35.3
74.0

U.S. EmbaGsy/U.S. AID, Greece, Unclsssified Statistical

hta, March 14, 1963.
So~lrces:

- 77 8.

PART I1

The restr: ? f i v e system

a. The e change r a t e s

Since April 9, 1953 t h e official rate has been Dr 30 per u. s. dollarThe Fmd concurred in the establishment of t h i s rate os t h e i n i t i a l Par
value for the drachm on Ihrch 29, 1961. The o f f i c i a l rates are :
29.85
buflng and Dr 30.15 selling, per U.S. dollar. bhrket rates for most other
currencies vary between t h e limits which r e s u l t from combining t h e official
limits f o r the U,S. dollar maintained by Greece and such limits as are
enforced i n the country of the currency concerned.
b, Administration of control

Controls are administered on the policy l e v e l by the Ministry of

Coordination, the Mjnistry of Trade, and the Currency Committee. Controls
are imslemented and applied by the Eank of Greece and authorized
commercial banks,
C.

Prescription of currency

Settlements on account o f merchandise transactions and invisibles

are made on the basis of the oriGin o r destination of t h e goods and
services involved or I n the currency and manner provided for by trade and
ayments agreemeuts. Uhder t h e terms of most of these b i l a t e r a l agreements
see page
and Appendix 11, Table 56) settlements are made throueh
controlled accounts, with t h e U.S. d o l l a r 8s the currency of account, or
i n the currency of t h e partner country.

d.

Nonresidetlt
accounts

Nonresidents are permitted to open convertible Foreign Sight Deposit

Accounts with Greek banks I n drachmas or convertible currencies. Thcse
accounts may be credited with convertible foreign exchange o r with t h e
proceeds of srles of convertible currencies, with authorized paymcrts by
residents of Greece for iuports o r services payable ,j conwrtLble
currencies, arid v i t h tranofers from other Foreign S i g h t Cepoolt Accorlrts.
They may be d e b m d f o r payments to reuidents f o r current transactions,
for Lranofers t o o t h e r Foreiga Sight,Deposit Accounts, and, in the case
of drachma accounts, for the purchase and transfer abroad
of any cLirency,
o r f o r transfers abroad i n the currency of the accodat in t h c case of
foreign exchange accounts. Any withdrawal from drachma accounts f o r use
Ln Greece and any converaion of foreign exchange withdrawals into drachmas,
entail the loss of t h e converaion r i g h t of the sum3 withdrawn. The
maximum rate of i n t e r e s t on such accounts i s l* per cent per an1n.m.

Nonreeldents endo ng the prlvileges of Legislative Cecree 2687/53

b e e below, Section (h 7 may also establish time deposits for a maximum
period of six months, w i t h a minimum deposit of the equivalent of $10,000
i n convertible currencies, and earning i n t e r e s t a t between 4 per cent
a d 5 per cent. Principel
and intereet are freely transferable in the
currency of the deposit.

All drachma assets of nonresiirents other than those i n Foreim Sight

Deposit Accounts must be declared and be held in blacked accounts.
b h n c e s on these accounts may be used for such purposes as personal
expensee i n Greece up to specified amounts, purchases of securities
officially l i s t e d on t h e Athens stock exchange, and f o r purchase of r e a l
e s t a t e i n Greece. Blocked balance8 may also be deposited with the
commercial banks as sight deposits where they earn Interest at cWrent

rates.

e.

Imports and import payments

All imports are subject t o p r i o r approval. The granting of an import

license implies the allocation of the required foreign exchange. A W t
from imports f o r which speclal licenses are required, one of two general
iarport procedures (E and D) are applicable t a p r l v a t e imports, mainly
for s t a t i s t i c a l purposes.
(1) Under procedure E, t h e approval of an authorized bank is
required for imports f r o m EMA countries when payment i s t o be made in
a convertible or an exteraal3y convertible European currency; for
imports from countries with which Greece has concluded b i l a t e r a l payments
agreements, when payment is t o be made through t h e relative clearing
account; and f o r imports fromCanada o r the U.S. whenpayment i s t o be
made ICfree dollars, 1. e . , not on t h e basis of procurement authoriza3ion
under U.S, aid. No license I s necessary under procedure E but import
applications which have been approved by an authorized bank are registered
with the Bank of Greece.
(2) lrhder procedure D, an import approval iesued by t h e Eank
of Greece i s required f o r imports financed by U.S. aid and for imports

other than those covered by procedure E.

Special licenses are required for imports of commodities on w
t o lists,
List A comprises certain luxury goods, textiles, autornobilec
and parte, and certain foodstuffs, Including rice; List R comprises
certain types of machinery and spare parts. (In January 1963 a number
of items were removed frcm t h i s l i s t , and t h e i r import no lon6er requires
prior approval by t h e Ministry of Industry.) Imports of petroleum
products, similar t o those produced by Greek oil refineries, requlre
regulations govern i m p o r t s of certajn other
prior licensing. Special
items, such as goods under monopoly control, medicines, vheat and flour,
sulphur, and motion pictures, as well as a few barter transactions based
on clearing agreements,

A and B.

- 78 -

PART IT

Payments for imports may be made i n one of the following ways : by

l e t t e r of credit; by cash agalnst shipping documents; and, for goods i n
l l s t s P-3 and P-6, by acceptance of time drafts. Imports on a deferred
payment basis are allowed for 285 products: scme 157 importitems on
list P-3 may be paid for by means of 9O-day drafts while items on l i s t
5 6 (coverlng about 100 commodities mostly raw materiala, machinery, and
lubricating o i l ) , may be paid by 360-day drafts. For certain types of
machinery, nccessorles, and spare parte, payment may be made by meane of
36-month drafts. The Minister of Commerce may authorize even longer F a v e n t
perlods, and may also approve payments on a deferred basis f o r Impo&S which
are not Included in the special lists. When time drafts areaccepted, e,
pereonal guarantee equivalent t o 4 per cent o r 8 per cent of t h e c i*f
Value of the goods t o be imparted is required as surety that p a p e n t will
be effected within the prescri5ed t h e limit a
Advance deposlts in cash are required only for private impol*t;s Included
lists, F-50 and F-100. For goods in l i s t F-50 the regulations
prescribe a cash mrgin of 45 per cent, plus 18 per cent as security for
import dutles and other taxes; for good8 in l i s t F-100 the advance deposits
are 90 per cent plus 36 per cent, Advance deposits or bank guarantees are
not required i n respect of shipments paid for by means of documentary
credits, except f o r payments Included in l i s t F-100 f o r which, as already
mentioned, a 36 per cent guarantee i s required as security for the payment
of Import duties and other charges. When imports are financedwith AID
W a s 8rl additional deposit of 10 per cent has t o he made In cash or 'by
bank guarantee i n favor of the Greek State, in 8dtlitiOn t o any other down
Fayment required. A l l deposits have t o be made w i t h the intervening bank
when obtaining the relative import approval under procedure E, and within
10 days (for Athen8 and Flxaeus). Wpon delivery of the shipping rZocument8
the i q o r t e r ' s bunk issues a permit f o r the customs clearance of t h e goods
and t h e advance deposits are refunded, If the importer fails t o di6chW~e
t h e conditions prescribed f o r payment, he may be f incd up to 25 per cent
o f the c i.f value of the consignment,

in

tW0

Advance payments may be made t o foreign suppliers f o r all imports,

Special regulations govern imports by state agencies, public entities,
Wd public u t i l i t y comsanies.

f, Payments for invlsibles

payments for lnvisibles require individual licenses,

b u t these are

granted freely for expenses incidental t o authorized trade transactions

and for certain other tranoactions. Transfers
abroad on account of specified
crttegories of Insurance (e.e;., shipping, aviation, merchandise tranqort,
aud fire) or reinsurance (accident and l i f e ) , are authorized by the Bank
of Greece for specified percentages of the amounts owed.

Greek residents going abroad for family P B ~ . B Q ~ for

S , tourist t r a v e l
to
or on buslness a r e e n t i t l e d t o US$200 for each t r i p , for a m a x i m u m of w
t r i p e a year. Exporters and manufacturers are allowed US$20 a day f o r a
maximum of 45 days when they travel t o the b i t e d States, Canada, or the

- 80 -

PART XI

Far Ease; for all other c o u n t r i e s the allowance is vS$lT a day for a
maximum of 30 days. Eequests for larger amounts o r from o t h e r categories
of businessmen, commercial representatives, etc. are submitted t o the
Foreign Exchange Subcommittee. Students undertaking educational couF8eS
abroad may be allowed up to U$$225 per month depending on t h e i r a t a t u s
and t h e country concerned.

Person6 traveling abroad m y take with them a maximum of Dr 2,000

in Greek banknotea. Nonresident travelers holding Greek p S S p o f i s are
required t o declare their foreign exchange when leaving Greece if the
amount of such exchange exceeds ~ ~ $ 5 0or
0 its equivalent; no declaratj-.an
is required from holders of foreign passporto.
6.

Exports and export proceeds

Travelers may b r i n g in a maximLtm of Dr 2,000 i n Greek badmotcs.

Greek residents returning to Greece must declare the foreign exchange
in their possession. Nonlesident travelers of roreign n a t i o n a l i t y need
not declare their foreign exchange and possessions a t the time of
e n t e r i n g the country and nonresidents holding Greek passporte are
required to declare t h e i r foreign exchange only if they intend, when
leaving Greece, t o take o u t again f o r e i s exchange t o an amount in
excem of ~ ~ $ 5 0o 0
r its equivalent.

h.

Capital

Transfers of capital abroad require approval. Greek residents may

repatriate capital held abroad In the form of ,gold or forejgn exchange.
Repatriation of' f o r e i g n exchange balances held by residents by means of
the importation of goods requires a sgecial license from t h e PYnistry
of Trade.

in Greece by nomestdento are subJect to approval.

Under Legislative Decree No. 2687153, approved foreign hverjtment which
hVeStment6

aims a t the promotion of natjonal pro&.rlction or otheYw1t;e contributes

t o the economic advancement of Greece, may be p a n t e d prefercnkial
treatment, L a v No. 4171/61 as amended by Legislative Cecree No 4256/62,
provides further privileges for foreign capital participating in investment

projec-bs in Greece exceeding Dr 60 million in value.

IvIoreover,

- -

PART 11

81

'0

Legislattve Decree No. 4256/62 provides additional facilities f o r the

r e p a t r i a t i o n of foreign Investment vhlch ha8 been used t o prornotc expofis.

Repatriation f a c i l i t i e s are as follows: (1) Approved investments

un&r the provisions of the above-mentioned leglelation may not be

regatrlated until one year has elapsed from t h e time the enterprise begins
t o operate productively and i n no caBe before one year has elapsed from
the time of t h e importation of the investment; (2) Repatriation of
foreign capital may not exceed 10 per cent per annum of t h e amount Of
c a p i t a l imported. The repatriation of dividends on equity capitdl Shall
not exceed 22 per cent per annum and, for interest on Loan capital, 10 ~ e r
cent per
Annual earnings below theae limits may be supplelnented
by earnings in excess 3f such limits from e a r l i e r years; ( 3 ) Profits on
approved f o r e l m lnvestment under the provisions of Law No. 4171/61 may
be transferred abroad in amounto not exceeding 6 per cent per annum of
the repatriated portion of the c a p i t a l provided, however, t h a t t h e mounf
of profits transferred s h a l l not exceed 8 Fer cent of t h e f o r e i p exchange
earnings of t h e enterprise from t h e sale of i t s products abroad. li'm
other types of lovestment under Decree 2687/53, t h e privilege of tramferring profits 1s related t o the residual capital remaining in Greece
and the transfer privilege expires aa soon as all capital ha8 been
r e p t r i a t c d ; (4) Acccrding t o Cecree 4256/62, t h e rcratrlation of Capital
and p r o f i t s of foreign investment approved urder Cecree 2687/53 may
exceed the rates apecifjed in (2) above. Also foreign loans approved
unclcr Decree 2687/53 may be repatriated a t an annual rate of up t 0 20 per
cent provlded t h a t the amount of t h e loan does not exceed double the
value of the capital of the corporation; the limitation ou-blined in (1)
above is also applicable t o these loans.

annun.

Exceptions from these general regulations may be approved for foreign

capital imported t o develop exports of agricultural and mining products
or f o r investment in enterprises of special importance t o the economy.
Specified foreign short-term Investment may also be granted preferential
treatment with regard t o the repatriation of capital and the transfer
of interest. Transfers of capital abroad by residents require appyoval.

i. P-qrmt s aEreernents
Greece maintains b i l a t e r a l trade and payments agreements with five
Fund members (Brazil, Finland, Israel, t h e U.A.R.
and Yugoslavia) and
seven Soviet bloc countrjes (Bulgaria, Czechoslovokia, Eastcrn Germany,
IlungEtry, Poland, Rumanla, and the U. S.$.R. )
The agreement x i t h Y q p 3 l E V i a
provide5 f o r a monthly settlement i n convertjble currency of 20 per cent
of YU6;OGl~Via'Sreceipts. The agreement with Finland stipulateo t h a t
the outstanding balance I s settled in free foreign exchange every f o u r
months and that auy balance outstanding beyond the c r e d i t margin of
$L,200,000 i s also t o be cettled in convertible currency.
The agreement

with I s r a e l provides f o r a sving margin of $150,000.

Re a result of capital transfers t o Greece by Greek former residents

of the U.A.R., balances amounting t o about $17 million xerc outstandinc
i n favor of Greece i n 1958. Under an agreement concluded in t h a t year

- 82 -

PART 11

the balance has since been substantially reduced; I n 1962 t h e Greek

Government agreed to permit t h e deferment of payment of the l a s t tranche
due on June
1962 and t o accept thedischarge of t h e obligation
(equivalent t o about $2,0 million) over a period of a further three
Years. The provlslons of t h e 1958 agreement are s t i l l in force for the
W u i d a t i o n of the balanceoutstanding In June 1962. As of M ~ J30, 1963
t h i s balance amounted t o f;E 26,000.

On June 30s 1962 Q new payments egreement was signed substituting

the U.S* dollar f o r t h e Egyptian pound as t h e unit of cmcount I n clearing
transactions and abo3ishing the system of discounts and premiumo provided
for i n the previous aGreement. All t r a m a c t i o n s now take place at
official rates.
k t a i l s of t h e bilateral payments agreements maintained by Greece
are shown In ApFendix 11.
Balances oulxtanding on pnrment
agreement accounts are shown in Appendix II, Table 56

,j*

Changes in the restrlctive system since the 1361 consultattons

762
3

March 23, The t i m e limit f o r payment by time drafts f o r i m . p U r t S Of

machinery, accessories, and spare parts included in l i s t P-6 was extended
froa tvo t o three years; f o r imports of other cotrmodities In l i s t P-6,
the time limit was extended Prom six months to one year.

-April

10, Seven commodtties were removed from l i s t A.

April 12. Four commodities were added to l i s t P-6, rstx t o list

P-3, and t v o to l i s t F; two commodities were removed from l i s t I?-100.

September 26. Residents t r a v e l i n g abroad for family reasone, f o r

touriom, or for business were entitled to t h e equivalent of US$200 f o r
each journey and f o r two Journeys a year; previously t h e cntitlcrncnt had
been ~ ~ $ 1 5gcr
0 journey.
Cctoher 19. Legislative Decree No. 4256/53 provided the following
further p r i v i l e g e s for f o r e i g n capital invested In accordance f i t 1 1
Legislative Decree No. 2687/53: (1) the amount of forctgn exchange vhhich
might be granted for t h e repatriation of c a p i t a l and profits tm3
Increased t o 70 Fer cent of the foreign exchange earnfngs of the enterprise
In question frcm t h e sale of its products abroad. (2) The amount of
foreign exchange which might be granted for the r e p a t r i a t i o n of' foreign
loans wa6 increased to 20 pcr cent provided tha-b the l o a n djd not exceed
double t h e value of the capLtal of the corporation.
( 3 ) The minlmum
value of investment projects referred t o in Law No. 4171/61, i r e 1 ,Dr 90
minion, was reduced to ~r 60 million.
"
I

November 1. Commodities formerly on l i s t F-200 were transfern d

to

llx F-100 and advance deposits required for private imports Included

iu lists F-100 and F-50 were rduced by 10 per cent.

November 23. hozea fish and millet were added to l i s t A,

m
January 26. Import licensing control was removed from Items of
machinery and sgare parte,
1, The system of bilateral trading arrangements with some

"

EMA countriee war3 ended. Settlements with these countries may now be
effected i n free foreign exchange and commercial banks are permitted t o
open accounts abroad and t o deal directly in convertible currencies
without the intervention of the Bank of Greece.

PART I1
APPrnIX I

Wble 50. Gross National Income

(In b i l ~ i o n 8of drachmas at current prices)

1959

3.958

lg@

lgGl

1962

provi-

Esti-

1962 Percentage over 1961

i o n a l mate

-4.6

Sources: Bank of Greece, Monthly S t a t i s t i c a l B u l l e t i n , April 1363; The

Minlstry of Coordination, Athens.

r/

Includec net income payments from rest of the world for 1.962; D r 46.4
billion in 1962 compares w f t h Dr 43.2 b i l l i o n in 1961.

Table 51, Areas i n Main Crops

(
3

Corn
Rice
Wheat

Cotton
Tobacco

..

"
"
"

_" " " "

"

Sources: National, Gtatistical Service of Greece, S t a t i s t i c a l Year Book oi'

Greece, 1963; and Ministry of Agriculture, Athens.

- 05

Table 52, ClassLfication of Credlt to the

Private Sector

...,

(Inalllions

of drachma)

1961
Dec.

1962
kc.

Agriculture
Short-term loans:
Cultivation
Collateral
Other

Long-term loans:
Equipment and land improvement
Fishing industry

Inventories held by Agricultural. Bank

Total

Manufacturing and mining

Short-term credits:
Bandicrafts
Fixed capital:
Agricultural industries
Mining
Other
Trade
Domestic
Import
Export
Tobacco

Construction (housing)
Other

Toto1

Source:

Bank of Greece, Monthly S t a t i s t i c a l Bulletin, A p r i l 1963.

-86Table 53.

Deposits with t h e Monetary S y s t e d

(In &=ions

of drachmas)

I'

1960
Dec

1961
Dec.

1962
DeC.

Private deposlts

sight

Swings
The
Blocked

Subtotal
Public e n t i t i e s deposits
Sight

Local goverment
Social insurance organizations
Other

Subtotal
Public enterprises sight deposits
Total deposits w i t h monetary system
of which:
Deposits with commercial b a n d
Private
Sight
Savings
Time
Blocked
Total
Public enterprises ( s i g h t )
Public e n t i t l e s

Sight
Time
Other

Total,
Total deposits with commercial banks

Source:

Bunlc of Greece, Monthly Statistical B u l l e t i n , July 1963.

A l l banks and ~ p e c i a lfinancing; institutions,

Allocation of public e n t i t i e s ! deposits w i t h the Bank of Greece excluded,

Table

'e

54, Dnigratlon of Greek Citizens from Greece

,'i

Total

50.8

84.1

26.4

1.1
6.2
0.7
47 3

0.9
0.h
0.3
24.1
0.4

Destination
Overseas
krope

Other Mediterranean
Occupations
1.1
Professionals
4 04
Farmers
o .G
Transport workers
27 00
Skilled industrial wcrkers
Service wgrkers and other workers
3.8
-, Without occupation
21

.$I

3 .o
25 b o

Ob3

1. 3
0 02
O.L

23 e 9
On5

0.4

National Statistical Service of Greece, Monthly S t a t i s t i c a l Bulletin, February 1963.

Source:

L/ Greek citir,ens who go abroad t o s e t t l e in another country for a period

exceeding one year.

- a0 -

"0n

"."

thousands)

*u

"".

1961
"
"
"

Mlniag

22.0

Industry
Food, drink and tobacco
Textiles
Clothing
Timber
Paper
Chemicals
Construction materials
Metal industries
Mechanical industries
Transport( equipment)
Miscelianeous
Ptiblic uti3 i t i e s

Building and public works

Source:

19'11
Forecast
"

32.0

102 0
0

80.0

156.0
r{O.O

24.0

53*0
26.0
7.0
89.0
37. 0
19.0

18.5

28.0

124.0

16'7.o

675.0

8go.o

Data supplied by tbe Greek authoritles.

Bilateral Trade and Payments Agreements of Greece

(Position ae of June 1963)

Country

--a

Date of Agreement
and I)uration

Settlements effected through

clearing account denominated i n
U.S. dollars. Swing limit
$1.0 million. Excess t o be
s e t t l e d Sa free exchange.

Brazil

Trade and paymentsagreement

Bulgaria

Trade and payments agreement simed Comaodlty lists.

December 5, 1953 with provision f o r
automaticrenewalannually.Modified
by Protocols signed May 12, 1956
and April 26, 1.962.

Czechoslovakia

Finland

laments Arrangements

Arrangements
Trade
sigmd

July 31, 1960 ertended until

January 51, 1964.

Settlements effected through

clearing account denominated
i n U. E. dollars. String limit
$400,000.

03

\o

Trade and p a p e n t s agreement signed

Cornmodit y l i s t s with
Settlements effected through
quotas, I n 1961 t h e
clearing account i n Czechoslovak
t a r g e t f o r Grmk c q o r t s crowns, kept with Bank of
t n a s e t a t 79 million
Czechoslovakia. Swing limit
crowns and f o r iapxts
10.8 million crowns
a t 37 mlllion c r o m a .
Thccc target0 have been
maintalncd f o r both 1502 and 1963.

Trade agreement s i ~ n e dMarch 24,

Commodity l i s t s without
quotas. Finnish exgorts:
timber, newsprint, and
o t h e r wood products
Greek exsorts : tobacco,
curranbo,citrus,
and
other f r u l t .

December 5, 1958, v a l i d f o r t h r e e
years

1949, automaticallyrenewable.

Payments agreementsigned June 9,

1960, adtomaticallyextended
under annual Protocols

Settlements effected through

11,s. d o l l a r s
clearingaccountin
kept with t h e Bank of Finland.
Swing limit $1.2 million. A t
t h e end of each four-month period,
outstanding balance is a e t t l e d i n
f r e e foreign exchange. If a t any
time the outstanding balance
exceeds t h e swing limits, t h e
amouct In excess i s also s e t t l e d
i n free foreign exckange

P
E

country

mte of Agreement
ana Duration

Trade Arrangements

Laatern Germany

Trade and payments agreement

between Bank of Greece and
Notenbalk of Berlin signed
December 1953, Further
agreement signed November 30,
1956, t a c i t l y renewable annually,

Hungary

Trade and payments aereemcnt

d g a e d June 5, 1954, SUPplemented and amended by
Protocols signed June 26, 1956,
January 30, 1959, and
February 3, 1361 and by a
new trade agreement (of three
years validity) signed
December 5 1962.

Israel

Poland

hyments Arrangements

Settlements effected t h o u g h
clearlng account denominated in
U. S. dol Lars. Swing limit of
$500,000 with provision for
additional seasonal increase of
$200, (300between November and bkrch.
l'ommodity l i s t s wltth quotas Settlements effected through
fixed annuslly. The acnddclearing
account denominated 9n
over-allceilings
f o r the
U.S. dollars. Swing limit of
three year period 1963-65
$2.0 million.
are as follows: Greek
exports : US$^. 2 million,
$9.5 million, and $10.0
millicn; Greek imports:
Us@O .O million, $10.5
million, and $ 1 L O million,
respectively,

Frivate b a r t e r t r a n e s c t i o n s
vay beeffectedin
addition
siCned June 24, 1951, Agreeacnt to trade through the
of June- July 1956 between Eank claaring.
of Greece and Bank of Israel
valid until June 30, 19c2 will.
be extended. u n t i l June 30, 1964,

ScttZcrnents effected through

clcrtring account denomhated i n
U . S . d o l l a r o which 13 maintained
by t h e B n k of Greece. Swing
litult of $1~0,000.

Trade and payments agreement

between t h e Bank of Greece and
the National Bank of Foll;znd
signed January ll, 1954,
Governmental agreement signed
J d Y 3, 1 9 s

Scttlement effected through

clearing account denominated in
U,S. dollars a Sving limit
$1.5 mlllion

Payments crgreemcnt between

Bank Letmi and Bank of Greece

Over-all c e i l i q , s on
t r u n s a c t i o n s f o r 1960j61,
1961/62 and lg62/63 s e t
a t $11.5 million, $12.4
m i l l i o n and $14.0 tnillioa,

ret3pectivelya

23
I

pi
El

wl'l

Country

Rumania

Yugoslavia

Date of Agreement
and Duration

Trade Arrangements
Payments

Arrangements

Conmodity l i s t s with quotas

flxed annually.

Settlements effected through

c l e a r i n g account denominated in
U, S. dollars. Swing limit
$750,000

Trade and payments agreement

commodity l i s t s with quotas
signed July 28, i95 3, supplemented fixed annually.
by a three-year agreemeut o f
July 21, 1958 and a further
agreement covering 1962, 1963,
and 1964.

Settlements effected through

clearing account denominated In
U, S. dollars. Swing limit $4.0
million

Trade and payments agreement

signed May 26, 1953, % a c i t l y
renewed annually, Subsequent
Protocols Sertember 1, 19.54,
Eugust 15, 1557, August 19, lg60,
and Augwt 3, 1961. New p p e n t s
agreement signed June 30, lg62.

Settlements effected through

clearing account denominated
in U. 6 , dollars Swing limit
$1.5 million t r i t h any excess
sayable i n dollars or another
convertlblc currency,

Trade and payments agreements

signed Yly 19, 1954. FrotoCOls
dated November 9, 1956 and
J a y 8, 1959.

Faymentr; agreement s i m e d
February 28, 1953. Cmmercial
transactions governed by
agreement of October 1, 1960
valid for f i v e years,

Commodity Lists with quotas.

Greece exports tobacco,
r a i s i n s , dried figs, o l i v e s ,
and resin: U.A,R, exports

f u e l oil, flax, cotton,

and potatoes.
Comuodity lists with quotas
f ixcd annually.

u3

P
I

Scttleiuente effected through

c l e a r i n g account denominated i n
U. S. dollars. Swing limit $2 .O
rntllion. Itrenty per cent of
Yugoslwia' s earningls under the
agreement are convertible.

$
H

- 92 -

PART IX
APE.iTDlX

IZ

Table 56. Balances on Bilateral. Payments Agreements

as at December 31, 1961 and December 3, 1962

(Tn u l l l i o n s of U. S. dollars)

Dec. 31

1961

Dec 31
1962

Change In

1962

3,112

-81

Hungary
Poland
Rumania
Czechoslovakia
Finland
Subtotal.

Other balances (EMA

accounts)
Total
Source:

+170

e ,064
+9,598

Bank of Greece, Monthly S t a t i s t i c a l Bulletin, March 1.963.

cl/ AG shown in Table 43, Greece incurred a trade deficit (receipts and
payments basio) v i t h the bilateral countries; the increase i n balancee in
favor of Greece r e o u l t e d from a surplus on invisible bransactions and from capit a l moveants.

APPENDIX I11

Morwkwy Measures In 1962

Measures, the Currency Committee announced in April 1962 to simplify
the selective credit controls and encourage the expansion o f production,
especially of export goods, were the following:
1. F i r m tthose annual exTorts reach R c e r t a i n minimum percentage
of t h e i r total sales in the preceding year are entitled to credit at tile
n o m 1 rate applicable t o the e q o r t trade, a t t h e time of the announcement 6 per c m t plus 1 per cent commission (the minimum requiremnta are
9 per cent of 1962 total sales for 1963, 12 per cent of 1963 for 1964,
rirJine;to 20 per ten$ of 1965 total sales in 1966),
2, Hovever, firms vhich achieve apecified hie;her parccntazcs, 'Or
example, exports i n 1.963 equal to 15 per cent of 1962 t o t a l sales, may
obtain credit at a rate 2 per cent less than t h a t applicable t o the export trade, that ia 5 per c e n t including commiscion,

3. Export fim, which meet thcse conditions, are entitled t o bank

on recluceh t e r n in amounta equal to tvice t h e i r share capital

adVt3nCeG

plus reserveG,

4. Firms whose borrotring from banks does not exceed t h c l r OW share

capital y l ~
s reserves may borrov et a rate 1 per cent less than the rate
f o r the export trade provuled they achieve e;;ports equlvalcnt t o %he
minimtun perceutages of t o t a l sale6 specified i n 1 above,
$. The c e i l i n g on c r e d i t c In the form of overdrafts t o export firms
tlas raised from 5 per cent of their annml sales t o 12 per cent azain
provided the firm achzeved the minunun export rcquiremcutc,

6 , Trading concerns, whose exports equal one-third of their t o t a l

sales and runount t o at least Dr 3 l u l l i o n o year, nlay obtaln In tuc
following year bank overdraft accnmrnodation in an amount e q m l to 70 per
ce& of the value of their exports and at the same rate ab t h u t a p y h cable t o tnc export trade,

7 I n regard t o t h e ? r o n s m n of long-tcrm loans t o flnancc flxcd

investment or t o provldc rrorlrinC: capital the commercial baldis ffere
authorized t o Grunt loans on t h c fo3llowinG term.

- 94 c . Where borrowing firms export 25 per cent of total sales, the

rate of intereet plus comrssion t r i l l be 7 per c e n t and not 8 per cent,
and if exporks e q c a bo per cent or GO per cent of t o w Gales, it wiU.
be further reduced to 5 per cent and IC per cent, respectively.

d o The came general conditione apply to loans from the Economic Development Financmg Orgauizatlon. Hotrevor, the usl1al rates 02
irxterest charged by the EDliY) were to be 5 per cent, and 5.: pe,. cent on
loans to firms formed by mergers,

e. The EDFO w i l l a l ~ oprovide ten-year l o a n s at 2 per cent to

finance technical studies by fi m or groups thereof mde trith a View
t9 developing t h e i r acti vi ti es in the European EC0nOm;iC c o m ~ i ~ y .
A feature of these measureG annollnccd in April 1962, was that they
were accompanied by an agreemnent between t h e main commercial banks and
the;hnk of Greece, which provided for the opening of a syecial account
to which the banks pay 5 per cent per annum of their total credits.
'phis is to cover the difference between the uouaL rate of interest and
the 6pecially reduced ratec for exporters.
Any balances remaininC: i n
the account at t h o cnd of evcrjr t w years are to 'be transferred to a
joint accovnt and used Zor the establishment of an export credit insurancc orGaniza bion.