We examine Greece’s external trade following accession to the EU, placing particular
emphasis on the 1990s. A large part of our analysis is based on unpublished,
disaggregated data sets. Our main findings are: (i) in the 1990s Greece sustained
heavy competitiveness losses in those sectors where she traditionally held a
comparative advantage; (ii) Greek trade becomes increasingly intra-industry,
especially in those sectors where Greece holds a comparative advantage; (iii)
regarding imports, EU participation has caused mutually offsetting, stable over time,
trade creation for the EU and trade diversion for third countries; (iv) EU participation
has not boosted Greek exports. A negative structural break in exports to the
Netherlands and Germany (Greece’s most important exporting market) has occurred
in the 1990s (v) Demand for Greek exports is highly sensitive to movements of the
real exchange rate and presents high income-elasticity. Hence, the deterioration of
Greece’s trade deficit in the 1990s is related to the strong-drachma policy and
unfavourable external conditions. Overall, our findings indicate that the real sector of
the Greek economy has not yet closed the performance gap dividing it from the
EMU’s hard core.
JEL Classification: F02, F10, F15
Keywords: Greece, EU, trade, competitiveness, 1990s.
We would like to thank Christos Ioannidis, Yannis Georgellis and Kul Luintel for useful suggestions
and comments. The usual disclaimer applies.
*Corresponding author: Michael Arghyrou, Department of Economics and Finance, Brunel University,
Uxbridge, London, UB8 3PH; United Kingdom. – e-mail: [email protected]
