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Greece 1990s economic survival

Flashback: Greek 'economic salvation' in the 1990s

The conditions leading to the later economic collapse were fed by prior actions that are important ingredients to the disaster that came in 2007, 2008 and 2009. The "profligate" spending and debt creation of the 1990s (described below) was built upon an unreal optimism derived from positive numbers presented by various previous governments, though later these numbers were shown to contain distortions developed from a politically controlled statistical department (since replaced with ELSTAT).

But it wasn't all "smoke and mirrors," rather, the performance in the past (Greece often had the highest growth rate of the latter half of the 20th century in Europe) made a continuing improvement seem inevitable, even if the numbers had to be massaged to help this along. Manipulating numbers was also part of Greece entering the European Union and adopting the euro as its currency in 2001. This brought changes, not all good, in the competitiveness of the Greek economy, but the general view was that the "EU" way of doing business and a more disciplined government spending would follow. Instead, this added new pressures that sped the country harder toward the collision with a mathematical reality that soon shocked the entire system.

"In the mid-1990s, it seemed as if the stock market would bring economic salvation. Investment returns were often as high as 25% percent. Suddenly, everyone became an investor and every stock held the potential of great fortune. With interest rates plummeting and stock returns soaring, countless Athenians converted their savings into equity. Many went even further, selling property, even borrowing from banks in order to invest. Privately held companies recognized the opportunity to cash in and went public. All over Greece, a new profession – stock brokering – emerged. With a few or no credentials, people opened brokerage firms. In Athens, underemployed young men donned suits and imagined they were on Wall Street. In a span of four or five years, speculation drove the Athens Stock Exchange into double it value. But by 2001, the stock market had essentially crashed. Investors were left feeling duped, many were ruined. One of my uncles, a hardworking immigrant to the United States for some thirty years before retiring to Athens, lost nearly his entire nest egg – $60,000. Greeks blame the government for encouraging them to invest, and for failing to implement adequate stock market controls. Government officials say people ought to have known that investment involves risk."

From the book Facing Athens: Encounters with the Modern City, by George Sarrinikolaou. Published by North Point Press, 2004. Quote from pages 15-16.


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