part of it) had learned a lesson in economics the hard way.This new phase has been characterized until now by a substantial improvement in terms of economic growth. Inflation and budget deficits have registered a sharp decline, thus rapidly converging towards the EU average. This convergence finally led to Greece’s admission to the European Exchange Rate Mechanism in March 1998, combined with a modest devaluation of the drachma. By the time of writing, the drachma had recovered more than half of its earlier devaluation. Despite the remarkable progress achieved in terms of macroeconomic stabilization, Greece failed to be admitted to EMU on the basis of the 1997 figures. It now appears almost certain that the country will be able to satisfy the criteria for admission by the end of this year, which would allow Greece to enter the euro-zone in 2001; and the financial markets are apparently betting heavily on its success.The popularity of Greece’s membership of EMU has been repeatedly confirmed by large majorities in opinion polls, even though every Greek in favour of EMU would not necessarily be prepared to pay the price associated with membership. Such support is easy to explain. The search for a collective shield against the enormous instability of exchange markets is coupled with the fear of political marginalization that would follow should Greece be left out for long of the most important part of the European construction. And experience suggests that monetary stability can be more effectively guaranteed, if responsibility for decisions in the area of monetary policy were to be transferred to the European Central Bank in Frankfurt.If accomplished, membership of EMU will serve as a psychological boost as well as a sure sign that, having erred for several years in the economic wilderness, Greece is coming back into the fold. One thing will be to secure membership of EMU, and another to ensure that the Greek economy performs w...
