GREECE AND THE EURO: THE IMPLICATIONS FOR FINANCIAL SERVICES IN SOUTHEASTERN EUROPE

On October 6, 1998 Mr. Dimitris P. Santixis, Deputy Governor of the Agricultural Bank of Greece gave a presentation at the American Hellenic Institute on the subject of European Monetary Union and the implications on financial services in the European Union, Greece and the Balkans.
Mr. Santixis spoke optimistically about EMU. He pointed out that this had helped Europe avoid the worst effects of the present global financial turmoil. For the future, the increasing pace of European economic and financial integration would continue to strengthen Europe's position as a source of economic stability. As a result of EMU, Europe would come to enjoy many of the business strengths of the United States.

In the financial sector, EMU would have a dramatic impact. It would remove many inefficiencies such as currency exchange costs. Further, by turning Europe into a single financial zone, it would ease financial and business decision-making. Government and corporate debt would be denominated in a single currency, thus eliminating country and foreign exchange risk. Cross-border acquisitions and cooperation in banking, which to date had been a rarity in Europe, would become commonplace.

Within Greece, the implications of EMU would also be positive. While Greece had not yet met the convergence criteria of the Maastricht Treaty, it was important to note the positive trend in the Greek economy. The improvements had been dramatic, both in attitudes and performance. Inflation and government and public debt had fallen. There is little doubt that Greece would be ready to join EMU by the 2001 target date and that this would have a positive impact on many sectors of the economy. The Greek financial services industry is preparing itself for this change through acquisitions and privatization.

EMU would also allow Greece to play a leadership role in the Balkans. As the sole country in the region that was an EU member, Greece is anxious to act as a channel of investment and development expertise to its neighbors. The Greek banks hope that their experience will help these countries in the transition from command to market economies, especially in the area of the restructuring of the financial services industry which is already underway.