During the 80s, despite membership in the EC, Greece suffered from poor macroeconomic performance due to expansionary fiscal policies that led to a tripling of the debt-to-GDP ratio, which went from the modest figure of 34.5% in 1981 to the triple digits by the 90s.
[17] The second oil shock after the
Iranian Revolution hurt Greece, and the 80s were racked by high inflation as politicians pursued populist policies. The average rate of inflation in Greece during the 80s was 19%, which was three times the EU average. The Greek budget deficit also rose very substantially during the 80s, peaking at 9% in 1985.
[17] In the late 80s Greece implemented stabilization programs, cutting inflation from 25% in 1985 to 16% in 1987. The debt accumulated in the 80s was a large problem for the Greek government, and by 1991 interest payments on the public debt reached almost 12% of GDP.
[17] When the Maastricht Treaty was signed in 1991, Greece was very far from meeting the convergence criteria. For example, the inflation rate of Greece was 19.8%, while the EU average was 4.07% and the government's deficit was 11.5% of GDP, while the EU average was 3.64%. Nonetheless, Greece was able to dramatically improve its finances during the 1990s, with both inflation and budget deficit falling below 3% by 1999. Thus, it met the criteria for entry into Eurozone (including the budget deficit criterion even after its recent revision calculated with the method in force at the time). The Greek economy also exhibited strong growth throughout the 90s, which has continued into the new millennium.