Competitiveness and the External Trade of Greece in the 1990s: A Cross-Sectoral Investigation

The paper examines Greek external trade following accession to the EU, placing emphasis on the 1990s. Using original disaggregated data we find: (i) Mutually offsetting, stable trade creation/trade diversion in imports from EU and third countries respectively. (ii) No EU effect on exports. These experienced a negative structural shift in the 1990s. (iii) Competitiveness losses, more pronounced in the 1990s, especially in sectors where Greece holds a comparative advantage (i.e. trade surplus). The widening of Greek trade deficit is mainly due to stagnating exports, which we attribute to unfavourable external conditions and the strongdrachma policy. Overall, our findings indicate that real convergence has not kept at pace with nominal.