Greece reached a major milestone on June 19, 2000. Europe's oldest currency, the drachma, finally got the green light fromEuropean Unionleaders at a summit in Santa Maria da Feira, near Oporto in northern in Portugal , allowing it to join economic and monetary union (EMU) on January 1, 2001, making Greece the 12th full member of the eurozone

When newly-elected Prime Minister Costas Simitis said in 1996 that Greece intended to join the European single currency by 2001, it seemed an ambitious goal. At the time, the likes of Italy, Spain and Portugal, were themselves unsure of entry, and, despite a firm commitment to EMU convergence dating back to 1993, much work had to be done.

This is all the more reason why the acceptance of Greece into the eurozone by EU leaders highlighted a remarkable turnaround that has seen the country achieve nominal economic convergence with its wealthier partners. Years of austerity have reaped rewards as Greece toiled to achieve the required five criteria on inflation, public sector deficits, debt, interest rates and currency stability.

Nominal convergence, meeting the targets set out in the Maastricht treaty, has been rapid and sharp.

The Greek inflation dragon has been slain, with inflation coming down to EU norms from double-digits six years ago. The country's deficit to gross domestic product (GDP) ratio has fallen from more than 7 per cent in 1996 to well below the Maastricht goal of 3 per cent.

National debt remains high, but as a ratio to GDP is smaller than that of some other eurozone countries and is set to shrink as the next round of privatisations proceed.

The drachma has been successfully steered towards the euro entry rate of 340.75 and even had to be revalued by 3.5 per cent in January- an unheard of sign of strength - as part of the process.

Long-term interest rates have converged, while short-term rates are being gradually trimmed to EU levels.

European boost

When Greece officially joins the eurozone from the start of 2001 it will add 10.5 million people to the zones existing 291 million-strong population. Greeces participation in EMU will also reinforce its attempts to play a stabilising role in the southern Balkans.

Most analysts agree that Greeces entry into the eurozone will turn the regions economy into a moving target as most have only just begun to understand what the European Central Bank is aiming at. The Bank consistently emphasises the forward-looking nature of its monetary policy and has already no doubt discounted Greek EMU membership. Analysts generally agree, however, that Greek entry will not make a major impact on the euro-zone economy as the country will only account for about 1.9 per cent of the enlarged areas GDP of about 6.23 trillion euros. A bigger impact would occur when larger economies, such as Britain and Sweden, join.

European UnionPresident Romano Prodi applauded Greeces EMU entry. He said the feat should serve as an example, not only for EU candidate countries, but those like Britain which had yet to join Euroland.

Spanish Prime Minister Jose Maria Aznar and Luxembourgs Jean-Claud Juncker also applauded the move as they welcomed Greeces entry into the eurozone. "Greeces participation in the euro will be a success for Europe. Undoubtedly, the drachmas entry will be positive for the present and future of Greece and from the present and future of Europe", Aznar said.

Challenges remain beyond single currency

The top two challenges for Greek economic policy in the years ahead will be public debt reduction and achieving high rates of economic growth. We are setting the course Greece will follow as a full member of the eurozone. Greece cannot follow the road of strong growth burdened by the debt load that was accumulated by wrong choices in the past. Greeces goal will be to lower the public debt to GDP ratio to close to 60 per cent, National Economy and Finance Minister Yiannos Papantoniou said in July. Another challenge for Greece as the 12th member of the eurozone will be to achieve sustainable high growth rates in order to bring about real convergence and attain living standards of other EU countries, while boosting jobs and aiming for greater social cohesion. Achieving these ambitious goals will be a major challenge for the next decade as Greeces public debt, although drastically reduced, is still more than 100 per cent of GDP.

Bank of Greece governor Lucas Papademos has said that structural reforms will be the main tool to achieve Greeces main goals of low inflation and unemployment, along with high growth rates post-EMU.

"The challenge of low inflation must be met with fiscal policy and structural adjustment measures which will seek to contain the growth of aggregate demand and boost competitiveness. The lower cost of financing with the convergence of interest rates, coupled with price stability, will strengthen investment and economic activity", Papademos said earlier in the summer.

"Greece's EMU entry is a historic event for our country. With the adoption of the euro in January 2001, a long period of strenuous efforts to stabilise the economy reaches completion", he said as he heralded "a new era, characterised by new possibilities, but also new challenges".

Over the next 10-15 years, Greece aims to achieve high annual economic growth of at least 5 per cent and to reduce public debt to 60 per cent of GDP. At the same time, Greece should move faster in opening its energy and telecommunications markets and reduce the states presence in the economy in a highly competitive environment.

In a strong signal of the positive impact of Greeces EMU entry, debt rating agency. Moodys International removed Greeces country ceiling for debt and deposits and placed the country within the triple-A/prime-1 regional ceiling for debt and deposits assigned to the eurozone.

Simitis summed up the feeling of most. "With this one single move, Greece has emerged a much stronger country, with more possibilities and much greater self-confidence. Our entry into EMU represents a security investment for our country. It enhances our significance vis-a-vis our neighbours, who are trying to become members of the European Union. We want Greece to be in the forefront of European developmentsGreece enters the nucleus of the EU as a strong country, with a strong economy, with international recognition and a regional role", he said.