ABSTRACT
Greece has been indeed raising barriers to economic and agricultural development and to structural adjustment by choosing inappropriate macroeconomic policies. This chapter examines the impact of inflation, overvalued exchange rates, interest rates and budgetary policy in relation to agriculture. Foreign exchange rates determine the terms of trade between domestic and international markets. As inflation made Greek products relatively more expensive and imported goods more appealing both to domestic and foreign consumers, foreign demand for Greek exports dropped, while Greek demand for foreign imports rose. During 1985-1989, the green rates were below the market rates, as green rates adjusted very slowly to the depreciating drachma. That implied that the effect of the drachma's depreciation was not passed fully to the prices of supported agricultural products. Producers received lower prices in drachmas, while they faced higher costs of imported inputs. Agricultural credit policy was formed on the basis of social and development criteria.
