Greece celebrates arrival of the euro

A printing machine turns out euro notes

ATHENS, Greece -- Greece has signed up to the euro currency, becoming the 12th member of the eurozone club.

Shops have already started displaying prices in both drachmas and euros well ahead of a January deadline for bigger firms and March for small businesses.

Thousands of Greeks marked 2001 -- and the country's new euro status -- with fireworks and late night dancing in Athens' central Syntagma square.

"We are building a better future for our children with persistence and patience," Prime Minister Costas Simitis said in a televised New Year message.

"We'll get used to the euro," said the owner of one of the Greek capital's trademark kiosks, Stathis Katselis.

Actual euro notes will appear in January 2002 and the drachma ceases to be legal tender after March 2002.

For many, this would have been unheard of only a few years ago, when Greece was left out of the first eurozone wave for failing to meet any of the EU's economic convergence criteria.

At the time most analysts predicted the EU's poorest member would have a hard time making the grade.

But in less than two years, Greece sprinted to meet targets of lower inflation and budget deficits. It was accepted in the eurozone at a European Union summit in June.

From renegade partner to hard working member of the bloc's inner core, the EU's only Balkan nation has had a rocky relationship with Brussels.

In the 1980s the late socialist premier Andreas Papandreou delighted in defying EU policies while collecting the handouts that brought relief to the impoverished Greek countryside.

His pro-European successor Costas Simitis made strides in streamlining key economic indicators and launched structural reforms most analysts say are necessary if the small Greek economy is to survive in the new euro environment.

The Greek central bank, which now hands the reins of monetary policy to the European Central Bank (ECB), brought high official drachma interest rates down to euro levels of 4.75 percent.

Double digit inflation in the early 1990s has been squeezed down to 4.2 percent and the drachma has smoothly landed on its pre-set central parity of 340.75 per euro.

Brokers at the Athens bourse said they were dusting down their calculators for the introduction of the euro when markets open on Wednesday and most in this staunchly pro-European Union country say they won't mind bidding farewell to the drachma.

But Greece, which expects economic growth rates of about five percent in the coming years, must make quick structural changes to face tough competition in the single currency, analysts say.

Tight control on inflation, the budget, wages policy and public debt need to match reforms such as speedier privatisations.

Greece must free its telecommunications and energy markets and privatise state-controlled companies like Olympic Airways, as well as revamp a nearly bankrupt pension system -- reforms that are sure to meet labour union opposition.

Reuters contributed to this report.

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