Greek bad boys clean up their EU image

A 14 PER CENT devaluation of the currency is perhaps an unusual way of proving one's credentials. But by drastically lowering the parity of the drachma last weekend and vowing the join the single currency by 2001, Greece is starting to shed its reputation as the European Union's problem child.

Devaluation should place the previously overvalued drachma on an even keel for the required two-year participation in the exchange rate mechanism before membership of monetary union proper. And if the country can weather an immediate upward blip in prices, it is on course to meet the Maastricht criteria, if not this year then in 1999. Inflation is 4 per cent and falling, and the budget deficit is within hailing distance of the Maastricht ceiling of 3 per cent.

The repercussions of the drachma's entry into the ERM are unclear. In one sense, it further isolates Britain, along with Sweden and Norway, as grumpy Northern hold-outs against monetary union. But it is equally possible that the presence of another devaluation-pronecountry in Emu may reinforce doubts in Germany and its traditional hard-currency satellites about the wisdom of the enterprise. It is beyond argument, however, that it underlines the commitment to Europe of prime minister Costas Simitis, and his foreign minister, Theodore Pangalos.

"Europe is the main focus of Greek foreign policy," Mr Pangalos declared this week - an assertion that might sound strange to those schooled in the anti-European rhetoric of the former Socialist prime minister Andreas Papandreou, and the endless diplomatic warfare with Turkey that has made most of Europe rue the day in 1981 when Greece joined the then EEC.

The obsession with Turkey - on display again last weekend at Edinburgh when the EU agreed a compromise to permit the opening of negotiations with Cyprus - can still infuriate. "Pangalos is fine, very clever and very European," one of his colleagues remarked privately. "But then Turkey comes up, and it's like pressing a button."

Nothing grates more in Brussels than Greek use of its veto to advance the country's cause against Turkey; most lately its refusal to sanction a financial package for Ankara after the dispute over the Aegean island of Imia. The EU's failure to honour that commitment, as well as the continuing refusal to admit Turkey for membership, are the prime reasons for today's crisis between Ankara and the EU - a crisis into which it it has been in part dragged by Greek membership.

But in other respects, Greece is a reformed creature. Emu entry is but the most vivid symbol of Mr Simitis's determination to modernise the economy, 60 per cent of which is in state hands. And unlike Mr Papandreou, he no longer plays with fire in the Balkans.

Athens has realised that with the break-up of the Soviet Union and the former Yugoslavia, it has become a major regional economic power with a GDP larger than the other Balkan countries combined. Greece may import goods from the EU, but the Balkans and Eastern Europe are good export markets. "There are economic reasons for us to work for peace," Mr Pangalos said.