Military expenditure and government debt in greece: Some preliminary empirical findings * * The authors gratefully acknowledge comments and suggestions by the Editor of this issue, Gulay Gunluk-Senesen, and the participants of the conference Defence and the Economy , TESEV, Istanbul, 16 November 2002 where an earlier version of this paper was presented. The usual disclaimer applies. The views expressed here are those of the authors and in no way should they be attributed to their host institutions.

Greece has over the years allocated substantial human and material resources to defence. Its defence burden (i.e. military expenditure as a share of GDP) has invariably been substantially higher than the EU and NATO averages. Furthermore, during the post-bipolar period, when the defence budgets of most countries shrunk, Greek defence spending grew in real terms. This paper contributes to the existing literature on Greek defence spending and its effects by empirically estimating the impact of such expenditures on the country's fiscal situation during the period 1960-2001 something that has largely been ignored in the relevant literature. In particular, it focuses on the effects of military spending on government debt and its two components: internal and external debt. The empirical findings reported here suggest that central government debt and, in particular, external debt has been adversely influenced by military expenditure but also by the domestic political cycle. [ABSTRACT FROM AUTHOR]