Abstract: This empirical paper uses annual data for Greece 1960-2000 to study the link between fiscal policy and economic growth. Our regression analysis implies that, although a smaller public sector can be good for growth, it is necessary to look beyond size; the composition and quality/efficiency of the public sector are equally important. The policy lesson is that a fiscal consolidation based on cuts in total expenditure, a reallocation of funds away from the wage bill to public investment, and an improvement in government quality/efficiency can become engines of growth.