Papagos died in office in 1955. During his tenure, an obscure politician, Konstantinos Karamanlis, had risen quickly in the Greek Rally Party. In the Papagos government of 1952-55, Karamanlis was a very effective, although autocratic, minister of public works. When Papagos died, King Paul surprised observers by choosing Karamanlis to form a new government. The forty-eight- year-old Macedonian reorganized the Greek Rally Party as the National Radical Union (Ethniki Rizopastiki Enosis--ERE) and proceeded to hold power until 1963.

During the Karamanlis years, the economy continued to grow by most statistical indicators, although it remained under state control and did not develop in new directions. Growth was especially fast in construction, shipping, and tourism. The state bureaucracy, the largest employer except for agriculture, became bloated, inefficient, and politically entrenched in this period. The service sector was the fastest growing element in the Greek economy. Overall, the standard of living of the majority of Greeks improved markedly in the 1950s in comparison with the sufferings of the previous years. Between 1951 and 1964, average per capita income quadrupled, and prices remained stable.

In the same period, Greeks flocked to cities in numbers unseen since 1900. Athens was the favorite destination of rural citizens seeking to improve their economic position. When the high expectations of Greece's shifting population were not realized, however, the postwar consensus that had supported the right began to crumble.

In foreign relations, the two dominant issues of the immediate postwar era, the Cold War and Cyprus, remained critical for Greece. Karamanlis was firmly convinced that Greece's fortunes lay with the West and that Greece must become "European." Karamanlis wanted to move closer to Europe than membership in NATO alone, so in 1962 he won associate status for Greece in the European Community (EC) with the promise of full membership in 1984. He also established close personal contacts in Washington, receiving an official visit from the United States president, Dwight D. Eisenhower, in 1959. No other United States president visited Greece until 1990.

The other overriding issue of the day was Cyprus. The postwar climate of British decolonization had led to expectations that Cyprus, whose population was 80 percent Greek, might become free to join with Greece. There were two obstacles: Cyprus's strategic importance to Britain and the Turkish population on the island. For Britain, Cyprus had a special role in protecting British oil supply lines from the Middle East. In 1954 Britain's foreign secretary, Anthony Eden, had stated simply that, because of that factor, Britain would never relinquish Cyprus. The sizeable Turkish population on the island meant that Turkey also had a stake in the future disposition of the island, if Britain were to agree to any change in its status.

In 1955 the EOKA campaign of violence and terrorism aimed at disrupting British rule and uniting Cypriot Greeks with Greece. After years of conflict and delicate negotiations, the interested parties finally reached a settlement in 1959. The island would be independent and ruled by a joint Greek and Turkish government formulated roughly according to the size of each population. The president would be Greek, the vice president Turkish. Greeks were awarded 70 percent of seats in parliament, with the Turkish minority holding veto power; 60 percent of the army was to be Greek. Britain retained one airfield and one army base, and Greece and Turkey were able to station military advisers on the island. The three nations jointly guaranteed the security of the island, and each had the right to intervene to defend it. The establishment of even temporary peace on Cyprus was a major accomplishment, but this solution was not popular in Greece.