The history of the greet bankruptcies and loans begins in 1824 and at that moment, Greece had not been established as a state. There were two loans that were taken; one in 1824 and the other one in 1825. The first loan was worth 800,000 British pounds, but it is said that only 308, 000 pounds and the supplies of army worth 11,900 were ever given to Greece. Then, the second loan was issued for 2 million sterling pounds. It is also believed that Greece barely received 530,000 of that, as the rest of the money is believed to have been held for the interest, brokerage fees, expenses and other previous charges.
The financial party as it was given a name at that moment continued as the little amount that Greece was supposed to receive continued diminishing. It is believed that nearly 156,000 sterling pounds of the remaining 530,000 was sent to the United States for the construction of two steamboat sailing vessels and then 123,000 would remain in England for the construction of other six steamboats. The other amount of about 37,000 was given as compensation to the admiral Cochran of Britain who took the lead for the establishment of the then under construction Greek Navy. To be a bit specific, 190,000 of the loan remained in Greece and this amount was wasted in civil wars and clashes, given Greece was still under the occupation of Turkey at that moment.
The first loan default that was official was expected and it came after almost three years later, in 1827, because Greece was not able to pay the loan interest on the first two loans. The second loan default was in 1843 when Greece defaulted on a loan worth 60,000 gold French Francs. This loan was given to the government of the installed Bavarian King Otto, and the loan was guaranteed by England, France and America, which are the three great powers and each of them was guaranteed a third of the loan. As it would turn out, this loan was spent out in payment of the previous loans that were from Britain.
In October 30th 1893, the then prime minister and confidant of the then king Charilaos Tricoupis appeared in the parliament of Greece, and announced that the country was bankrupt and he then went ahead to acquire seven loans with terms that were exorbitant. Up to around 1897, the borrowings in total amounted to 770 million French Francs of which 389 million or 50.5% was received and the rest was interest, fees and other expenses. By the year 1893, 472 million Francs or 120% of what was received had been paid back, but still Greece owed 631.4 million French Francs, 82% of what was borrowed. That very same year, the total annual income of Greece as a state was 64 million French Francs or 10% of the external national debt.
The foreign capitals were gladly offering loans to Greece. French, America and British lenders were competing on who will be the first to loan Greece with the money. The French sent inspector Rough, the British sent sir Edward Law, and America sent banker Morgan Daniel, to check the financial conditions before they could send the money in. Greece received some amount of loan funds which were subdivided into various functions. The lenders at that time were Banque de Paris Brleishrober of Berlin, Harmbo of London, and the Banque de Constantinople who was from Andreas Syggros. And for the total face value of 643 million gold francs, Greece received only 463, 000,000 gold francs. For new and old loans, 455 million gold francs were paid back dating back from 1880 to 1890. After the defeat of Greece, the International Financial control, which comprised of national and international financiers, dissented to the state of Greece and began collecting all sales taxes payable for state monopolies such as oil, salt, cigarettes and others directly for lenders and that went on until 1978, that is for about 80 years. The third loan default led to the destruction of drachma as Greece currency and the total disintegration of the economy of Greece.
On the March of 1910, there was issuance of new loans for new public works. Despite the defeat in minor Asia, and foreign banks being reluctant to issue new loans, the bankruptcy that was nearing was averted with the first compulsory loan, which is an interest free loan to the state from citizens, enforced by the then minister for finance, Protopapadakis, who did literally cut the money in half, keeping one half in circulation, and exchanging the remaining other half as note of internal debt. The League of Nations issued a loan in 1922 for the relief of the refugees from Asian minor that came after the botched war, and the Greek army restructuring, also helped to forestall the catastrophe.
But irrespective of all the efforts, bankruptcy was unavoidable and as such, it finally happed in 1932. According professor and minister of finance Dr. Barbaressos’s report of the budget, Greece owed 2,868,100 French gold francs. In the year1952, prime minister of Greece Spyros Markezinis repeats the trick of cut-the-money and this time around, they cut the three zeros at the end the inflationary banknotes in order to stabilize the country. Mrkezins, who was the king’s favorite prime minister, also inserted the newly three year old, but very well founded pension plan of social security at the time and took their reserves including every savings he found lying in banks, plus the reserves in the national treasury to pay some of the debt owed to the British and French.
After World War II, the Greek people with President Zolotas Xenophon of Greece national Bank supporting them, requested to have the pre-war II loans forgiven by the allies. They requested to have the old debt erased for the contribution of Greece the victory being the major reason. Of course not only was the loan debt not forgiven, but after negotiating continuously for 15 years, with a lot of pressure and blackmail, the final settlement of the pre-war II came to happen in 1964. The government of G. Papandreou signed the resolution that may be the worst ever. The thing that followed, and which went unchecked, was that the economy suffered terribly from a long term shortage of money supply. There was no money in circulation in the market because the Central Bank of Europe did not approve issuing Greece with more currency. Greece decided to increase the national debt by 18% in an effort to use the borrowed money in order to show the increased GDP. In essence, Greece was all along trying to live above their means.
In the course of this crisis, Greeks adopted a new term, neoptochoi, to explain a new social group that is said to have emerged in the crisis. This term means young people aged between 18 and 35 years that have become homeless as a result of them losing their jobs. To hide the new type of poverty that was facing Greece, the municipalities have hired hotels and guest houses in which the people who does not have homes are able to sleep and take a bath for the subsidized among of 2 pounds.
Greece and the Greek people should have handled the crisis well instead of repeating the mistakes every now and then concerning the loans. There is no country that deserves to be humiliated as much as Greece has been. There is no doubt that the people of Greece are willing to correct their mistakes by paying their debts, but on amount and logical way. The people of Greece know that the only way they can solve the financial and economic problems they are facing is through development. Given a chance, the Greek people can pay their debts from their 50 billion worth of resources; petrol, gas, gold, clean technologies and their merchant activities. Greeks have lived above their means, but given an opportunity, they can fix those mistakes without their leadership making blind sacrifices and a nefarious plan.
Work Cited
Dimoulas, Vassilis K. Fouscas and Constantine. Greece, Financialization and the EU: the political economy of debt and destruction. Palgrave Macmillan, 2013.
Kenneth John Atchity, Rosemary McKenna. The Classical Greek reader. Oxford University Press, 1996.
Petrakis, Panagiotis. The Greek economy and the crisis: Challenges and responses. Springer, 2011.
Publications, eM. The Greek debt crisis. eM Publications, n.d.
Rothenhöfer, Markus. Greek debt crisis: Background and possible improvements. GRIN Verlag, 2011.
Safley, Thomas Max. The History of bankruptcy: Economic, social and cultural implications in early modern Europe. Routledge, 2013.
The Greek Bankruptcy and Bailout * A History Review | SOFISINTOWN (Sofia Stafford): http://sofisintown2.blogspot.com/2011/06/greek-bankruptcy-and-bailout-history.html
