The Greek foreign debt and the great powers, 1821-1898

145 Pages·1944·19.393 MB·English

by  Levandis, John A.

THE GREEK FOREIGN DEBT
AND THE GREAT POWERS
1821-1898
THE
GREEK FOREIGN DEBT
AND THE
GREAT POWERS
1 8 2 1 - 1 8 9 8
By JOHN ALEXANDER LEVANDIS
SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE DEGREE OF DOCTOR
OF PHILOSOPHY IN THE FACULTY OF POLITICAL
SCIENCE, COLUMBIA UNIVERSITY
1 944
COLUMBIA UNIVERSITY PRESS
NEW YORK : MORNINGSIDE HEIGHTS
IN FULL COMPLIANCE WITH THE GOVERN­
MENT'SPECULATIONS FORCONSERVING
PAPERAND OTHER EHENTIALMATERIALS
COPYRIGHT 1944 COLUMBIA UNIVERSITY PRESS, NEW YORK
Foreign agent: Oxford University Press, Humphrey Milford, Amen House,
London, E.C., 4, England, and B. I. Building, Nicol Road, Bombay, India
MANUFACTURED IN THE UNITED STATES OF AMERICA
PREFACE
he writing of this book owes its inception to two eminent schol­
ars—the late Professors Edwin R. A. Seligman and Thomas
Parker Moon of the Graduate Faculty of Political Science of Co­
lumbia University—each of whom it had been my privilege to call a
teacher. It also owes much to the late Professor Andreas Andreades
of the University of Athens, whose unrivaled knowledge of Greek
finance contributed greatly to clearing up many controversial points.
Without their encouragement, assistance, and inspiration, this study
would not have been undertaken and completed.
It is difficult to acknowledge adequately the guidance and help
which many friends and former teachers have given me. To Professor
Carlton J. H. Hayes, now United States Ambassador to Spain, under
whose direction the work was carried on, I am deeply grateful for
scholarly criticism and wise counsel. I am likewise indebted to Pro­
fessor Shepard Clough for discussing with me the original draft of the
study, and to Professors Charles Cheney Hyde, Jacques Barzun, and
Charles Cole, who carefully read the manuscript and gave me the
benefit of their suggestions. To the late Nicholas Polites, for many
years Greek Minister to France, I owe many thanks for introducing
me to M. Maurice Lewandowski of the Comptoir National d’Es-
compte, who placed at my disposal invaluable material. For having
access to the diplomatic files of the Greek Ministry of Foreign Af­
fairs, I owe many thanks to the late Andreas Michalacopoulos, Secre­
tary of Foreign Affairs in the last Venizelos ministry. Words are in­
adequate to express my deep gratitude to my wife, Edna H. Levandis,
for her patience in enduring many inconveniences in her household
during the writing of this study and for devoting countless hours in
checking and correcting the text.
Limitation of space prevents individual mention of the staff mem­
bers of numerous libraries here and abroad, where courteous co­
operation made research a pleasure.
For any errors and shortcomings in this study the author is alone
PREFACE
VI
responsible. He hopes that the following pages may fill a gap in the
literature of Greek diplomatic history and finance. But if they do
no more than point out to scholars the rich possibilities for future
research in this field his efforts will have been amply rewarded.
John A. Levandis
New York,
December, 1943
CONTENTS
I. Foreign Borrowing during the Revolution of 1821 1
II. Sovereign Lending: the Guaranteed Loan of Sixty
Million Francs 29
III. The Expansion of the Foreign Debt, 1879-1890 55
IV. Diplomatic Intervention and Imposition of Finan­
cial Control 88
Bibliography 117
Index 131
INTRODUCTION
This study tells a tale of Greece, not of Greece of classical gran­
deur and bygone glories, but of modern Greece, which today lies
prostrate under the brutalizing jackboot of ruthless conquerors and
despoilers. It is a story of economic struggles which a resurrected but
exhausted Greece waged during the last three quarters of the nine­
teenth century. Its central theme is the growth of the Greek external
indebtedness and the periodic interference which sovereign and pri­
vate lenders resorted to in order to force an impotent debtor to dis­
charge solemnly contracted obligations.
In tracing the development of the foreign debt of Greece an account
is given of the circumstances under which this indebtedness was con­
tracted and the purposes for which the imported funds were expended.
The terms of the loan contracts with their tying clauses gave rise to
transactions which might be justly called financial depredations.
Practically all Greek loans, in spite of the many safeguards offered,
were floated at 30 percent and often at 40 percent discount; their
yields ranged from 5 to 8 percent, and interest and sinking fund
charges were payable in gold. The acceptance by the borrowers of
such onerous terms was due to urgent need. As a result the foreign
debt was hastily and disadvantageously contracted. Most of the loan
proceeds were appropriated to nonincome-creating purposes and par­
ticularly to expanding debt charges which could not be met by an
enfeebled Greek treasury. This eventually led to debt defaults. On
such occasions the aggrieved creditors appealed to their respective
governments, and demanded restitution through interference in the
financial affairs of the borrowers. These interferences varied from
simple interpositions to concerted diplomatic intervention which
finally resulted in the imposition of an international financial control.
Such control was justified on the pretext that the borrowers could not
manage their financial affairs in a manner satisfactory to Western
tenets of fiscal administrative efficiency.
In recounting the causes and extent of foreign interference in the
INTRODUCTION
X
financial affairs of Greece the narrative does not confine itself to the
enumeration and elucidation of diplomatic reprimands and threats
instigated by a set of hectoring creditors. The constant accumulation
of capital abroad and the search for higher remuneration beyond the
country’s own confines and the repercussion of an ardently espoused
Greek expansionist policy on the economic and financial structure of
Greece will be introduced and commented upon. All these factors
contributed their share in shaping the course of events. But the
single potent factor which precipitated ministerial crises, affected tax
policies and determined political and diplomatic alignments was the
perenially unsolvable foreign debt question. It was the question
which gave many a headache to the guardians of the Greek ex­
chequer and to the representatives of European high finance.
C H A P T E R I
FOREIGN BORROWING DURING
THE REVOLUTION OF 1821
THE MATERIAL CONDITION OF INSURGENT GREECE
Archbishop Germanos and a band of intrepid Greek moun-
hen
taineers unfurled the flag of revolt against the Sultan’s au­
thority on the 25th of March, 1821, they could not foresee the serious
consequences of that challenge. Wars, then as now, required not only
stalwart hearts but ample means. Such ample means insurgent Greece
did not possess. It must be remembered that the insurrection was an
unorganized and leaderless movement with no vital resources or na­
tional exchequer upon which it could draw with regularity in a pro­
tracted struggle. Its original supporters were the landless and under­
privileged who had nothing to lose but their chains.1 The well-to-do,
the Kodjabasis (native primates), the merchants, and shipmasters
were reluctant to join a movement that would jeopardize life, posi­
tion, and fortune. By inclination and self-interest they were commit­
ted to a policy of postponement and denounced all undercover mach­
inations as entirely premature. Their apparent hesitancy was not
hard to explain. The insurgents lacked organization, means, and all
prospect of foreign assistance, while on the side of the Osmanli rule,
there was power, vast, bloated, overwhelming.
At first the insurgents relied on their own paltry resources to
finance the war.2 When internal borrowing3 failed, they tried the sys­
tem of voluntary contributions and compulsory lending.4 But volun­
tary contributions raised by an appeal to patriotic motives could not
meet the imperative needs of the moment: “patriotism as a motive to
conduct, while strong during the period of its activity, is uncertain
1 Phillips, The War of Greek Independence, 1821 to 1833, p. 47.
2Frantzës, Epitome tes Istorias tes Anagennëtheisës Ellados, II, 182 ff.
3Archeia tës Ellënikës Paligenesias, I, 157ff.
4Tsagarës, Symvolë eis tën Dëmosionomikën Istorian tes Epanastaseos, p. 18.