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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.

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