The post war reconstruction of greece a history of economic stabilization and development, 1944 1952

The Post-War Reconstruction of Greece A History of Economic Stabilization and Development, 1944–1952... 2 Greece’s Pre-war Economic Development 5 Greek External Economic Relations Unt

THE POST-WAR RECONSTRUCTION

OF GREECE

George Politakis

Palgrave Studies in Democracy, Innovation, and Entrepreneurship for Growth

Series Editor Elias G. Carayannis The George Washington University

Washington, District of Columbia, USA

The central theme of this series is to explore why some areas grow and others stagnate, and to measure the effects and implications in a trans-disciplinary context that takes both historical evolution and geographical location into account In other words, when, how and why does the nature and dynamics

of a political regime inform and shape the drivers of growth and especially innovation and entrepreneurship? In this socio-economic and socio-technical context, how could we best achieve growth, financially and environmentally? This series aims to address such issues as: How does technological advance occur, and what are the strategic processes and institutions involved? How are new businesses created? To what extent is intellectual property protected? Which cultural characteristics serve to promote or impede innovation? In what ways is wealth distributed or concentrated? These are among the key questions framing policy and strategic decision-making at firm, industry, national, and regional levels A primary feature of the series is to consider the dynamics of innovation and entrepreneurship in the context of globalization, with particular respect to emerging markets, such as China, India, Russia, and Latin America (For example, what are the implications of China’s rapid transition from providing low- cost manufacturing and services to becoming

an innovation powerhouse? How do the perspectives of history and geography explain this phenomenon?) Contributions from researchers in a wide variety of fields will connect and relate the relationships and inter- dependencies among (1) Innovation, (2) Political Regime, and (3) Economic and Social Development We will consider whether innovation is demonstrated differently across sectors (e.g., health, education, technology) and disciplines (e.g., social sciences, physical sciences), with an emphasis on discovering emerging patterns, factors, triggers, catalysts, and accelerators to innovation, and their impact on future research, practice, and policy This series will delve into what are the sustainable and sufficient growth mechanisms for the foreseeable future for developed, knowledge-based economies and societies (such as the EU and the US) in the context of multiple, concurrent and inter- connected “tipping-point” effects with short (MENA) as well as long (China, India) term effects from a geo-strategic, geo-economic, geo-political and geo-technological set of perspectives This conceptualization lies at the heart

of the series, and offers to explore the correlation between democracy, innovation and growth

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The Post-War Reconstruction

of Greece

A History of Economic Stabilization and Development, 1944–1952

Palgrave Studies in Democracy, Innovation, and Entrepreneurship for Growth ISBN 978-1-137-57569-2 ISBN 978-1-137-57734-4 (eBook)

https://doi.org/10.1057/978-1-137-57734-4

Library of Congress Control Number: 2017949884

© The Editor(s) (if applicable) and The Author(s) 2018

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The registered company address is: 1 New York Plaza, New York, NY 10004, U.S.A George Politakis

Athens, Greece

I dedicate this book to the memory of my grandparents

Georgios and Ismini Georgaras

They gave me the keys to walk the distance taught me courage in the discovery

and so gave me life

During the time of the research and writing of this book, several people have given me support and advice My first debt is to my supervisor, Professor L Tsoukalis, who guided me throughout the original dissertation

at the University of Oxford My second debt is to Professor Elias Carayannis, who encouraged me to publish it and has been actively engaged in this process My third debt is to the editorial staff of Palgrave Macmillan for their work in shaping my manuscript into the present book

I would like to thank the (late) Greek politicians and economists and journalists who shared with me their unique insights of the period In particular, Dr I Zighdis; Professors A Angelopoulos and X Zolotas; and Messrs S Markezinis and A Frangias

I am also indebted to the staff of Bodleian Library, Oxford; the National Archives, College Park, MD; the Library of the Hellenic Parliament, Athens; the Greek Historical and Literary Archive, Athens; and the Library and the Historical Archive of the Bank of Greece, Athens I am also per-sonally grateful to Messrs N Pandelakis and K Papachrysanthou, who entrusted me with the private papers of A Diomidis and K Varvaressos in their possession, now part of the respective archives

I am especially thankful to my family for their continuous support and for accepting my, sometimes, exclusive interest in this project, and also for their active interest in it

2 Greece’s Pre-war Economic Development

5 Greek External Economic Relations Until 

6 From Liberalization of Foreign Trade to 

the Exhaustion of Reserves 121

7 The First Year of American Aid: The Porter Mission,

the Amag, and Initial Setbacks 149

8 Greece’s Association with the Recovery and 

Reconstruction of Europe: The Lessons from 1948 175

9 Defining and Implementing Economic and Political

Priorities in Post–Civil War Greece 221

x CONTENTS

10 Conclusion 257 Bibliography 269 Index 279

Fig 4.1 Remittances, March to December 1945 82 Fig 6.1 Monthly evolution of industrial output in 1946 123 Fig 6.2 Remittances, March 1945 to September 1946 127 Fig 6.3 Sales of gold and foreign exchange, March to December 1946 132 Fig 6.4 Evolution of domestic prices in 1946 138

Fig 8.1 Sales of gold sovereigns in millions of US dollars 178 Fig 8.2 Sovereign, 1948 market price in drachmas 213 Fig 9.1 Greece’s balance of payments, 1938, 1945–1952 

list of figures

list of tAbles

Table 2.2 The origin of the raw materials of Greek Industry 1928, 1938 19 Table 2.3 Agricultural exports as a percentage of total exports 21

Table 2.6 Percentage composition of Greek Foreign Trade,

Table 2.7 Land reform in Greece and other countries of Europe

Land distributed as a % of total cultivated land 25 Table 2.8 Production of charcoal before and after the First World War 25 Table 3.1 Greece, imports of foodstuffs as a percentage

Table 3.2 Public expenditure in Greece, 1939–1944 37 Table 3.3 Comparison of accounts on imports required 43 Table 3.4 Varvaressos’ request of relief imports 44 Table 3.5 Money, public spending, and gold in Athens,

Table 4.1 Government income and outlay (in millions of drachma) 70 Table 6.1 Agricultural production, 1945, 1946 123

Table 7.1 Porter’s estimated balance of payments for 1947 151 Table 7.2 Performance of Greek Foreign Trade in 1947 169

© The Author(s) 2018

G Politakis, The Post-War Reconstruction of Greece, Palgrave Studies

in Democracy, Innovation, and Entrepreneurship for Growth,

Yet, Greece’s current economic crisis that started in 2009 is misleading

in one respect: it hides the unprecedented success story, that of Greece’s post-war economic miracle From 1953 to 1977 the Greek economy grew

at an annual growth rate of 6%, exceeded only by Japan among OECD members Greek per capita income grew to fivefold its pre-1953 (or sixfold its pre-1938 level) in real terms, while domestic price stability set another OECD record, and the balance of payments remained in control Greece’s position within the international economy changed: whereas in 1938, 80%

of Greek exports were made up of farm products, by 1975 over 50% could

be classified as industrial products, and employment in manufacturing grew from 18% to 29% of total As a result, in the late 1970s, Greece was consid-ered as one of the most dynamic New Industrialized Countries (NICs).2

In order to get better integrated with Western Europe, Greece became

in 1961 the first country ever to be associated with the newly formed Common Market of Six original members, with the ultimate goal of achieving full membership Between 1961 and 1977 per capital income

2

increased from one-third of the EC average to two-third The progress made was acknowledged in the successful conclusion of the negotiations for accession to the European Community (EC) in 1978 and officially membership the EC as of 1981, ahead of the two Iberian candidates.3These major advances, however, were questioned by many Greeks What many commentators, and a large segment of the Greek public, resented was an economic development that was seen as having too many political, social, and economic drawbacks Perceived political drawbacks primarily related to foreign intervention in Greece’s domestic affairs Greece’s relationship with the USA, starting in 1947 at the height of the Greek Civil War and the time of the Truman Doctrine, was perceived as a status of dependence Within this perspective, large concessions to foreign investors were seen not as the price to pay for attracting foreign capital to

a poor and underdeveloped economy, but rather as the outward economic manifestation of political dependence

The social and economic criticism was based on two grounds: firstly, that large-scale emigration had been encouraged as part of the process of economic development and that this was an unacceptably high price to have been paid for industrialization; secondly, that the distribution of wealth produced had been unequal These criticisms were fueled by the limits of the political reconciliation in the post–Civil War era and ulti-mately the seven-year repression of individual liberties in Greece from

1967 to 1974 While prominent economists have disputed that the 1967–1974 economic policy is a continuity of pre-junta policy, the mili-tary rule has been commonly interpreted as the culmination of earlier social and political conditions, not least of the very model of economic development Even the proper economic achievements in terms of eco-nomic growth were, as is usual in such a political context, much disputed and their relevance for the country’s future contested

While much of the criticism of the political regime and in particular the limitations of democracy in the post–Civil War environment were well founded, one should, however, make a distinction with the conclu-sions that were drawn and their implications Annual growth rates and economic development after the seven-year military rule were only acceptable if they were to follow a pattern of increased income redistri-bution Gradually, dividing the pie became a concern before growing it

As a result, the pattern of development itself became a matter of political controversy, and Greece’s present condition should not fail to be seen

in this light

1 INTRODUCTION

There is no doubt that Greece’s post-war development pattern was a particular case, compared to the post-war Western European model The differences existed not only in the devastating Axis Occupation and the destructive Civil war, but arose mainly from the pre-war economic devel-opment The Western European post-war pattern has been one of increas-ing wealth of national economies proud of their independence,4 under full employment, development of the welfare state, and increased sharing of wealth through progressive taxation—the model A. Shonfield exalted in

his Modern Capitalism.5 Had Greece followed a development along lar lines, the above-mentioned criticism might have been unfounded However, Greece’s path was different from Western Europe’s This par-ticular path of development created within Greek society vulnerabilities of its own and provided the grounds for criticism of economic development How did all this start?

simi-In order to understand the origins of post-1953 development, we have

to be in a position to understand how and to what extent Greece’s ing point differed from the rest of Europe It would be wise to see how it came about that the Marshall Plan, the common departure point of the Greek post-war economy together with that of other Western European participants, ultimately led Greece to a different path of economic devel-opment from the rest of Western Europe that participated in the Marshall Plan The year 1953 has been widely accepted as the starting point for the post-war economic development of Greece, after the sharp and successful devaluation in April of that year put an end to the earlier post-war period

start-of price instability and currency inconvertibility If so, where can one find the origin of these Greek particularities? Should one cite the very low departure level, as demonstrated by Greek per capita income of $150 per annum? Had it to do with the Greek Civil war, and if so in what way? Hadn’t Greece after all been a member of the European Recovery Program (ERP), the Marshall Plan, and, if so, why after a grant of US$2 billion, did the Government in 1953 opt to offer exceptionally advanta-geous terms in order to attract foreign investors, which put it on a par with underdeveloped countries that did not benefit from such largesse? This is the subject of this book

In order to provide a satisfactory answer to these important tions, we should survey the state of the pre-war Greek economy, con-sidering in particular the level of economic development, external economic relations, the balance of payments, foreign trade, and the role

ques-of debt We look into this in Chap 2, in connection with the course of

1 INTRODUCTION

4

pre-war economic policy, paying attention in particular to some new thinking that started to emerge in the inter-war period after 1922 and the experience from the autarkic policies of the 1930s

Chapter 3 opens with a discussion on the effects of war and Occupation upon the Greek economy, both real and monetary The priorities and planning for the aftermath of Liberation are presented It is followed by the attempts of the National Unity Government to arrest hyper-inflation and to create the monetary and material conditions for domestic recovery

at the time of Liberation X. Zolotas, who directed this effort as co-governor

of the Bank of Greece, tried to do away with as much state regulation and controls as was feasible at the time, by insisting mainly on creating the right psychology in the markets These efforts were severely disrupted by the Civil War of December 1944

Chapter 4 deals with the gradual deterioration of the economic look in Greece in the early months of 1945, at a time when, thanks to the implementation of relief programs, underlying material conditions were gradually improving We consider why, while proposals for adjust-ing economic policy were submitted by the governor of the Central Bank K Varvaressos early in February 1945, action was postponed by reluctant politicians until June, and then suddenly introduced after British pressure While his stabilization had the opposite philosophy of Zolotas’, his efforts failed three months later for similar reasons: political developments, domestic opposition to his plans, and the absence of firm political backing obliged him to resign

out-Chapter 5 presents how the evolution of Greece’s economic situation was perceived in the West, and how this influenced Greece’s perception by the United Nations Relief and Rehabilitation Administration (UNRRA), the UK, and UNRRA’s major backer, the USA

Chapter 6 describes the course of the economy between Varvaressos’ departure in September 1945 and the end of 1946 Attention is paid to the course of economic policy after the third post-war stabilization of January 1946 and in particular how after the elections of March 1946 Greece’s reserves were depleted following an untimely liberalization of the trade policy, without matching foreign exchange earnings or credits Finally, we show how the very institutions that were supposed to supervise Greece’s monetary policy failed to react on time

A review of Kyriakos Varvaressos’ private papers shows that the Americans were being advised by the former governor of the Central Bank himself and that the latter exerted strong influence on the Undersecretary

1 INTRODUCTION

of State Dean Acheson and the State Department and weighted heavily on the unusually strict terms included in the policy of assistance to Greece.Chapter 7 deals with this new context of the expanding Civil Conflict and the announcement of the Truman Doctrine The bilateral agreement

of June 1947 has been seen as the basis of US interference in Greek affairs Here, these heavy terms are analyzed in the light of the record of Greek post-war economic policy as perceived by the US administration looking through Varvaressos’ eyes Then the initial difficulties and Greek Government’s opposition the Americans faced in 1947 when they first tried to dictate Greek economic policy are discussed

Chapter 8 introduces the key issues of Greek reconstruction policy, in connection with the launch of the ERP in 1948 It shows how Greek- enlightened proposals to use this opportunity to Greece’s best benefit, especially to bring about a change in the structure of the economy That these proposals attracted the attention and got the support of key US poli-cymakers, only to be defeated by strong and well-connected domestic interests Here, thanks to the archives of the Greek Highest Reconstruction Council we can establish that, contrary to what has been often proclaimed

in the past, it was opposition from powerful interest groups within Greece that wrecked those ambitious plans, rather than the security threat of the Civil War or American opposition to Greece’s economic development And how in turn the Americans, who exercised enormous influence in Greek affairs under the bilateral agreements of 1947, failed in this key test.Chapter 9 surveys the poor record of the realization of the Marshall Plan in Greece during the Civil War, carried over in the first post–Civil War year It discusses various attempts, under American pressure, to return the Greek economy to a peacetime operation and parallel efforts to nor-malize political conditions It is followed by a discussion of the impact of the Korean conflict on the future of Greek reconstruction It is demon-strated that the removal of the unconditional US backing for the moder-ate Plastiras Government set loose those Greek elements who were opposed to the normalization of the political situation through a gradual re- integration of their (defeated) opponents in the political system and paid lip service to the success of the ERP. In tandem, we consider how the Americans were successful through successive aid reductions to get through most of the reforms they had tried unsuccessfully to introduce in the past—even though the offer of large-scale aid had by then disappeared and the future of the Greek economy remained in suspense

1 INTRODUCTION

6

Dealing with the roots of Greek post-war development, one always has

to keep in mind the explosive Greek political situation throughout the 1940s, when Greece after Liberation became entangled in civil strife To search for the roots of the post-war economic development of Greece in a period of civil conflict was and still remains a huge challenge Because of the intensity of political strife, one might be tempted to abandon the anal-ysis of the economic policy during this period, for well-understood reasons First of all there is the mere gravity of domestic political developments around the Greek Civil War An intense political situation is less than a solid ground for economic history The history of this period is still a politically and emotionally charged issue in Greece, and this has clouded the judgment of economic historians of the period

Secondly, the task of economic analysis is made difficult by the fact that events in Greece then had an acute international dimension The Truman Doctrine was the first ever implementation of containment, preceding the Marshall Plan by a year Thus the international factor, in the form of foreign intervention in Greek domestic affairs, has influenced Greek understanding The “foreign factor” has in the past occupied center stage

in the interpretation of Greek affairs in the 1940s, excluding domestic forces from any role of a real political, economic, or social significance And the importance given to the foreign factor has reduced our under-standing of Greek post-war developments, in particular when dealing with the adoption of the Greek post-war pattern of economic development.These problems are reflected in the voluminous historiography of Greece in the 1940s The attractions to the historian, first of the Civil War itself, then of the foreign intervention surrounding it, have always exer-cised a heavy influence on our understanding of Greek history of that period This concentration of interest on political affairs has done an injus-tice to the political economy of the period This injustice takes us beyond the “mutual neglect”, as S Strange coined in 1970,6 since here lack of inter-est has sometimes been camouflaged in parenthetical references to eco-nomic developments, which tends to ignore the internal dynamics of the economy

So the present study has a dual task: firstly, to disentangle the issues of Greek economic development of this period from the politics of foreign intervention; secondly, to reconnect economic development with domes-tic politics This approach will permit us to establish the respective con-tribution of politics and economics to the internal dynamics of Greece,

by avoiding the undue influence exerted on previous analyses by the

1 INTRODUCTION

in the Greek society reacted to the very important questions raised by post-war economic recovery and reconstruction The strategy which led the Greek economy from stabilization to economic development in the ensuing period was first and foremost the product of an analysis by Greeks themselves, who maintained ownership throughout the program and led

it finally to success after these initial setbacks

It is true that such a focus on national development strategies during the Marshall Plan years is more common these days than when this study was originally conceived However, no other European participant became entangled in a prolonged civil war and no such neglect is more pronounced elsewhere than in the case of Greece And nowhere else in Western Europe has the Marshall Plan been more effectively used as a tool of economic modernization than in Greece

The more comprehensive methodological foundations for this research can be found in the survey “Greek History, 1940–1950, The Main Problems” by N. Svoronos (1980), wherein he said,

In their treatment of [the 1940’s] historians have focused mainly upon two factors; first, internal politics, that is (a) the stand taken by Greek political and social groups during the war and (b) the resistance organizations and their relationships both with the various political parties and among them- selves; and second, the foreign factor, that is the intervention of Great Powers in Greek affairs Emphasis on this second point has been such that foreign intervention came to be considered the most important factor in the development of recent Greek history.

… It would be a serious methodological error to ascribe to these nomena, with the pretension of offering interpretative keys, the character of principal and autonomous historical factors -even though one may connect them, somewhat parenthetically, with social and economic developments This error occurs with many of the studies of the period we are concerned with In fact such studies often conclude with a series of value judgments that try to either justify or to condemn the policy of one of the rival powers toward Greece or the policy of one of the Greek political parties Such stud- ies, furthermore, give the impression -so widespread in Greek historiography

epiphe-1 INTRODUCTION

8

and politics- that Greece is merely a stage for puppets whose strings are moved by alien hands Such a conception is naive for a historian, a mortal disease for history itself, and an unacceptable alibi for politicians 7

The present author has greatly benefited in his investigation from the fact that during the research period three economists that played a major role, namely Angelos Angelopoulos,8 Xenophon Zolotas,9 and Ioannis Zighdis,10 were already in retirement but keen to talk about this period and major archives, in particular those of former Central Bank governors Kyriakos Varvaressos11 and Alexandros Diomidis,12 had just become available

It is our intention to prove that the actions of the Greeks themselves in response to various circumstances—or their failure to act—were much more important in shaping Greece’s economic future than foreign inter-vention, however forceful or inappropriate the latter might have appeared

at times Furthermore the reason why the Greeks failed to use to their advantage the opportunity of the Marshall Plan had less to do with the Civil War and rather more with the opposition to the policy of economic modernization The focus of this research is to discover how the path to development emerged from the difficult choices faced during the process

of Greek post-war recovery and reconstruction, from 1944 to 1952

Notes

1 IMF Country Report No 17/40, February 2017, 2016 ARTICLE IV CONSULTATION.

2 O.E.C.D The Impact of the Newly Industrialized Countries, Paris 1978.

3 That economic growth came to a halt with EC membership in 1981 was, as

in the previous period, again the result of Greek domestic developments.

4 Spain, another country of Southern Europe, which presented similarities

to Greece in terms of concessions to foreign investors, did not participate

in the Marshall Plan.

5 A.  Shonfield Modern Capitalism, The Changing Balance of Public and

Private Power, O.U.P., London 1965.

6 S. Strange “International Economics and International Relations, A Case

of Mutual Neglect” in International Affairs, April 1970.

7 J. O Iatrides (ed.) Greece in the 1940s A Nation in Crisis University Press

of New England, Hanover and London, 1981, pp. 2–3.

University of Economics and Business (AUEB), Leipzig and Paris Elected

1 INTRODUCTION

professor in 1939, fired from his post in 1946 for political reasons, and left Greece Returned to Greece 1959, re-elected professor in 1961, where he remained until 1967 when he resigned protesting against the coup d’état Member of the Academy of Athens In 1976 Director of the Supreme Economic Council (1931–1945), Secretary of State for Economics in the Mountain Government in 1944, and Deputy Finance Minister in the Government of George Papandreou Governor of the National Bank of Greece (1974–1979).

he held until 1967, when he resigned in protest at the military regime Governor of the Bank of Greece in 1944–1945, then in 1955–1967 (when

he resigned in protest at the regime), and in 1974–1981 In November

1989 he was chosen to head a Coalition supported by the conservative, socialist and communist parties, with the task of saving the Greek economy from bankruptcy He was close with Angelos Angelopoulos and Ioannis Zighdis.

did his Phd in London School of Economics 1937 In wartime he worked

in London under Varvaressos to prepare for the solution of Greece’s cial problems after the end of the war From June 1944 until the end of

finan-1947 he served in UNRRA international staff, in London and Athens From the last position, a series of projects were published including “The Mineral Wealth of Greece” To avoid political prosecution for his views on economic development and industrialization he went on a long trip to Africa to study the economic situation in Ethiopia and Kenya where there were large Greek communities Elected MP in 1950 of the Dodecanese Minister for Industry under the Centrist Coalition Governments of

N. Plastiras (1952) and G Papandreou (1964–1965).

Economy, Greece, 1911–1913, director statistics, 1913–1920 Assistant professor economics, University of Athens, 1918–1923, Professor 1923 Economic adviser Greek National Bank, 1924–1933 Minister of finance,

1932 Deputy governor Bank of Greece, 1933–1939, Governor, 1939–1945 Minister of finance, 1941–1943 (London) Ambassador at large for economic affairs representing Greece at UNRRA Conference, Atlantic City, New Jersey, 1943, Bretton Woods, 1944, San Francisco,

1945, 1943–1945 Deputy prime minister, also minister of coordination and Minister of Supply, 1945 Executive director then Advisor, Inter- national Bank for Reconstruction and Development (IBRD, commonly the World Bank), 1946–1957.

NOTES

10

Weimar and Paris, doctorate from the University of Berlin Professor in Athens in 1905 Member of the Athens Academy First elected in 1909 to the Hellenic Parliament under the banner of the Liberal Party From 1912

to 1915 and again in 1922 he served as the Minister for Finance Governor

of the National Bank of Greece in 1923 and first governor of the Bank of Greece in 1928 Diomidis became prime minister upon the death of Sofoulis It was during his brief term in office (28 June 1949–6 January 1950) that the Greek Civil War ended.

1 INTRODUCTION

© The Author(s) 2018

G Politakis, The Post-War Reconstruction of Greece, Palgrave Studies

in Democracy, Innovation, and Entrepreneurship for Growth,

of economic development, and the time it took to establish frontiers acceptable to the Greeks as definitive cast serious doubts on its viability as

an independent entity For a long time to come, the number of Greeks living within Greek frontiers was to remain smaller than those under Ottoman rule So in the era of nationalism, the issue of the unredeemed (the liberation of ethnic Greeks living under Ottoman rule) became a key reference of the new country’s foreign policy

These developments were of considerable importance for Greece’s tionship with the international economy Territorial expansion required a relatively large army and high public expenditure on defense, which was usually provided by borrowing internally or, more significantly, externally.2For over a century, Greece had to finance the cost of its expansion, which was the first reason for reliance on foreign finance.3 Second, whereas the independent state covered initially 48,000 square km and had a population

rela-of fewer than 1,000,000, territorial expansion by 1922 had increased it to 127,000 square km and a population of over 6,000,000.4 The implications

12

from such a formidable expansion of the internal market are obvious Qualitative changes, which took place during the same period, broadened their impact

2.2 Post-1922 course oF Greek econoMy

The economy was positively impacted by a decade of territorial expansion from 1912 to 1922, that started with the Balkan Wars and ended with a defeat in Asia Minor in the aftermath of the Great War At first, high demand and profits generated by the Balkan Wars of 1912/3 provided a powerful stimulus to Greek industry; military supplies and the annexation

of new territories in particular gave a strong impetus to Greek industrial production Also, Greece acquired for the first time a shared border with the rest of Europe A rail link, which Ottoman obstruction had not allowed before, was quickly established.5 Greek industry was at last set for expansion

The outbreak of the First World War6 initially shelved all plans for expansion since machinery could not be imported from overseas due to the high transportation risks involved in maritime communications Nevertheless, there was a need to supply the increased demand of a grow-ing domestic market, which had been confined to local industry during the 1916/17 blockade,7 and the demands for supplying an Entente army, which was stationed in Northern Greece

In the meantime, the disruption which international trade had faced ing the First World War had contributed to spreading the idea of economic development for underdeveloped regions.8 This spread the new concept of economic self-reliance, which resonated following Greek experiences of import trade difficulties during the Balkan Wars, the First World War, and,

dur-in particular, the Anglo-French blockade of Athens dur-in 1917 As a quence, there was a switch from imports to local production and a utiliza-tion of Greek lignite9; from those experiences one can sense on the part of the Government a nascent positive perception of the role of industry.The last major stage of Greek territorial expansion (1917–22) was to be

conse-of the utmost benefit for Greek industry; not only did markets expand at hitherto inconceivable rates, but in addition, following the traumatic defeat in the war against Turkey in 1920/1922 and the subsequent with-drawal of the Greek population from Asia Minor after 1922, would supply not only abundant and cheap labor, but also entrepreneurial skills This brought significant changes to the perception of the optimum structure of

2 GREECE’S PRE-WAR ECONOMIC DEVELOPMENT AND EXTERNAL

the Greek economy Awareness was progressively growing that industrialization was henceforth necessary for the significantly expanded Greek state, if employment were to increase, incomes to rise and social unrest contained.10 Simultaneously, emigration from Southern Europe to the USA was abruptly curtailed after 1921.11

Greek foreign policy was also reshaped as a consequence of the defeat

by Atatürk’s Turkey in 1922 In its aftermath, Greece moved progressively toward regional cooperation, while traditional links with the Great Powers,

in particular with Britain, the leading naval power, were preserved Greek economic and foreign economic policy was to be considerably adjusted in the same direction

Among the economic issues which post-1922 Greece had to face, were the effects of ten years of war in destabilizing its financial position Greece had been at war between 1911–1913 and 1916–1922 War expenditure and the cost of resettling the refugees in its aftermath were met by further borrowing The sheer size of the financial emergencies created by the problem of resettling 1.3 million refugees in a country of fewer than 6 million, led to excessive paper-notes issue and precluded for some time any long-term cure It took at least up to the late 1920s before some kind of balance was re-established in Greece’s finances, while the most pressing needs of the refugee problem were barely met.Foreign debt between 1914 and 1930 increased by 165%, measured at constant 1914 prices.12 Between 1914 and 1930, internal and external components of public debt increased on average by 143%.13 As a result, during the same period, the servicing of the public debt increased from 19% to 36% of public spending in the financial year 1931/1932.14 Public debt as of the end of 1936 was 75% external and 25% internal, the highest ratio of non-resident ownership in Europe.15 Greek public debt service was among the highest among European debtors in 1930 As Fig. 2.1

shows, Greece was third highest Most significantly, there existed no important offsetting payments, as war reparations were low.16

This ever-increasing resort to external finance had important quences It destroyed the confidence of foreign investors, and thus the conditions of loans issued during the 1920s deteriorated It has been calcu-lated that loans extended in the 16-year period from financial year 1915 to 1931/1932 produced receipts of drachma 22.2 billion while the service of public debt absorbed drachma 25.9 billion.17 Simultaneously, the State’s resort to external finance on a large scale squeezed credit for industry

conse-2.2 POST-1922 COURSE OF GREEK ECONOMY

14

Until then the National Bank of Greece (NBG), the leading cial bank, had extended credits to the Government In exchange for this special relationship between the Bank and the State, the NBG had enjoyed the exclusive right to issue paper notes The non-existence of an indepen-dent Central Bank was at that time a rather common phenomenon among Southeastern and Central European economies, and reform was almost simultaneously introduced in most if not all of them in the 1920s.18 In order to rebuild the confidence of foreign lenders in the Greek economy, the League of Nations, acting as an advisor to the Greek Government, proposed in connection with a stabilization loan to set up an autonomous central bank in order to discipline the government’s borrowing demand This was implemented in 1928 with the creation of the Bank of Greece

commer-In this way a certain degree of stability was restored and this attracted private savings to the banking system The increased financial self- discipline that followed the setup of the Bank of Greece in 1929/1931 was benefi-cial to industry Since the State’s appetite was being more controlled, sav-ings were transformed into significantly larger and cheaper credit for the industrial sector Consequently, the lower levels of interest Greece was to know from the late 1920s onwards and through the 1930s were a real bonus to industry, and played an important role in the development of Greek industry in the last inter-war decade.19

Commercial banks had been traditionally reserved toward financing Greek industry.20 The high levels of interest prevailing before the war can

be attributed to the low savings, the policy of commercial banks selves, but also to the Government’s appetite for credit, which was easily satisfied by the special relationship that existed between the leading commercial bank (the NBG), and the State

them-Fig 2.1 Service of public debt as a percentage of public expenditure in 1930

2 GREECE’S PRE-WAR ECONOMIC DEVELOPMENT AND EXTERNAL

Nor did foreign direct investment provide the answer to the question

of the development of the Greek economy Foreign capital was made available in pre-war Greece almost exclusively in the form of loans, with very little direct foreign investment Among the reasons advanced in order

to explain this state of affairs, one could mention the insecurity for foreign investors created by external military involvements and internal political instability21; the low level of existing infrastructure in energy transport and communications; the low productivity resulting in low rate of return because of the above-mentioned reasons; the tax discrimination that existed for a long time against large-scale investment; and finally the pre- war international economic system, and Greece’s place within it The pat-tern of pre-war of international investment encouraged foreign direct investment only on a minimum scale, such as in extraction but not in processing.22 Consequently, the only exception to the pre-war absence of direct foreign investment in Greece was investment in mineral extraction, like elsewhere in the underdeveloped world.23

In the absence of cheap long maturity finance it was considered that only foreign interests could respond to the capital requirements of infrastructure investment But then in the crisis of 1930s, this window of opportunity was again quickly closed.24 Lack of finance for infrastructure, construction of agricultural dams, of public utilities and energy,25 was considered the major obstacle to economic development Technology and education would be easier to master under conditions of capital availability.26

2.3 the crIsIs oF the 1930sThe economic activity of the countries of Southeastern Europe was tradi-tionally oriented toward the great industrial economies of Europe These absorbed the major part of Balkan exports and funded them with capital

to finance their imports gap Intra-Balkan trade was small, given the great degree of similarity in the structure of their economies.27 The traditional reliance of the Balkan countries upon exchanges outside their area is con-sidered to have had also implications for political relations in the Balkans.28With changes in international economic conditions brought about by the worldwide depression of the 1930s, poor countries were in a very weak position The European powers proved shortsighted as the great depression moved across the world after 1929.29 Britain and the USA in particular remained attached to liberal trading practices in their foreign

2.3 THE CRISIS OF THE 1930S

16

economic policy Faced with the problem of deteriorating external balance, they sought to isolate themselves from the results of the crisis by freezing the level of their purchases from the countries of Southeastern Europe.30

It was not difficult for Germany and its allies to fill the gap where relations with poor countries were concerned They were offering barter trade agree-ments at a time when foreign exchange was becoming increasingly scarce This policy was particularly directed toward Southeast Europe, where Germany followed a twofold policy It sought to secure supplies of foodstuffs and raw materials, and to compete against British traditional influence,31 as Nazi Germany tried to alter the balance of power before the war to its benefit, and to increase its influence over Southeastern European countries.32

Greece proceeded to the conclusion of payments and compensation agreements wherever it could in order to save scarce and precious foreign exchange reserves Overall, the clearings offered to Greece an artificially high ratio of coverage of exports by imports revenue, which reached 70%

at the end of the pre-war period The most important in scope and quences was the deal concluded with Germany, whose importance as a market for Greek exports grew as a result It is there that this policy found its natural counterpart

conse-While this experience was common among the countries of Southeastern Europe, what is particular to Greece is that she experienced a significantly lower degree of dependence vis-à-vis German clearings (see Fig. 2.2, p. 21)

A possible explanation can be found in the lack among exportable Greek

Fig 2.2 Trade of countries of Southeastern Europe with free exchange countries

2 GREECE’S PRE-WAR ECONOMIC DEVELOPMENT AND EXTERNAL

commodities of such worldwide surplus foodstuffs as grain.33 Instead, the presence of the semi-luxury crops allowed higher diversification in export markets and a continuation of trade with free exchange countries to a larger extent A less economic and possibly more convincing explanation can be found in the British connection of the Greek foreign policy Metaxas, who ruled Greece with dictatorial powers between 1936 and 1941, negotiated

a financial agreement with Britain, which went some way toward offsetting the German grip on Greece’s economy However, the Greek Government’s efforts to alleviate Nazi domination of the Greek foreign trade were ham-pered by continuing resentment in London at Greece’s default on past loans.34

It seems that the consequences of the interconnection between nomic and political dependence were generally ignored and neglected on the British side, and where realized, reaction was sporadic and limited This contrasted sharply with German policy As Kyriakos Varvaressos, the governor of the Bank of Greece, disclosed later in a wartime lecture at Chatham House, the Greek Authorities at that time, faced with the policy

eco-of benign neglect on the part eco-of Britain, were put in a difficult position.35Yet, trade dependence in favor of Germany did not alter Greece’s external alignment, nor did it influence its desire to oppose German aggression

On the contrary, the Greek leadership was rather too eager to declare itself

an ally of Britain, a matter that did not allow it to negotiate a timely and effective alliance with Britain to face the Nazi onslaught.36

It is of great interest to note how Greece responded to the payments crisis of the 1930s, as it provides some interesting clues Suffice it to say that it relied first on a policy of import contraction Secondly, Greece con-cluded a debt moratorium in the 1930s.37 In the ensuing years before the onset of the war, the Greek State was able to finance some infrastructure projects on its own.38

As a consequence of the crisis, internal and external financial stability became essential, since external means to support Greece suddenly became unavailable In particular, the external balance of the country had to be quickly restored, since the flow of foreign funds was interrupted by the crisis Stringent controls were introduced to handle and allocate scarce for-eign exchange, which at one point reached a bare $2.3 million.39 At first, in the short term, the response was to be diminished imports In order to sup-port these policies, a medium-term policy of increased self- sufficiency in agriculture was pursued, particularly in cereals and industrial fibers (espe-cially cotton) In addition the expansion of a mainly consumer goods industry was encouraged Commercial policy became heavily protectionist

2.3 THE CRISIS OF THE 1930S

18

As the international economic environment deteriorated after 1932 with the worldwide crisis, a new lever was adopted in the negotiation of bilateral agreements, in the form of the introduction of quantitative restrictions (quotas) This meant that the Authorities had full control over imports.40 Though the reason for their introduction was the preservation

of Greek foreign exchange reserves, quotas were used as a major tool for renegotiating bilateral commercial agreements on terms favorable to Greece Through the negotiation of bilateral agreements, Greece, like other countries at that time, was able to discriminate between trading partners: the higher the commitment to import Greek products a country would offer, the higher the share of Greek quotas it could claim According

to the Greeks, this proved to be a most useful instrument during the period of discriminatory trade, 1932–1939.41

As a consequence of protectionism, the price of domestically produced goods was allowed to rise 40% above the level of foreign prices of equiva-lent products.42 The machinery sector was treated in a special way by Government policy As imported machinery was necessary for both indus-try and agriculture, initially (in the period 1923–30) imports of machinery were encouraged through a generous licensing system Later (in 1932), L.D 5246 was issued by the Government to control imports of machinery through a special import license, which was not as generous as before

1932 This measure may be a reflection of the emergence of domestic production of machinery It could also be the case that the licenses to control imports of machinery were dictated by the general payments prob-lems of the 1930s, and the administrative authorities used the special import licensing law to restrain imports of non-essential machinery.The efficiency of these controls is not known Hadjivasileiou estimated that in 1938, 75% of manufactures consumed in Greece were produced locally, which confirms that some significant import substitution had taken place.43

With the exception of Romania, Greece adapted its economy better than the other countries of Southeastern Europe when the depression came The crisis itself was mild for Greece, and was followed by an inter-nally based quick recovery.44 In fact the difference in output between the peak of 1928 and 1935 was only 6.5%, a relatively low figure compared to the impact of the crisis on the rest of Europe

This recovery was internally based, implying that there were important changes taking place within the Greek economy Greek pre-war industrial development was aimed at import substitution rather than export-led

2 GREECE’S PRE-WAR ECONOMIC DEVELOPMENT AND EXTERNAL

Table 2.1 Import substitution in the 1930s

Imports, 1938/1930 ratio Production, 1938/1930 ratio Percentage increase of imports Percentage increase of

Greek political leadership had also understood the importance of try as the engine of future growth According to A Angelopoulos, a respected economist, Venizelos during his last tenure as Premier (1928–1932) had grasped the importance of economic development of Greece and was personally involved in the process When the Technical Chamber of Greece (TEE) organized a series of lectures in 1928, Venizelos opened the lec-tures and addressing himself to the young professor of economics Zolotas,

indus-whose doctoral dissertation on Greece in the phase of industrialization had

just been published, called upon him to assist in the development of the Greek economy.47 Indeed, in Macedonia Venizelos used foreign loans to

2.3 THE CRISIS OF THE 1930S

US quotas.50 The content and extent of industrialization took a long time

to be defined Not unexpectedly, and in accord with the prevailing nomic doctrine, industrialization was pursued in Greece empirically, and with an almost blind reliance on external protection, especially in the 1930s.Under the economic and technological conditions prevailing in Greece, industry could hardly claim to be competitive vis-à-vis foreign competition Greek industry was labor-intensive, due to the low labor-to-capital cost ratio; also the high degree of external protection allowed

eco-it to be organized in very small uneco-its, weco-ith minimum invested capeco-ital and inexpensive technology Consequently, Greek industry was essentially liv-ing under heavy protection This is particularly true for the period from

1922 to 1940.51 Under these conditions, with competition from tional trade operating only to a very limited extent, Greek industry con-centrated mainly in the processing of local raw materials,52 hence the predominance of food and textiles industries The structure of industrial output in 1938 was similar to that of 1923.53

interna-Agricultural development was similar to that of industry.54 The ment of agriculture, as well as industry was an instinctive reaction to the experience of the First World War with improved emphasis on self-sufficiency crops, such as cereals.55 Total cultivated land expanded as a consequence of the expansion of agriculture, together with the expansion of the labor force and land resulting from the wars Between 1911 and 1940, an estimated 1,626,000 acres were brought under cultivation through drainage and irrigation (a 123% increase), as well as another million acres of low-grade land.56 In the 1910s and 1920s the Greek state, under pressure to satisfy agricultural workers, but also to resettle the refugees, proceeded to what pos-sibly amounted to the most radical land reform at that time among backward countries in Europe57 (see Table 2.7 in appendix p 25)

develop-2 GREECE’S PRE-WAR ECONOMIC DEVELOPMENT AND EXTERNAL

Under conditions of worldwide protectionism, efficiency of domestic duction became a minor concern What mattered most was self- sufficiency The production of basic crops which had been very low prior to the 1930s increased dramatically between the years 1928/32 and 1933/7: up by 50% for grain, 30% for maize, 35% for potatoes, and 16% for cotton Simultaneously,

pro-as a result of the inelpro-astic demand for the export of Greek semi-luxury crops (currant, tobacco) during the depression, the output of these had declined

by 18% in 1936 over the 1928 volume By contrast, self -sufficiency in a crop for domestic consumption like cereals grew in 56% by volume over the same period,58 and land allocation followed a similar trend.59 We will now consider how these changes affected the Greek balance of payments

2.4 the Balance oF PayMentsAlthough an agricultural country, in 1938 Greece imported food repre-senting about a fourth of its import bill; this compares with 70–75% of its exports being agricultural products.60 Greece had come a long way from the situation in the 1920s, when food imports represented almost 50% of total imports.61 As a general rule, we can say that prior to the 1930s, the agricultural balance of payments was neutral or slightly positive, while in the 1930s it created a considerable exports surplus (Table 2.3)

With imports in 1938 accounting for 20% of GNP the Greek economy was remarkably more open than those of her Balkan neighbors, although when compared to highly trading countries like Sweden, Belgium, or Netherlands, Greece appears a relatively closed economy (Fig. 2.3).62Before the depression of the 1930s exports usually covered between 40 and 50% of the value of imports.63 Greek exports around 1937–38 repre-sented 0.40% of world exports.64 In every single market, (except for orien-tal tobacco) Greece was a marginal producer While in 1934–38, 65.6% of total exports volume was made up of minerals, these were in a raw form and contributed only 4.7% to the total receipts from exports.65 The prog-ress toward payment of imports by exports was a very gradual one, as can

be seen from Table 2.4 The figure of 60% was only to be averaged in the 1930s, and exceeded temporarily at the end of the period

Table 2.3 Agricultural exports as a percentage of total exports

1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938

81.7 61.2 85.5 87.2 87.3 80.1 76.7 81.1 76.4 70.5 78.6 Source: Bacon (1974) p. 26

2.4 THE BALANCE OF PAYMENTS

22

Against the progress registered in the inter-war period, one should recall that Greece from the point of view of the international economy remained largely a mono-product country Currants had been the main foreign exchange earner in the nineteenth century The position of cur-rants in the international markets was already declining during the late nineteenth and early twentieth centuries, as low-cost Australian and North American producers flooded the markets As a result currants had been replaced by tobacco in the twentieth century Both these commodities proved to be highly volatile means by which to secure the necessary for-eign exchange.66

Greek shipping made a significant contribution both to employment and the balance of payments, contributing by 20% to invisible receipts in

1938, though before the war shipowners had showed a lack of confidence

in repatriating profits.67 A significant part of the deficit of the balance of payments was covered by remittances from Greek emigrants in the USA Remittances were the major contributor to invisible receipts, overtaking

Fig 2.3 Per capita imports of Balkan countries in gold dollars

Table 2.4 Evolution of foreign trade

Period Imports Exports Exports as a

% of imports (Annual average) Millions $ Millions $

Source: Svoronos (1976) pp. 90, 126 and Sweet Escott (1954) p. 184

2 GREECE’S PRE-WAR ECONOMIC DEVELOPMENT AND EXTERNAL

shipping and tourism (Table 2.5) In the decade before the First World War, some 300,000 Greeks went to America, and in 1921 their remit-tances reached a peak of $120 million But in the same year, the USA imposed its quota system, which admitted no more than 100 Greek immi-grants a year and similar restrictions were imposed in the British colonies.Energy was a key element of the imports’ bill Consequently, the ques-tion of increasing the degree of self-sufficiency in energy was one of the major preoccupations As imported coal was then the basic source of energy generation, two main substitutes were considered: first, a Greek-produced charcoal called lignite, which was poorer than coal in energy efficiency, but had the advantage of being sourced locally; and secondly, the development

of hydroelectric power was envisaged.68 During the First World War, Greek charcoal effectively replaced imported coal (see Table 2.8 in appendix,

p. 25) The process of substitution of imported coal by domestically sourced lignite already taking place in neighboring Balkan countries suggesting that more could be done to ease the energy deficit (Table 2.6).69

Table 2.5 Financing

imports, 1934–38 Exports of GoodsNet Invisibles 63.128.9

Net Capital Transfers −1.5 Net Change in Foreign Exchange reserves 9.5Source: Halikias (1963) p. 39 Note: (+) decrease of foreign exchange reserves

Table 2.6 Percentage composition of Greek Foreign Trade, 1934–38 average

(1934–8 aver.) (1936–8 aver.)

Olive oil & olives 7.4 Semi-processed goods 18.2 Wines & Spirits 1.6 Consumer goods 37.0

Source: Halikias (1963) p. 44

UNRRA VI, annex II section IV, p. 18

2.4 THE BALANCE OF PAYMENTS

24

2.5 conclusIonThis review of the Greek pre-war economic situation focused on the key factors of the economic policy in connection with the development of the economy and the balance of payments It should help the reader better understand the debate during the post war reconstruction period on domestic and foreign economic policy choices Among other factors, the particularly light constraint of the foreign trade deficit (based on the high net invisibles ratio) imposed on the Greek economy, permitted it to delay for some time the development of its productive forces One should bear

in mind this pattern of behavior, which delayed structural change, as mal conditions gradually came to prevail in the Greek economy from the late 1940s onwards It will be our claim that the long-established and suf-ficiently identified economic problems of the pre- war Greece re-emerged

nor-in the context of radically new post-war conditions

Greek pre-war economic policy, whatever its achievements, had already reached its limits We have already dealt with the gradual change of attitudes vis-à-vis industrial development, and with the direction industri-alization took in general A new approach—already present as the main-stream criticism—was trying under adverse circumstances to impose itself Arguably, the post-war legacy of the 1930s had been the lesson of moder-ate economic growth relying on self-sufficiency, primarily in agriculture and to a lesser degree in industry The latter’s potentialities could not be fully exploited in the absence of capital to finance investment in energy and infrastructure

2 GREECE’S PRE-WAR ECONOMIC DEVELOPMENT AND EXTERNAL

Table 2.7 Land reform in Greece and other countries of Europe Land

distributed as a % of total cultivated land

Country Year of reform Percentage of land involved

Table 2.8 Production of charcoal before and after the First World War

Year Production Year Production Year Production Year Production

Modern Greece, A Short History, Faber and Faber, third edition, London,

1984, p.  143 See also J.  Campbell and P.  Sherrard, Modern Greece, London, Ernest Benn Limited, 1968, p.  74; T.  Lignadis, H Ξενική Εξάρτηση κατά την Πορείαν του Νεο-Ελληνικού Κράτους (1821–1945),

(Foreign Dependence in the course of history of the modern Greek state,

1821–1945), Athens, 1975, p. 102 A. I Psomas, The Nation, the State

NOTES

26

and the International System; The Case of Modern Greece, National Centre

for Social Research, (EKKE), Athens, 1978, p. 70.

2 The use of loans for financing army expenditure was a common feature of the

newly independent Balkan countries; see I.  Berend and G.  Ranki, The

European Periphery and Industrialization, 1780–1914, C.U.P., 1982, p. 125.

3 Woodhouse (1984) p. 173.

4 Inclusive of the 1922 defeat-generated 1.3 million refugee population.

5 Woodhouse (1984) p. 175; Zolotas, X Griechenland auf dem Wege zur

Industrialisierung, Verlag Teubner, Leipzig, 1926 First edition in Greek,

Η Ελλάς εις το Στάδιον της Εκβιομηχανίσεως, (Greece at the stage of

indus-trialization), Athens 1926; p 76 [Second edition Bank of Greece, 1964; page refer to the 2nd edition as it is widely available] p. 76; Svoronos, N.,

Επισκόπηση της Νεολληνικής Ιστορίας (A survey of the history of Modern

Greece) Themelio, Athens 1976, p. 90.

6 1914/8, Greece participated between 1916 and 1918.

7 N. I Hadjivasileiou Η Ελληνική Εξωτερική Εμπορική Πολιτική, (Greek

for-eign trade policy), Athens 1936, pp. 12–13, speaks of a risk of blockade as

an argument for increased self-sufficiency in both agriculture and industry.

8 C.M. Cipolla, editor, The Fontana Economic History of Europe, Collins/

Fontana Books, London 1976, vol 6 p. 327; Zolotas (1926) p. 13.

9 See p. 23; also Table 2.8 in appendix p. 25; Zolotas (1926) pp. 59, 60.

10 M.  Mazower, The Greek Economy & The Inter-War Depression, Oxford

1985, p. 17.

11 Hadjivasileiou (1936) p. 5.

12 X. Zolotas Το Δημόσιο Χρέος στην Ελλάδα, (Greek Public Debt), Athens

1930, p. 13 In per capita terms increased by 29%, though it should be considered that part of the new population were refugees.

13 Zolotas (1930) p. 20.

14 Zolotas (1930) p. 38.

15 INSEE, Collection de Conjoncture et d’ Etudes Economiques, Mémento

Economique, LA GRECE, PUF, Paris 1952, p. 222 Zolotas (1930) p. 29.

16 Zolotas (1930) p. 44.

17 Zolotas (1930) p. 40.

18 For instance, Austrian stabilization, introduced in 1922 under the auspices

of the League of Nations, led to the creation of a Central Bank and benefited from an initial loan, as in Greece; similar loans were extended to Hungary and Bulgaria F.E.H.E 5(2), p. 581.

31 Pipinelis (1948) p. 246.

32 E.H.  Carr, The Twenty Years Crisis, 1919–1939, First Edition London

1938, p. 129.

33 N. Momtchiloff, Ten Years of Controlled Trade in South Eastern Europe,

London N.I.E.S.R, C.U.P 1944, p. 12.

34 Woodhouse (1984) p. 235.

35 K.  Varvaressos Archive at the Bank of Greece, Historical Archives: HABoG_A4S1Y1F32T4 in particular pp. 4–6.

36 A policy meticulously presented by J.S.  Koliopoulos, in Greece and the

British Connection, OUP, Oxford 1977; this deficiency of Greek external

policy was also stressed by V. Mathiopoulos in To Vima, 27 August 1989.

37 In fact this is a typical history of a debtor country, a settlement of a ously defaulted debt being a prerequisite for further loans Greece in fact had already defaulted on payments before, in 1827/33, 1843 and 1893;

previ-T. Lignadis (1975) pp. 100,102,103,105,147; N. Svoronos (1976) p. 83; I.N.S.E.E (1952) pp. 223–224, 264 On the issue of debt repudiation as

a result of the depression among the countries of South-Eastern Europe, see Momtchiloff (1944) pp. 16, 28 in F.E.H.E (5) 2, p. 582 Payments were largely reduced, usually limited to arrears of interest.

28

45 On 04/08/1950, La Bourse Egyptienne described the pre-war Greek

econ-omy as an “économie de la disette” (scarcity econecon-omy), which held prices

at unnecessarily high levels.

46 In the case of machinery, the reason for fast growth lies probably in the encouragement of local production through increased external protection

In the case of textiles, it was one of the branches of industry which met most of the necessary conditions of growth: not only was it light industry and could take advantage of cheap labor, but also it benefited from the domestic supply of the raw material, namely cotton.

47 Zolotas, X Griechenland auf dem Wege zur Industrialisierung, Verlag

Teubner, Leipzig, 1926 First edition in Greek, Η Ελλάς εις το Στάδιον της Εκβιομηχανίσεως, (Greece at the stage of industrialization), Athens 1926;

Second edition Bank of Greece, 1964 Venizelos intervention quoted by

A. Angelopoulos, Οικονομικά Προβλήματα Ελληνικά και Διεθνή (Greek and

International Economic Problems), Estia, Athens 1986, p.  10 Venizelos though cautioned his audience that agriculture would continue to remain the main source of revenue for the foreseeable future, “If up to 1912 we could believe that Greece could remain an exclusively agricultural country, because (especially after the wars) the density of our population had increased, this is now impossible Naturally, agriculture will always be our most impor- tant source of wealth.” Quoted in G. Dertilis Κοινωνικός Μετασχηματισμός και Στρατιωτική Επέμβαση, 1880–1909, (Social Transformation and Military

Intervention, 1880–1909), Exantas, Athens 1977, p. 88.

48 Angelopoulos (1986) p. 9.

49 Hadjivasileiou (1936) p. 5.

50 Hadjivasileiou (1936) p.  5 Emigration of Greeks and other Southern Europeans to the USA was restricted; a quota of 100 Greeks per annum was imposed in the mid-1920s.

51 Hence the term “δασμόβιος” (owing its survival to tariffs) applied to Greek industry; INSEE (1952) p. 188.

of total agricultural land was distributed between 1924 and 1940; Woodhouse (1984) p. 223 Among the factors that prompted this reform were a concern to limit social unrest and the refugee resettlement; Vergopoulos (1977) p. 138.

58 Vergopoulos (1977) p. 151.

2 GREECE’S PRE-WAR ECONOMIC DEVELOPMENT AND EXTERNAL

59 Boyazoglu (1931) p 142.

60 Sweet-Escott (1954) pp. 185, 186 The low level of food imports covers among other things an under consumption of animal products This was the main factor responsible for the imports policy in the 1930s, as K. Varvaressos was to confess later (see Varvaressos (1952) p. 135).

61 Zolotas (1926) p. 42.

62 UNRRA Division of Operational Analysis, European Regional Office,

Foreign Trade in Greece, [hereafter referred to as UNRRA I] London,

December 1946, p. 1; D. Halikias Οικονομική Ανάπτυξη της Ελλάδος και Ισοζύγιο Πληρωμών (Economic Development of Greece and the Balance of

Payments), Bank of Greece, Athens 1963, p. 47.

63 Zolotas (1926) p. 45 Also worth mentioning is that in the 1920s Greek imports contained a significant percentage of capital imports which accompanied the early phases of industrialization; see Sweet-Escott (1954)

p. 145.

64 Halikias (1963) p. 47.

65 UNRRA, Mission to Greece, Committee for the Valorization of Mineral Resources of Greece, [EAPPE] Ο Ορυκτός Πλούτος της Ελλάδος (The Mineral Wealth of Greece), Athens 1947, p XIII.

at 156 million tons In 1938–1939, following an one year long survey of Ptolemais, in NW Greece, surveyed stock was estimated at 300 million stocks and potential stock at 7.2 billion (Technika Chronika 1939 issue 176) Angelopoulos estimates and Kegel’s survey should be compared to the Public Power Corporation and its predecessor Liptol extraction from its mines in Greece 1.5 billion tons of lignite between 1951–2016, and left usable deposits of 3 billion tons Around 60% of exploitable lignite deposits are located in Ptolemais.

NOTES