Since
2010, Greece has been the centre of attention. Yet this debt crisis,
mainly the work of private banks, is nothing new in the history of
independent Greece. The lives of Greeks have been blighted by major
debt crises no less than four times since 1826. Each time, the
European powers have connived together to force Greece to contract
new debts to repay the previous ones. This coalition of powers
dictated policies to Greece that served their own interests and those
of a few big private banks they favoured. Each time, those policies
were designed to free up enough fiscal resources to service the debt
by reducing social spending and public investment. Thus Greece and
her people have, in a variety of ways, been denied the exercise of
their sovereign rights, keeping Greece down with the status of a
subordinate, peripheral country. The local ruling classes complied
with this.
This
series of articles analyses the four major crises of Greek
indebtedness, placing them in their international political and
economic context – something which is systematically omitted from
the dominant narrative and very rarely included in critical analysis.
by Eric
Toussaint
PART 2 -
How did the Troika of the United Kingdom, France and Russia proceed?
The Troika
turned to French banks, asking them to issue a loan of 60 million
French francs (FF) equivalent to about £2.4 million sterling. The
United Kingdom, France and Russia acted as guarantors to the banks,
promising to undertake repayment themselves, should Greece default.
The Troika added that they would take measures to ensure that the
loans of 1824 and 1825 would also be repaid. The agreement between
the three powers was made in 1830 but such were the difficulties
involved in carrying it out, that it did not come into effect until
1833. The FF 60 million loan was made in 1833 and paid in three
tranches.
It is
particularly edifying to note what the first two tranches were used
for. (The loan was issued in French francs and paid in Greek drachma
(GDR) at the rate of one gold franc to 1.2 GDR.) Out of a total of
44.5 million GDR, only 9 million ended up in the Greek State
Treasury, i.e. 20% of the nominal amount borrowed. The Rothschild
Bank in France deducted more than 10% commission or 5 million GDR;
those who bought the bonds, including Rothschild, received 7.6
million in advance interest for the period 1833-1835, i.e. more than
15% of the nominal amount; 12.5 million, or a little less than
30% of the nominal amount, was paid to the Ottoman Empire as
compensation to offset their losses due to Greek independence;
France, the United Kingdom and Russia took 2 million GDR, as
creditors of Greece; over 15% of the nominal amount borrowed, or
7.4 million GDR, was paid to King Otto to cover pay and travelling
expenses for his suite of Bavarian dignitaries who assured the
regency and for the 3500 mercenaries recruited in Bavaria, as well as
1 million GDR spent on arms.
On 7 May
1832 the great powers signed an agreement with the King of Bavaria,
father of Otto, the future King of Greece, obliging the newly
‘independent’ state to give absolute priority to repayment of
debt. As can be clearly seen in the reproduction of part of the
agreement of 7 May 1832, this document was signed by the
representative of the British Crown, Lord Palmerston; the
representative of the French monarchy, Talleyrand; the representative
of the Tsar of all the Russias and the representative of the King of
Bavaria acting on behalf of Greece before Otto and his suite had even
left Munich! Otto was not to arrive in Greece until January 1833.
With this document, we have undeniable proof of the odious and
illegal nature of the debt imputed to the Greek people from 1833.
The Troika
exerted strict budgetary control on the state and its revenue
collection. They regularly demanded that taxes and duties be
increased and that spending be compressed. We note that the 5th
National Assembly which met in December 1831 had adopted a ‘Greek
Constitution’ of which Article 246 stipulated that the sovereign
did not have the right to make decisions alone regarding taxes,
duties, public spending or revenue collection, without observing laws
or resolutions adopted by the legislative body. The monarchy and
the Troika trampled this Constitution underfoot without ever giving
it due recognition.
In 1838 and
1843, the monarchy suspended debt payments, not having enough funds
in the Treasury to afford such heavy interest rates. At the time
of the 1843 default, when the interest to be paid represented 43% of
state revenue, the Troika put maximum pressure on the monarchy to
implement a radical austerity plan as dictated by the ambassadors of
the three powers.
Such were
the sacrifices imposed on the Greek population that they rebelled on
several occasions. In 1843, the revolt was particularly strong.
Already outraged by the pomp and extravagance of the ceremonial
inauguration of the imposing royal palace (now the seat of the
Hellenic Parliament), in September 1843 the population of Athens rose
up against yet another tax increase and clamoured for a
constitutional regime. The United Kingdom went as far as
threatening King Otto with military intervention if he did not
increase taxes to fulfil his obligations towards the Troika. The
British and French navies occupied the port of Piraeus for two years
from May 1854 as a very efficient way of laying hands on customs
revenue levied in the port.
Otto was
eventually overthrown and expelled by popular uprisings throughout
the country in 1862. After which, a new constitution was introduced
that was only a limited restriction of regal powers. The Troika
looked for a new King. London proposed the second son of Queen
Victoria. France and Russia were hostile to this proposal, not
wanting to see British influence spread further. Finally, agreement
was reached on a Danish prince by the name of Wilhelm of
Schleswig-Holstein-Sonderburg-Glücksburg.
Since 1843,
as promised to the banks, the Troika had undertaken the repayments of
Greek debt when Greek revenues were insufficient to cover capital
and/or interest repayments. Troika repayments ended in 1871 and the
creditors could be well satisfied: they had earned interest and their
loans were repaid. The FF 60 million loan was wiped out.
However,
Greece continued to devote a part of its revenues to debt
repayment. France, Russia and the UK claimed from Greece the sums
they had paid out to the bankers when Greece was unable to pay. These
payments continued into the 1930s, although Russia received no
further repayments after the 1917 revolution.
Source,
tables and references:
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