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Newly independent Greece had an odious debt round her neck

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 3 - What happened to the repayments of the 1824 and 1825 loans?

It is worth remembering that repayments were suspended in 1826 and the creditors refused to come to an agreement with the provisional Greek government. The Troika finally deposed and replaced the provisional government with a monarchy. The FF 60 million loan (which was the equivalent of 124% of Greek GDP in 1833) did not replace the 1824 and 1825 loans (which were the equivalent of 120% of Greek GDP in 1833). Once the FF 60 million had been repaid, the Troika insisted that the matter of the 1824 and 1825 loans be settled.

That is why, in 1878, Greece was pressed into an agreement with the bankers who held these loans. The old bonds were exchanged for new bonds worth £1.2 million sterling. This was an excellent arrangement for the creditors but more injustice for the Greek people. As the amount effectively transferred to Greece in the 1824-25 loans was no more than £1.3 million, the creditors had every reason for satisfaction, especially as some of them had purchased their bonds for next to nothing. The bankers have continually speculated on Greek bonds, selling when they start to go down and buying back when they start to rise.

It is shocking to see how most of the superficial analysis of Greek debt claims that Greek public spending was too high and tax evasion was rife. However, a rigorous analysis of State budgets shows primary surpluses, with only two exceptions; in other words, all through the 41 years between 1837 and 1877, revenues were superior to expenditure before debt repayment was taken into account.

Once debt repayment enters the picture, it becomes clear that it was the sole cause of the unsustainable debt burden. We are not suggesting that the Monarchy managed the State budget in the interests of the population. Throughout history, creditors have typically insisted upon having a primary budget surplus. A primary surplus is a guarantee to creditors that a debt can be repaid, as it provides the funds for repayment. The burden of debt repayment and administrative supervision exercised by the big European powers are among the principal reasons why Greece has been unable to establish a growing economy.

Conclusion of this part

The 1824-25 loans should be considered as illegitimate and illegal because the terms in the contracts were unfair and the manipulations by the bankers clearly deceptive.

The 1833 loan clearly falls into the category of odious debt. The debt was taken on by a despotic regime dominated by major foreign powers consolidating their strategic objectives on the backs of the Greek people, while at the same time catering to the demands of the international bankers.

The refusal of the creditors and the great powers to abolish or reduce the debt has produced long-term effects that maintain Greece in submission and prohibit real economic development.

The people of Greece have remained in the thrall of the odious debt that she was born with.

Source, tables and references:


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