History Repeats Itself: Greek Crises 1832-1897

Just as some folks spell T-R-O-U-B-L-E, certain nations have the reputation for it going a looooong way back. For a blog purporting to be the IPE Zone, you may have noticed that I have had very few posts on the EU project as of late and the myriad crises on its periphery. Honestly, I tired of this story a very long time ago and have as much interest in it now as the details of a root canal operation. While I found it amusing when the Greek finance minister responsible for hiding the true extent of his nation's debts came to the LSE and faced a very hostile audience, it's been blah ever since. Essentially the Greek story is one of Hellas repeatedly failing to meet economic targets set by the EU; the EU demanding more concessions from Greece, and Greek leaders giving in to EU demands after some posturing. The cycle repeats itself with the Greeks arguing that belt-tightening measures are responsible for insufficient "escape velocity" from now-chronic recession. And on and on it goes...

Interestingly though, Greece has had recurrent crises stretching back many, many decades. What's more, other Europeans alike the--wait for it--French and Germans have been forced to marshall their resources to bail out an ungrateful, perpetually hard-up nation. This from Stephen Krasner on seeming violations of Greek sovereignty from its creditors during earlier episodes of financial crises (pp. 12-13):

When Greece was recognized as an independent state in 1832, it received a 60 m franc loan from Britain, France, and Russia, but only by signing an agreement pledging that the ‘actual receipts of the Greek treasury shall be devoted, first of all, to the payment of the said interest and sinking fund, and shall not be employed for any other purpose, until those payments on account of the installments of the loan raised under the guarantee of the three Courts, shall have been completely secured for the current year’. In 1838 the entire finances of Greece were placed under a French administrator.

Greece could not secure new loans during the middle of the nineteenth century in part because it was in default on its 1832 obligations. After 1878 its borrowing increased substantially, but to secure these funds Greece committed specific revenues, including the customs at Athens, Piraeus, Patras, and Zante and the revenues from the state monopolies on salt, petroleum, matches, playing cards, and cigarette paper. The loan of 1887 gave the lenders the right to organize a company that would supervise the revenues that were assigned for the loan.

In 1897, after a disastrous war with Turkey over Crete, Greece’s finances collapsed. It was unable to service its foreign debt or to pay the war indemnity that was demanded by Turkey. Germany and France, along with private debtors, pressed for an international commission of control. Greece acceded when it became clear that this was the only way to secure new funding, and Britain, which had been more sympathetic to preserving Greek autonomy, then accepted the Control Commission. The Commission, which consisted of one representative appointed by each major power, had absolute control over the sources of revenue needed to fund the war indemnity and foreign debt. The Commission chose the revenue sources that it would control. They included state monopolies on salt, petroleum, matches, playing cards, cigarette paper, tobacco duties, and the customs-revenues of Piraeus. Disputes that might arise between the Commission and agencies of the Greek government were to be settled by binding arbitration. The members of the Commission were given the same standing as diplomats. One member of the Greek parliament argued that the establishment of the Control Commission suspended the independence of Greece.

Bottom line: if the EU were wise, then they would have taken Greece's history of repeated financial debacles as a warning for the future. Some argue that the EU's German paymasters were too naive in expecting EMU members to actually follow rules alike the Stability and Growth Pact to avoid undermining the entire project. It's the same old, same old over a century and a half later with these same folks whingeing about their loss of sovereignty and so forth when, of course, they wouldn't be in this place if they actually bothered sorting out their finances for good. Heaven knows, they've had, what, 180+ years to sort themselves out so there's really no excuse even if European powers have continually meddled in its affairs since the Treaty of Constantinople. Set against its history as a nation-state, Greece's current troubles are exceptionally unexceptional.

But no; I guess some people never learn and carry over bad habits for decades and decades.