Committee for the Abolition of Illegitimate Debt

Recall of Part One, published 12 April 2016 http://cadtm.org/Newly-Independent-Greece-had-an: Newly Independent Greece had an Odious Debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts. round her Neck

Modern Greece was born shackled to debt from bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. issues (in 1824, 1825 and 1833) which together amounted to 245% of her GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. . Three major European Powers (Britain, France and Russia) formed a coalition that amounted to the first Troika Troika Troika: IMF, European Commission and European Central Bank, which together impose austerity measures through the conditions tied to loans to countries in difficulty.

IMF : https://www.ecb.europa.eu/home/html/index.en.html , imposed a monarchy, putting a Bavarian prince on the throne, and subjugated the country through debt. The Troika systematically defended the interests of the big banks in London and Paris, ensuring that they would extract maximum profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. from the odious debt demanded of Greece. The Greek people, who had to foot the bill for a spendthrift, bellicose monarchy, rebelled on several occasions. While they succeeded in ousting the despot in 1862 and instituting a Constitution granting them certain civil and political rights, they were not able to free themselves of the burden of debt. The major Powers kept Greece in a position of subordination, denying the Greek people the exercise of their sovereignty. The monarchy and the local ruling classes systematically attempted to divert popular discontent towards nationalism and hostilities with the Ottoman Empire.

Introduction to Part Two

According to the dominant version of history, whether untruthful or simply mistaken, during the 1880s Greece was re-admitted onto the financial markets thanks to an 1878 agreement with the creditors who held their 1824-1825 [1] debts and to policies of radical public expenditure reduction. Greece then made heavy use of fresh borrowing and significantly increased its public spending. This, the story goes, was the cause of the 1893debt crisis and suspension of payments. Greece’s inability to manage its borrowing seriously is said to have led the big Powers to impose a financial control commission to oversee the Greek budget. This story is false!

The following translated extract from Le Monde dated 16 July 2015 is an example of what is widely said: “But, as today, the country was rife with clientelism and tax avoidance by the notables. Immediately after Greek independence, the King Otto, the first king of Greece, who was imposed by the European Powers, introduced costly major works projects. The civil service took on any warm body, the army was superbly equipped... It was all paid for by generous loans [sic] from western countries. The government lost control: in 1893, almost half of the country’s tax revenues were devoted to paying the interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. on the debt”. [2]

Another example can be found in the 20 June 2015 issue of the Swiss financial magazine Bilan: “Thanks to the agreement that was ratified in 1878, Greece could once again, in 1879, borrow on the financial markets. Over the next fourteen years Greece borrowed the equivalent of almost 530 million French francs from Paris, London and Berlin creditors. Less than 25% of the sums were invested in infrastructures to develop the country. The rest went on military expenditure to finance Greece’s confrontations with its neighbours (with mixed military fortunes)”. [3]

The true part of the story is that the bankers again lent money to Greece. It is also true that the Monarchy spent a lot and waged expensive military campaigns against the Ottoman Empire. Most commentators, always ready to side with the creditors (like the Le Monde journalist who did not hesitate to mention ‘generous loans’, a real oxymoron) [4], also point out that taxes were inefficiently collected.

Now let’s see what really happened: during the 1880s the bankers of the great Powers (British and French but also German, Belgian, Dutch, etc.) were favourable to lending to countries that were normalising their payments situations. They imposed one condition: the old outstanding debt must be restructured and repaid. Most of the countries who had had repayment defaults accepted these conditions that are very favourable to creditors who then opened their purses to lend money so that countries would have the means to repay old debts. Big capital, then experiencing a new phase of expansion in the dominant countries, was attracted to the new investments and lending possibilities offered by massive capital exports to peripheral countries. This was the beginning of the imperialist phase of world capitalism. [5]

Greek Bond - 1880

Other debt restructuring of the same period

Debt restructuring that took place during the 1878-1890 period concerned Greece, Costa Rica, Paraguay, Peru and the Ottoman Empire.

The Greek debts from 1878 onwards. In 1878, the outstanding debts from 1824-1825 were restructured. The creditors obtained that Greece repay the equivalent of the amount she had received in 1824-1825. There was therefore no real debt reduction and Greece recommenced the payments of interest and capital. [6] Between 1879 and 1890 Greece entirely repaid the restructured debt. The debt had not been reduced because new debts were taken on in order to pay the old ones, which meant both series of debts were repaid during the 1880s.

The Costa Rican debt restructuring of 1885. In suspension of payment since 1874, Costa Rica agreed, in 1885, to a debt restructuring satisfactory to its creditors: along with £2 million they gained possession of a part of the railways and 568,000 acres of land.

The Paraguayan debt restructuring of 1885. Paraguay, which was also in suspension of payment since 1874, agreed to pay its creditors £800,000 and to concede to them 2.5 million acres of land.

The Peruvian debt restructuring of 1890. The Peruvian debt restructuring of 1890 was the biggest restructuring of debt for a Latin American country. The terms were very unfavourable for Peru: the creditors repossessed two million tons of guano (a natural fertiliser), gained possession of the whole public railway system, a shipping line on Lake Titicaca, the mines of Cerro de Pasco and, to top it all, a new loan was agreed to fund the repayment of the remainder of the debt in suspension of payment. Finally, it was in 1926 that Peru finished paying the restructuring of 1890 after the suspension of payments that started in 1876.

The restructuring of the Ottoman Empire’s debt. Following a payment default by the Ottoman Empire in 1875, the debt was partially restructured in 1881. The creditors demanded maximum repayment. To achieve this, a financial commission of experts appointed by the “great powers” was established. As Louise Abellard wrote: “An institution was created in 1881, by imperial decree, under the name of ‘The Ottoman Public Debt Administration’. This Administration gained absolute and irrevocable control over several Imperial revenues (customs and excise, taxes on alcoholic beverages, stamp duties, fishing rights, tax on silk, tobacco and salt monopolies, etc.). These revenues were to be allocated by the Administration to the payment of compensation to the creditors holding bonds issued before the default. The Administration was piloted by Europeans (British, Dutch, French, Germans and Italians) directly representing their nations’ creditors. Entirely independent of the Ottoman authorities, they were an instrument of absolute guarantee for the creditors who thus had the assurance that the old and the new investments would be reimbursed. Up to a point, the holders of the bonds, through the Administration, acted directly on Ottoman finances, in their own favour, until perceived prejudice was fully compensated (up to the end of the Empire). The Administration’s prerogatives were progressively extended to the role of guarantor for infrastructure contract payments (particularly railways)”. [7]

Debt restructuring permitted the imperialist countries to launch a new cycle of indebtedness and capital expansion

The debt restructuring that was carried out during the 1880-90s was the means by which the creditors embarked on a new phase of spreading the over-abundant capital available in the central countries (UK, France, Belgium Netherlands, Germany, etc.) all around the world. The granting of new loans was aimed at setting the repayment pump back into motion, since the countries in default needed fresh liquidities Liquidities The capital an economy or company has available at a given point in time. A lack of liquidities can force a company into liquidation and an economy into recession. in order to repay their defaulted debts. Investments and loans were the vehicles used. In several cases, as we saw earlier with Latin American countries, restructuring took the form, partly, of property exchanged against outstanding loans. The principal criteria of the bankers, and other investors, was not at all the well-being of the debtor country and their ability to manage the funds they were loaned, or even to repay them, but the creation of maximum profitability. Their decisions were based on the necessity to invest all the funds at their disposal in making maximum profit as well as maintaining the country in a state of indebtedness and financial dependence. The creditors were assured that in case of non-payment their own country’s governments would intervene, by military means if necessary, to force the debtor country to keep up repayments and if necessary, colonize it.

In Tunisia, the Ottoman Empire and in Greece, international supervisory bodies with far-reaching authority were created by the creditor Powers (amongst whom France and Britain always occupied important or even highly privileged positions). Greece was in this position from the very beginning, as illustrated by the 1832 convention passed with Britain, France, Russia and the Kingdom of Bavaria, which created the Greek Monarchy and gave absolute priority to debt repayment. [8] An International Financial Control Commission was imposed on Tunisia in 1869 before it went under direct French control in 1881. In the Ottoman Empire the creditor Powers installed twenty local offices throughout the territory (from Yemen to Thessalonika), and employed 5,000 civil servants. Greece’s subordination to the creditor Powers – in fact written into its international “birth certificate” – has changed in form over time but still remains today: from the interference by the British, French and Russian ambassadors in the council of ministers in 1843, [9] to the creation of the International Finance Control Commission in 1898 (which functioned up to the Nazi invasion), not to forget the International Financial Enquiry Commission created in 1857 to watch over the repayment of the 1833 debt.

The impact of the international financial and economic crisis of 1890-1891 on Greece

In November 1890, the City of London was in a situation comparable to that which occurred again in the US in 2008 and which triggered off the failure of Lehman Bros., a credit crunch, an international banking crisis and a worldwide economic recession in 2009. On 8 November 1890 the London bankers held an emergency meeting to plan action, should Baring Bros. fail. On 10 November, the bankers met with the government, who established contacts with the other big Powers in order to coordinate reactions to the crisis. Baring Bros. (unlike Lehman Bros.) was saved, but the financial and economic crisis of 1891-1892 was profound. Among those who took part in saving Baring Bros. was the Rothschild bank (present in London, Paris and other European capitals and an important player in Greek debt), JP Morgan (already the biggest US bank) and JS Morgan (established in London and parent to JP Morgan, with whom they later merged). [10]

Nowhere in the articles on the 2015-2016 Greek debt crisis published by the chief organs of the international press are references to the 1893 Greek debt crisis to be found; nor any link to the international financial and economic situation and the suspension of payments decreed by the Greek Parliament at the time. The crisis that had its origins in London caused an economic recession, a fall in international trade, an international credit squeeze... Greece experienced a serious drop in its exportations and so was deprived of the foreign currency essential to funding its debt repayments. Exports of currants, which represented two thirds of Greek exports, fell by 50% between 1891 and 1893. There were two reasons for this sharp drop: 1. The international crisis and the reduction of demand in the richest countries; 2. The decisions taken in the UK, France and Russia to impose import duties on the currants entering their markets. This was in total contradiction of their own dogma professing free trade and the removal of all import-export duties. [11] The fall in revenue and blocked access to loans from British, French and German banks left Greece no option but to suspend payments. Fifty-six percent of Greece’s revenue was devoted to debt repayments. [12] Another contributing factor was a fall in the value of Greek currency against the pound sterling and other strong currencies. With a devalued currency, the real cost of the foreign debt became unsustainable.

The commentators who accuse Greece of being a country that goes easily into payment default should learn that in the 19^th century, Spain suspended payment six times, the Austro-Hungarian Empire five times, Portugal three times, Prussia twice and Russia once. [13]

The military conflict against the Ottoman Empire and the restructuring that followed

The Greek monarchy and the local elite launched a disastrous military conflict against the Ottoman Empire in 1897. Evidently, the great Powers manœuvred the two parties into war [14] in order to take advantage of their mutual weakening and increase their influence over them, particularly by using their debts. The conflict was costly and the great Powers imposed their will on Greece as much as on the Ottoman Empire. The peace treaty was signed in Constantinople (now Istanbul) on 4 December 1897 under the supervision of the UK, France and Russia (the Troika of the time, in place since 1830), the Austro-Hungarian Empire, Germany and Italy. [15] In 1898 another loan was made to Greece (see Box: The 1898 Bond Issue…) The Troika was again the guarantor of the loan. The loan was granted within the framework of the peace treaty and covered a big indemnity paid by Greece to the Ottoman Empire. The great Powers did good business; as they had control of the Ottoman Empire’s finances, they saw to it that the Ottoman Empire’s creditors were paid. Greece and the Ottoman Empire had the same creditors!

Extract from the report of the International Finance Commission from 1898

Extract from the report of the International Finance Commission from 1898 - administrative costs of Greece 1892 - 1896

The Commission made it quite clear that in the future, the Greek State budget would make no provision for major public works such as improvement of sea-ports and new railway lines. The Commission considered that any undertaking likely to significantly aggravate budget charges should be postponed until such time as the country’s finances had reached stable equilibrium. This is an explicit acknowledgement of the creditor Powers’ intention to maintain Greece in a permanent state of economic underdevelopment. In Article 11 of the Law, the IFC lays claim to the following for debt repayments:  all revenue from stamp duty, about 10 million drachma;  all revenue from import duties collected by the Piraeus Customs, i.e. about 10.7 million drachma;  all revenue from duty on tobacco, i.e. about 6.6 million drachma;  all revenue from duty from the monopolies on salt, oil, matches, playing cards and cigarette paper, to which were added all revenue from the emery mine at Naxos (an island in the Cyclades), i.e. about 12.3 million drachma in total.

Extract from the report of the International Finance Commission from 1898

Extract from the report of the International Finance Commission from 1898 - Conclusions

Sources:  the diplomatic document (in French): Arrangement financier avec la Grèce, travaux de la Commission internationale chargée de la préparation du projet / French Ministry of Foreign Affairs – Paris, 1898, 223 pages, http://gallica.bnf.fr/ark:/12148/bpt6k5613443s/f1.item.r=1898%20Gr%C3%A8ce%20Commission.zoom consulted on 1 May 2016;  the text of the Greek law implementing the dictates of the international Financial Commission, consulted on 1 May 2016.

It is to be noted that from 1870 the German bankers and Germany were increasingly involved in the Balkans and the Ottoman Empire. The Greek defeat of 1897 was partly due to the military reinforcements and advice that the Ottomans had received from German officers (including generals) sent by Berlin. Bankers and diplomats were active in Athens and Constantinople. Among the countries keen to increase their influence in Athens after independence, Germany was omnipresent alongside the Troika. [19] No sooner had the peace treaty been signed and new loans granted to Greece, than the IFC imposed a new set of conditions on Greece. The Commission took up residence in Athens and took control of a large part of the Greek budget, which continued to be devoted to debt repayments. The Greek government had no authority to change the use of the income or modify taxation, without the agreement of the IFC. This bears a close resemblance to the present situation. The Commission remained in place up to the Nazi occupation of Greece in 1942! [20]

On top of the indemnity that Greece had to pay to the Ottoman Empire and that was diverted to the Great Powers, a large part of the new loan was to be used to continue repayments to the Troika countries for the 1833 loans. These repayments went on until the 1930s. According to calculations made by the economists Josefin Meyer, Carmen Reinhart and Christoph Trebesch (who are regularly associated with IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org research projects), only 25% of the sums borrowed by Greece between 1894 and 1914 were spent on regular projects (debt repayments apart) and investments. Forty percent went on debt repayments and banking commissions. The remaining 35% became military expenditure (the principal suppliers of armament were also the principal creditors and this situation persists today). [21] My own estimates show a much smaller portion of the borrowing being used for regular spending – no more than 10-15%.

Conclusions on the debt restructurings that took place in 1878 and 1898

These facts indicate that the debt resulting from the restructurings of 1878 and 1898 must be considered odious debt. The restructuring of 1878 required Greece to resume repayment of the debt contracted in 1824-1825, whereas that debt was illegal given that its terms were so overwhelmingly favourable to the creditors. This restructuring made repayment of the debt just as unsustainable and could only lead to a new crisis, which broke out in 1893. The restructuring of 1898 served to increase by several degrees the level of coercion exercised on the Greek government and its people, notably through the creation of the IFC. It enabled the six major Powers to grab a very large share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of the government’s revenues while maintaining Greece in a situation of dependence toward its creditors.

An editorial comment published in the French daily Le Figaro in May 1898, describes the creditors’ strategy fairly clearly: “The maxim of the old policies was: Divide and Conquer. It has been partly replaced by the new rule: Lend them money to keep your foot on their necks. It would be interesting to make a study of it, for poor Greece, as we have had occasion to study it in Egypt, of that subtle invention of modern genius: the lender’s stranglehold on the borrower, substituted for brutal conquest using old-fashioned bayonets; judicial counsel imperceptibly becoming a counsel of wardship, of government, at first gentle and collective, then harsh and personal, for the benefit of the richest, the most tenacious, the most adroit members of the directory. We would like to observe, at its origin, the tying and the tightening of this noose of silver, the imperial instrument our century has made into its most effective weapon for political aggrandisement.” [22]

It is also important to conduct a study to determine what portion of foreign debt (debt issued in foreign currencies on the foreign financial markets, which must be distinguished from Greek loans in the local currency) was purchased by wealthy Greeks, whether residing in Greece or part of the wealthy Greek diaspora living in Istanbul, Alexandria, Smyrna and Paris. [23] It is certain that these powerful Greek elites had invested a significant part of their financial wealth in Greek securities. What that implies is that it was not in their interest to encourage their friends who succeeded one another in the Greek government to take a firm attitude with the creditors (see the Conclusions as well as the end of the inset with excerpts from Constantine Tsoucalas’s work).

Excerpt of a voucher issued by Greece in 1914, part of a loan of 500 million francs to repay previous loans

Greece - 1832-1947

The debts from the 1920s to the Second World War

The defeat of Greece’s military adventure into Turkish territory in 1922 had dramatic effects on the civilian population. Approximately 1.5 million Greeks, the majority of whom had been living in Turkey, were forced to cross the Aegean under catastrophic conditions and return to Greece, which had lost the part of the Ottoman territory she had been granted after the First World War under the Treaty of Sèvres. [25] This massive influx of refugees led the Greek authorities to request aid from the League of Nations (the “ancestor” of the UN), which granted loans to Greece between 1924 and 1928 for a total amount equivalent to 20% of Greece’s GDP at the time. As guarantee, the League required that harsh austerity policies be applied. Both the League of Nations’ representation in Greece and that of the IFC, created in 1898, were dominated by the creditor powers, in particular Britain.

Repayment of the loans granted by the League of Nations was added to a series of other repayment obligations – the continuation of the repayment to Britain and France of the remainder of the debt of 1833 (Russia has received no repayments since the Bolshevik Revolution of 1917), repayment of the debt of 1898, and repayment of the war loans granted during the First World War by Britain, the USA, Canada and France (these war loans amounted it 55% of Greece’s GDP). [26] The total debts owed by Greece were more than 100% of her GDP, and the amount paid each year accounted for more than 30% of the revenues in the Greek budget and approximately 10% of GDP. That gives an idea of the effort imposed on the Greek people and on the country’s economy.

For as long as the international economy was undergoing a phase of growth, as during the period 1898-1913 and the 1920s, Greece was able to post a primary budgetary surplus and cover its debt repayments (that is, under IFC constraints, it managed to generate revenue in excess of expenditures excluding debt service Debt service The sum of the interests and the amortization of the capital borrowed. , which meant that it could use the surplus for repayments). Greece also received capital inflows, as during any period of growth of the world economy. The creditors granted Greece new loans so that she could repay the old ones.

Greek Bond - 1925

The situation changed radically starting in 1930-1931 when the effects of the new international crisis that broke out on Wall Street in October 1929 began to be felt. Greece’s revenues from exports (mainly tobacco and currants) again collapsed, several Greek banks failed in 1931, and Greece’s currency was devalued by 50% following the British decision to suspend the exchange system based on the gold standard. [27] This devaluation Devaluation A lowering of the exchange rate of one currency as regards others. automatically doubled the external debt as expressed in the local currency. The State was forced to double the amount of revenues set aside for repayment of the external debt in foreign currencies. As a result, in 1932, Greece had to partially suspend repayment of the debt.

Once again, if we focus on Greece while isolating her from the international context, we are likely to wrongly interpret what has taken place, just as a great many commentators have done. Yet it needs to be kept in mind that in 1932 the UK, France, Belgium, Italy and other countries also decided to suspend repayment of war debts between themselves and the USA. Germany suspended repayment of its debt to private creditors starting in February 1932 and, in May 1933, announced suspension of payments to all creditors. Hungary, Latvia, Romania and Yugoslavia were also in suspension of payment. Not to mention fourteen Latin American countries. What is systematically ignored by the dominant media is the fact that even after the moratorium decreed by Greece in 1932, she continued to make debt repayments under the tutelage of the IFC.

The International Financial Commission’s effects

The daily Le Monde, cited earlier, says about the IFC’s actions: “In spite of everything, the result is far from being negative: It assisted a young Greece in taking control over its tax revenues and limiting the misappropriation of foreign capital by the local elite. It also contributed to the establishment of reforms that were indispensable for the country’s modernisation.” How is it possible for someone to write such a thing? The IFC exercised a true, permanent diktat over Greece’s finances for the benefit of the creditors, which prevented Greece from defining a development project and kept the country under the yoke of structural subordination.

According to Meyer, Reinhart and Trebesch, the actual yield Yield The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. obtained by the holders of Greek securities purchased abroad and denominated in foreign currencies and which were in suspension of payment at one time or another is between +1% and +5%. That’s a pretty high yield for the government bonds of a country that has the reputation of being a poor payer! How can this positive yield be explained? The actual interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation. were high, the debt stock Debt stock The total amount of debt was not reduced and, despite the repeated periods of suspension of payment, the country most often continued the repayments. As a matter of fact, even during the Great Depression of the 1930s, Greece, even though officially in partial suspension of payment, devoted a third of her revenues to debt repayment, which corresponds to 9% of Greece’s GDP, while during the same period Romania and Bulgaria were devoting, respectively, 2.3% and 3% of their GDP to debt service.

Conclusions

The analysis conducted in this article is not aimed at exonerating Greece’s governments and dominant class of their responsibilities. Quite to the contrary, the decision made by the successive Greek governments and by the dominant class to cave in to the requirements of the creditors and the major powers had terrible consequences for the Greek people. The Greek capitalist class, who were specialists in the realm of finance and international trade, constituted a bourgeoisie that was largely deterritorialised and never had either a true national project nor the will to promote development based on a real industrial fabric. Due to this very fact, its interests were inextricably linked to the interest of the country’s creditors. At times it even constituted a large percentage of the totality of those creditors, which explains its complicity with the representatives of the creditor powers. This is a constant fact from the 19^th century up to today.

During the period we have examined here, Greece has constantly been dominated by foreign European powers. Foreign debt has been a permanent weapon used to exercise that domination. Yet as we see, that debt was clearly illegitimate, odious, illegal and unsustainable.

We’ve also seen that the successive debt crises are very closely linked to the international context and that many other peripheral countries have been subjected to the same treatment. The analysis must therefore be pursued in other areas of the world and justice must be done for all peoples subjected to debt.

Bibliography for Part Two:
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 Tsoucalas, Constantine. 1969. The Greek Tragedy, Penguin Books Ltd, Harmondsworth.

Translated by Snake Arbusto, Mike Kolikowski and Vicki Briault Manus

Acknowledgements: The author’s thanks for review and suggestions go to: Thanos Contargyris, Olivier Delorme, Pierre Gottiniaux, Jean-Marie Harribey, Daphne Kioussis, Damien Millet, Nikos Pantelakis, Claude Quémar, Patrick Saurin, Yannis Thanassekos, Eleni Tsekeri.

The author accepts full responsibility for any errors that may occur in this work.