Committee for the Abolition of Illegitimate Debt

The First Odious Loan imputed to Greece in 1833 by the Troika (France, the United Kingdom and Russia, known as the Great Powers)

The memorandum imposed by the Troika in 1843

Adapted from Takis Katsimardos

In June 1843, unable to afford the annual tranche of interest payments on the 1833 loan, Greece was forced to default. Faced with threats from the creditors, the government undertook to apply a brutal austerity programme to enable them to keep on servicing their debt.

Greece then entered a phase of ‘extreme’ austerity. Sources of the time report scenes of mass hardship, in town and country. In the capital, penniless citizens stopped paying their taxes to the point where there were no candidates for the once coveted post of tax-collector, previously attributed by auction!

Obviously it was impossible to collect money for debt servicing in a country where the majority of the population was living in utter deprivation. Yet the creditors continued to demand the debt payments.

The situation led to a conference being held in London on Greek debt where the representatives of the Troika redacted a statement condemning Greece (June 1843). The statement declared that Greece had failed to fulfil her obligations. The three ambassadors gave the government 15 days to make even more drastic cuts in public spending to raise the sum of about 4 million GDR. The cuts that the government had initially planned would only have levied 1 million GDR.

After a month of discussions, a memorandum protocol was drawn up by the ambassadors and the Greek government. The agreement was ratified on 2 September, giving rise to a storm of protest. The next day was the start of the 3 September 1843 Revolution, which was to result in a new Constitution that was still far from democratic. [10]

The main measures taken by the Greek government in 1843 in application of the Memorandum of that time included: [11]

1. Laying off one third of civil servants and reducing the salaries of those remaining by 15-20%;
2. Suspension of retirement pension payments;
3. Considerable reduction of military spending;
4. Payment by all producers of an advance on tax called a ‘tithe’, corresponding to a tenth of the value of everything produced;
5. Increases in customs duties and stamp duties;
6. Laying off all civil servants in the National Printers, forest wardens and most university professors (all but 26!);
7. Closure of all state health services;
8. All State civil engineers laid off and all public works projects halted;
9. Cancellation of all diplomatic missions abroad;
10. Legalization of all illegal constructions and illegally appropriated land belonging to the state, upon payment of a fine;
11. Regularization of all pending tax fraud cases (to the value of 5 million GDR) on payment of a modest sum.

Furthermore, in line with the terms of the ‘Memorandum’, the ambassadors of the Troika countries of that time were present at all cabinet meetings where the measures were validated, and were sent detailed reports every month concerning their implementation and the monies collected.
Do you not have a funny feeling that you have heard all this before?

Several key economic and social points to understanding the historical context in which Greece attained independence in the 19^th century

Constantine Tsoucalas, whilst exiled in Paris in 1969 during the Greek colonels’ dictatorship, wrote: « In almost a century and a half of modern Greek history, foreign intervention or foreign support has almost always been responsible – to a greater or lesser extent – for the birth and outcome of every crisis. Domestic social and political forces have never been able to develop or function autonomously. The Greek people have long been powerless to take their destiny into their own hands: most flagrantly so when there was the most to win or lose. For, whatever the strategic and diplomatic line-up, Greece could not escape international attention because of her geographical situation. As a pawn of Western diplomacy when the Ottoman Empire was breaking up, as a naval base essential for the control of the Dardanelles, as a bastion of the ‘free world’ in its attempt to stop the expansion of Communism, or as one of the very few secure bases for the strategic control of the ever-unstable Middle East, Greece has always had to pay the price for the international interest she has provoked.» [14]

Constantine Tsoucalas’s observation has its exceptions; the Greek people defeated the Nazi occupation through a long, difficult and heroic struggle. Nevertheless, the tragic events of 2015 confirm the political aspects of these remarks made nearly half a century ago. The Western European powers once again intervened in Greece for international political reasons: to prevent the success of an experiment that breaks with austerity policies so that it does not spread to other European countries such as Spain and Portugal; to prevent their project of European integration dominated by powerful economic interests from being called into question. The European institutions and the 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 have terminated an experiment that could have changed the course of history.

To continue with Constantine Tsoucalas’s description:

“It is difficult to pin down the historical and cultural character of the Greek nation – Balkan but not Slav, Near Eastern but not Moslem, European but not Western. It may or may not be possible to trace a racial, cultural and national continuity from the Classical period through the Byzantine Empire to modern Greece; the undoubted fact is that the origins of the modern social and economic structure are deeply rooted in the long period of Ottoman rule. (…)

“The Ottoman ideology, with its rigid social divisions, maintained a disdainful attitude to mercantile activities; this enabled the Greeks, and to a lesser degree other minority groups like the Jews and the Armenians, virtually to monopolize business life. The Greek community of Constantinople, consisting of the remnants of the Byzantine aristocracy and of the emerging groups of bankers and merchants knows as Phanariots, rapidly gained control of the greater part of economic transactions. The role of the Phanariots, however, was not confined to the financial sphere. They were often called upon to play a significant political and administrative part in the Ottoman power system. (…)

“The Greek element was also predominant in the commercial, entrepreneurial and maritime activities which grew rapidly after the middle of the eighteenth century, and infused a new spirit into the lethargic life of the Balkans. The prestige of this nascent Greek bourgeoisie, through which the new revolutionary ideas fermenting in Europe, especially after 1789, became gradually paramount among both Greek and Slav peoples. The idea of a movement for independence, leading to an All-Balkan federation, was spreading, mainly under the instigation of Russia, while the widespread decay of the Ottoman Empire roused strong hopes of approaching independence in all social classes throughout the Balkan peninsula.

“This process culminated in the Greek revolution of 1821. But, after considerable successes in the first years of the struggle, the reorganized Turkish-Egyptian army managed to win decisive victories which led to a political stalemate. By 1827 the revolution – which had been restricted to the Aegean islands, the Peloponnese and the southern part of the main peninsula (Sterea Hellas) – was nearly expiring.

“It was then that the intervention of the foreign powers became decisive. (…) The atrocities committed during the war and the romantic aura of the Hellenic past had greatly excited international public opinion. Popular pressure and diplomatic interests converged for once, and the great powers decided to take the situation in hand. Russia, France and Great Britain destroyed the Turkish-Egyptian fleet at Navarino (1827) and thus secured Greek independence.

“To see how important these powers were in ensuing events, we must look briefly at the policies they pursued. Russian policy was based on the idea of creating a large Balkan Greco-Slav state under her protection, to ensure her a stronghold in the Mediterranean after the breakdown of Ottoman power. Most of the population of the Balkans was Slav, and 90% subscribed to the Christian Orthodox faith; these were the two main propaganda instruments serving Russian aims. By contrast, British policy was basically oriented towards the conservation of the Ottoman Empire, as a counterbalancing power against Russian expansionism. To the extent, however, that the growing centrifugal forces within the Empire made its disintegration unavoidable in the long run, Great Britain favoured the creation of an independent Greek state which would, however, be politically and economically dependent on Britain, and therefore openly antagonistic to the other ethnic groups in the Balkans. The Protocol of London (1830), through which Greek independence was finally recognized, was a victory for British policy. The decision to install an absolute monarchy was aimed at the replacement of the first Greek Governor, Ioannis Kapodistrias, an ex-minister of the Tsar and naturally inclined towards Russian conceptions. Meanwhile, the restriction of the independent state’s boundaries to a very small area, inhabited by a comparatively homogeneous population, made the new-born State absolutely dependent on foreign (that is British) economic and diplomatic support, and eventually led to antagonism between Greeks and Slavs. Thus, for more than a century, the Balkan peninsula was to be the most turbulent spot in Europe and the scene of continual struggles between interventionist powers. The idea of a federation uniting the Christian peoples of the European provinces of the Ottoman Empire, who had been living in relative harmony with one another for four centuries, was shelved. Britain, Russia, France, Austria and later Germany fought over the future of these provinces; their peoples paid and are still paying the bill.”


Social structures

“After independence, the social and economic structure of Greece remained basically unchanged. The semi-feudal system prevailing under the Ottoman regime disappeared; but the land owned by Turkish feudal lords, amounting to about half the cultivated area of the country, passed in the main into the hands of the local chiefs and notables. These chieftains had played a significant role during the Ottoman period. They had been entrusted with considerable administrative and representational powers, especially in those villages which had been granted a certain degree of autonomy. After an ambiguous attitude in the first months of the War of Independence, they joined the revolutionary movement and played an important role. Very soon, however, they were involved in bitter struggles with the popular elements, which sometimes led to brutal armed conflicts. The outcome of class antagonism between local chieftains and popular forces was still inconclusive when independence was proclaimed. Under pressure from the chieftains, Kapodistrias hesitated to distribute the land among the impoverished peasants. When Kapodistrias was murdered by members of one of the most powerful clans, and when King Otto Wittelsbach, second son of King Ludwig I of Bavaria, was placed on the throne, the antiquated social structure was safeguarded.

“Admittedly local chieftains had not succeeded in ousting the Ottoman rulers. While agricultural production was increasingly based on small private farmsteads, local chieftains, who often owned considerable lands, exerted economic, and thus political, control on most farmers; it was to take almost a century to achieve the necessary reforms and solve the land problem.”


In 1832 Greece was 95% rural

“This, then, is Greece in 1832: a small country utterly devastated after a terrible war lasting almost ten years, with a 95 per cent peasant population and an archaic, semi-feudal structure. The new state is not even the centre of Hellenism. No city of any importance is included within its boundaries. Its cultural, religious, and economic centres are all abroad. Out of a total of three million Greeks, barely 700,000 are living in the Greek state. When Athens became the second capital of the country (after Nafplio) it was a miserable village with no more than 5,000 inhabitants – hardly to be compared with Constantinople, the symbol of national and religious regeneration, seat of the Patriarchate, centre of the Phanariots and the Greek bourgeoisie, swarming with Greek schools and publishing houses, housing the ‘Great School of the Nation’, a university of high prestige, and with a Greek population of over 200,000.”


The “Great Idea” of uncontrolled and unconditional nationalism leading to chauvinism

“Naturally, the new state’s main preoccupation was to try to liberate those Greek-inhabited regions that were still under Turkish rule. But although this natural urge towards national fulfilment was of supreme importance to Greeks, and although in itself it did not directly conflict with the interests of the other Balkan nationalities, it quickly degenerated into a utopian dream of rebuilding the Byzantine Empire under Greek sovereignty. The ‘Great Idea’, as this conception came to be called, was the main ideological and political slogan throughout the century. The repercussions of this orientation are enormous, both in domestic and in foreign policy. The solution of all internal problems was usually shelved by means of skilful demagogy, in the name of the national unity necessary to make the dream come true. Time after time the realization of this dream is successfully called upon to divert public attention from the incapacity or unwillingness of the ruling groups to take the measures required by the permanently frustrating internal situation. It is true that the glorification of ‘Hellenic’ values, which constitutes the cultural parallel to the ‘Great Idea’, did much to develop national unity and consciousness. The mystifying power of the notions of ‘Eternal Greece’ and ‘cultural unity of the Greek people’, however, resulted in serious ideological distortions which have yet to be completely dissipated. For not only did the mystical orientation towards classical antiquity constitute a major obstacle to a realistic and progressive national outlook; it also led to the imposition of, a ‘pure’ language, reintroducing grammatical elements of ancient Greek, completely strange to the spoken idiom and to a certain extent incomprehensible to the common people. The contradiction between official and spoken language dominated the second half of the century and became the main cultural issue. The educational obscurantism which persists up to the present day is to a large extent due to the fact that conservative political forces have managed to identify the ‘purity’ of the language, symbol of the eternity of the nation, with the conservation of retrograde and mystifying educational and cultural values.

“The international repercussions of the ‘Great Idea’ were even more far-reaching. Uncontrolled and intransigent nationalism led to chauvinism and pushed the country into conflict with the similarly motivated neighbouring Balkan countries, a conflict which haunts Balkan relations to the present day. Imperialist antagonism between the powers, and especially between Britain and Russia, did much to aggravate the problem. Throughout the nineteenth century the powers continued to instigate or to repress the outbursts of their diplomacy, and not hesitating to use direct military intervention. When, at the outbreak of the Crimean War (1853), Russia induced Greece to support revolutionary movements in Thessaly and Macedonia, the Anglo-French answer was prompt. French and British troops landed at the port of Piraeus and Greece was virtually occupied for three years (1854-7).”


The political system

“After the departure of the troops, the country was formally declared to be under economic control by the powers. Meanwhile, the evolution of the socio-economic structures of the country was extremely slow. The absolute monarchy of King Otto, surrounded by a large Bavarian court, was characterized by total disregard of the real needs and aspirations of the Greeks. Both the common people, who lived in a state of absolute misery, and the leading strata, who had emerged during and after the revolution (landowners, notables and military leaders), were intensely dissatisfied. The Bavarian administration had installed an undisguised despotism and ruled in complete separation from the indigenous forces. This state of affairs was only slightly modified by the revolution of 1844, which resulted in the promulgation of the first Greek Constitution. The limitations imposed on the monarch’s absolute powers were nominal, and therefore the machinations of the three major parties openly representing the interests of the foreign ‘protectors’ (characteristically named the English, French and Russian parties respectively) were openly and unequivocally directed towards acquiring the royal favour.”


From 1860, the rise of the bourgeoisie

“It is only after the ending of economic control in 1860 that some progress is visible. A new political generation emerged and the first signs of early capitalist development were manifest. If industrial activity was still extremely limited, the boom in the merchant navy, tripled since 1838, and the spectacular growth of commerce resulted in the creation of a rising bourgeoisie. Though the main centres of economic and cultural activity were still abroad, the prestige of the national state was growing. A considerable amount of Greek-owned capital was invested in the country and began to constitute a strong pole of attraction for Greeks abroad. This trend gathered pace among the Greek bourgeoisie of Constantinople and the other large cities of the Ottoman Empire, for they lived under the threat of hostility from the Ottoman government.”


The balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of power between the UK and Russia in the Balkans

“Whenever the Balkan peoples tended to unite against the Sultan, Britain imposed a veto, for she was still haunted by the nightmare of a Balkan federation under Russian influence. In 1867 the Greek Prime Minister signed a treaty with Serbia, Rumania and Montenegro declaring that the future of the Balkans should be considered an internal Balkan affair; the British put pressure on King George and the government was immediately dismissed. Again, on the eve of the Russo-Turkish war in 1877, Greece was forced by Britain to turn down Serbian proposals for a common offensive against Turkey. When, however, at the end of the war, the treaty of San Stefano strengthened the Slav states to a considerable extent at the expense of Greece, not only did the British insist on a revision of the treaty and finally obtain a considerable curtailment of the Slav territorial gains through the treaty of Berlin (1878), but moreover, during subsequent negotiations with Turkey, they insisted on the cession of Thessaly and a part of Epirus to Greece (1881). Thus, not only was the territorial balance successfully maintained against Russia; Britain also postponed an eventual Balkan coalition through the intensification of inter-Balkan grievances resulting from the treaties.”

It is striking to note that in Constantine Tsoucalas’s analysis, often perspicacious and always interesting, the debt claimed from Greece is considered of marginal importance, whereas in fact it was a decisive element in the subordination of Greece to the great powers.