HISTORY IS BEING REPEATED BUT PEOPLE DON’T LEARN

 (When are we to learn our lesson?)

 

This text is a translated adaptation from an article in the same Blog, written, a few weeks before the recent parliamentary elections in Greece, during June 2012.

The intention is to inform English speaking friends and relatives, who are interested to have a closer look and understand the historic background behind the recent adventures that this country is enduring in the current financial crisis.

The intention is also not to fabricate a series of excuses for the devastating situation our country has reached, neither to pass the blame to any external parameters, but to give a realistic explanation and counteract widely spread populist accusations giving simplistic answers to very complicated situations effecting the country and the world today.

It is never the people that are the cause of disasters and it is wrong to blame them, it is usually the politicians and their vanity or wrong judgment together with conflicts of interest in the wider world wide arena, that  generate disasters.      

Greece is on the brink of collapse and the new political “status quo” is following the same catastrophic tactics which previous leaders of both government and opposition partiers have been following for many decades

Greece has failed to establish a contemporary, stable infrastructure to ensure development. 

The following article attempts to summarize events of the most critical periods that the newly established Greek State had to go through since the beginning of the 19th century, focusing specifically in four periods which lead to repeated bankruptcies

Greece is living a nightmare by watching local politicians, as well as friends and enemies in the wider European arena, repeating the same historical mistakes.

The nightmare has not only to do with bankruptcies but more so with what is at stake today, the perseverance of Hellenism.          

The history of the newly established Greek State is relevantly short, less than 200 years, compared to thousands of years of the history of Hellenism. 

In these last few hundreds of years, Greece, although a small and for many  centuries, occupied country, has surprisingly, played an important role in shaping the history of the Balkan Nations and even infuenced in shaping the history of the rest of Europe.

This was done in many ways:

Greeks pioneered, in awakening the Balkan and other Eastern European nations and led them to fight for their independence against the Ottoman Empire. Greeks pioneered also in the cultural influence and the spread of Christianity (Orthodox) in all Eastern Europe. That happened in spite of the 400 years of Ottoman oppression which deprived Greece from active participation in the Renascence and the Industrial Revolution that the rest of European nations benefited from.   

The reestablishment of the Greek State coincided with enormous Ethnic changes that took place in Europe and the rest of the world, which inevitably affected the evolutionary process in the development of the new State.

A small country, which had an important geopolitical position, was easy to become a “pray” among the competing Powers of the time, which, in many ways, took advantage of the weaknesses, inherent within any newly formed state.        

Over a long period, since the war of independence of 1821, the Greek Nation went through, in addition to this unequal fight against Ottoman Empire and their ally  Egypt, two Balkan wars, two world wars, one genocide,  an occupation that caused total distraction of the country in the second world war,  a fratricidal fierce civil war and two dictatorships.

During these periods of agony, the country was forced to seek financial support from its allies in a form of loans, to establish its defenses, and create the basic infrastructure for a State organization and for the establishment of a viable economy.

As a result of its weak position to negotiate proper terms for these loans and its incapability to capitalize on these financial resources, Greece was forced to bankruptcy four times.

One needs to investigate the reasons that led to these situations.  

One may also wonder, how was it possible that Hellenism, that did survive, but also, managed to play such an important role, during the 19th, 20th, even the 21st century and be in position to influence the international scene, the developments in Europe, even the developments within the Ottoman Empire, (It is worth mentioning, here, the influence that the first Governor of Greece Kapodistias previously Minister if Exterior of Russia had, to a degree that he was considered by Metternich as his most dangerous opponent),  while the same Nation was failing to establish a stable infrastructure for development? 

In order for anybody to form an opinion, will need to search deeper and look closer, in a more inquisitive way, to the international historic, geopolitical and financial happenings of these periods.

Hellenism survived, in spite the long term subservience, under Ottoman rule, due to awareness of its identity and cultural inheritance.

It was mainly the Greek minority of Asia Minor (later expelled), that contributed to this survival.

The Turkish higher class of this period, preferred to be part of the military hierarchy in this strong militaristic state, which was ruling over 70 nationalities, scattered over a wide geographical area, including the Balkans, parts of Asia and Africa, extending to Central and Eastern Europe. The military structure and preference of the Turkish higher class generated a gap, depriving the Ottoman society of a homogenous strong middle class.

So, the Greek population that had been  residing in Asia Minor for more than three thousand years and other Greek populations in the wider area of Central and Eastern Europe were presented with the opportunity to step in and create a cultural, commercial and political core within a society which was mainly agricultural.

In the financial and business field, Hellenism generated, in the middle of Turkish occupation, Traders, Architects, naval architects, ship-owners, politicians, businessmen, who developed extraordinary activities so much in Asia Minor but also in the Balkans, in Central and Eastern Europe and the Black Sea as far East as the Caspian Sea.

In the political and cultural field, many leading Greek personalities are, even today worshiped as National heroes in many countries of the area, including Serbia, Romania, Ukraine, Moldavia and others. This is due to the contribution and inspiration they provided towards independence.

At the same time new situations were evolving in West Europe and USA, as a result of which new military and political alliances were formed. The objectives of these alliances were continuously changing, but the main one was to stop the expansion of the Ottoman Empire to the west and hopefully share parts of the Empire that was disintegrating

Such alliance formations included powers such as England, France, and Russia, later Italy and USA, up to the end of the Second World War, when the Atlantic Alliance was created and NATO was formed. 

The European Union was also founded later, falling short of a military and complete political alliance.

Under these International developments the New Greek State was trying to create a sustainable infrastructure seeking support.

This support was taking the form of loans or subsidies in exchange of Greece’s participation and support to each alliance objectives.

Since the war of Greek independence  of 1821, up to the end of the second world war, Greece ended up fighting against Germany, one of the major European powers which was constantly seeking viable breathing space for its development, having as  main opponent the Anglo French Axis and Russia.

The long expected disintegration of the Ottoman Empire found many aspiring victors, ready to share the pray.

All European powers, England, France, Italy, Russia, Germany Austro-Hungarian Empire, Germany etc, were antagonising to attain sovereign, territorial, financial, military and other benefits and rights.  

The territorial rights, that some of the European powers were claiming, included parts of the Greek  National space, such as Ionian Islands, Dodecanese, Crete, Thrace, Macedonia and Cyprus.

It easy therefore to understand how unstable the International environment, within which the new Greek Nation was trying to develop, had been and how easy it could be for this State to become a “ploy” among the competing powers, that were trying to take advantage of

The easiest way for the powers to take advantage, in such situation, were to set the terms and conditions of the loans that were needed for Greece to achieve its national goals for its independence and to establish the basic infrastructure for the operation of the New State.

But let us see, how the Greek state behaved since its formation, reverting to continuous loans for funding its development projects but also for equipping its armed forces, necessary to maintain its independence. This drainage of funds was leading to inevitable monetary shortages and consequently to consecutive bankruptcies ending inevitably to international supervision by its lenders.   

There are four periods that resemble very closely to the current unhappy situation.

The period that led to the first bankcraptcy 1826- 1829

The first attempts to obtain a loan, after the declaration of War of Greece’s independence (1821), failed as the conditions imposed, were considered treacherous for the Nation. The loan to be provided by France, in response to the mediation of the “Knights of the island of Rhodes”, did not materialise because the request involved, as exchange, the loss of sovereignty of the islands of Dodecanese in Aegean Sea.  

The first actual loan was provided by England which was hoping towards the disintegration of the Ottoman Empire and as a world sea dominant power, was giving Greece very big strategic importance, because was hoping to gain control of Dardanelles Straits, the entrance to Black sea.     

But the lending parties demanded land guaranties. (Let as not forget that England bought from the declining Ottoman Empire the whole of Cyprus Island.)  

But the problems were not coming just from the side of the lenders.

Upon the signing of the loan contract, in addition to unacceptable guaranties, the contract had serious financial drawbacks and manipulations

From the initial loan, amount of 800.000 pounds, only the 59% was contracted to reach the country, not to mention that, finally, the amount actually dispersed was just 298.000 pounds.

Yet, there were other serious internal problems, as these loans steered internal conflicts which eventually lead to internal civil conflicts.

Even today, for any one in deep debt situation, there is an expression that is commonly heard among Greek public: “He is in debt and he owes the loans of England” A joke surviving even up today. 

The loans therefore contributed to internal conflicts among Greek politicians to such an extreme that one wonders how is it possible that they reached to the point to throw in prison even the General of the war of independence Theodore Kolokotronis.

It was due to competition between England and Russia, in their effort to control Greece that lead to such an extreme action.

Then, there was also great waste in managing state affairs

From the Greek side the waste concerned, among other, payments to the military and mainly to the leaders of the revolution, chieftains and worriers who, overnight, were upgraded from irregular looters to paid regular army officers. Now, these officers were spending their salaries to purchase glittering uniforms which were surpassing in luxury both Ottoman and Egyptian army officers.

But on the other hand the loans were also used for defense equipment which was purchased from the lenders themselves, the British, this time.

Parts of these supplies were warships which were built in England and never delivered to specifications although were fully paid.

This is indicative of the British involvement and interweaving.

These transactions resample very much with todays case of German submarines which were not delivered to specifications while many millions of Euros reached the wrong pockets.

Mismanagement, interrelations, exploitation and civil conflicts lead to the first bankruptcy of the newly established state in 1829.

Even under these circumstances Greece honoured the agreement, it did not write off the debt, honestly negotiated with lenders and proposed a haircut and partial extension of time to repay with certain mortgage of national estate. The proposal was not accepted and the negotiations ended much later in payment of securities exchanged in the Greek stock market in London which guaranteed the loan repayment in 30 years

The period of the second bankruptcy. 1833-1843

The next loan was granted in 1833 by the «protector» forces of England, France and Russia after the Bavarian agreement to give the loan as a «dowry» to the young Bavarian Prince Otto, sent to Greece to reign.

This was done under the fear that another force could be involved that probably wanted to control the Dardanelles Strait, after the expected disintegration of the Ottoman Empire.

But again, the mismanagement and overspending of the regency and the Greek Constitutional Revolution suspended the servicing of the loan ending up in a second bankruptcy during 1843.

This nearly stopped the annexation of Thessaly.

National adventures and expectations have always intertwined with the borrowing needs.

It is very easy to see the parallel drown with the confrontations between Greece and Turkey today over Aegean Sea, Cyprus, the shelf and the financial zone in Aegean Sea.

The period after the Constitutional Revolution, the economic situation and the image displayed by the Ministry of Finance was more than tragic.

As a major problems, one could identify, were both tax evasion and failure of proper operation of the state machine (well known pathologies of the Greek state) affecting the country till now.

This situation caused the involvement of the first international “troika” in Greece which happened during 1856.

The first international “Troika” 1856

Troika was investigating the finances to impose conditions for servicing the loan.

The negotiation lasted 22 years

From 1844 to1860, Greece survived without borrowing

The large deficits started again from 1861 to 1878.

This period resembles ones more, with the current situation.

Everything was there, fiscal problems that continuo over the years, pre election overspending and customer relationships, inability of cutting costs.

The situation was deteriorating due to military spending, in support of the Cretan revolution against the Ottomans. But the biggest problem was the political instability generated, due to antagonism among a plethora of political parties. It is worth noting that the handling of the Cretan revolution was shared among five alternating governments in Greece.

The period of the third bankruptcy. 1878-1893

The third failure and consequent bankruptcy was the most famous one because of the well known public declaration of the Greek Prime Minister Charilaos Trikoupis that was announced in1893 «Unfortunately we have gone bankrupt».

During the period from 1878 to this bankruptcy was the first time that the Greek two-party system was introduced and prevailed. The power was switching between Harilaos Trikoupi and his main opponent Theodore Deliyannis.

In 1884 the English economist Charles Tseston, wrote:

«One of the tendencies of the Greeks, to be taken seriously into account is the desire to avoid paying taxes.»

And Charilaos Trikoupis confided on this issue:

«For 20 years we strive to correct the» faults «sometimes even jeopardize our popularity but unfortunately, we faced fierce opposition.»

By 1875 a quarter of the non agricultural- rural population lived in wealth supported by the state, to the point that the French ethnologist Count de Gkomino observed:

«There is nowhere else noticed the phenomenon of a whole society that operates on the basis that only the state has money.»

In fact, the only ones who had money at the time, 1873, were the Greek businessmen of Constantinople, Odessa and Marseilles.

As a result the large “off community” Greeks acquired much of the assets available in central Greece, even the Turkish estates of Thessaly and Arta, as soon these were liberated.

A large portion of the local society reacted to these investments and to the transfer of ownership of all liberated property assets to “off community” Greeks.

From this reaction a strong populist propaganda was created that characterized the wealthy Greek colonies as «Gang of master builders.»

The political representative of this reaction, to the introduction of  such investment capital, was Theodore Deliyannis.

Trikoupis was accused as «plutocrat»

Deliyannis came to power in 1885, and was engaged in the internal politics while his efforts were spent more in trying to balance between election promises given and the reality, concealing the real potential.

Generally, Deligiannis used  to regularly arouse the crowds with populist nationalist political motives, but without taking decisions, to resolve financial difficulties, instead he was manipulating the public somewhat «exciting” the crowds with pompous nationalistic expressions. The situation got out of control to the point Deligiannis had to force a pretext call to arms of all the army reserves.

But to these erratic preparations for war, the major powers reacted, as they do not like unpredictable actions, especially when their interests are at stake. Politics is the art of achieving the “possible” and that had been violated by Deliyannis

The great powers had lost their patience with the absolute confusion that prevailed in Greece. The hysteria did not help its credibility.

So Deliyannis became an unfavorable politician and major powers stopped granting additional loans and what was worst, they blocked Greek ports.

In consequence, Deliyannis managed to kill Greek imports and exports and the country was driven on the verge of famine.

To confront the outcry against himself, Deligiannis made excuses by saying for all the fault: It is all due to the foreigners…

Deliyannis of course, had received a significant deficit and was forced to do cut costs and spending, enforce taxes, acts for him was extremely difficult, since he was elected with the slogan «Down with the taxes» nor it was easy to cut costs  for political reasons.

Eventually Deligiannis forced to put taxes and duties and imposed wage cuts. But even this measure did not have the desired effect.

The bankruptcy seemed inevitable, and then, Deliyannis resigned

But the evil continued. The ongoing negotiations with lenders were unsuccessful. Then, Greece was involved, totally unprepared, in an unfortunate Greco-Turkish war of 1897

The period of International supervision. 1897-1912

Greece was in an even more difficult negotiating position; so that foreign forces could impose any conditions they wished.

 

The most important issue was that Greece was forced to accept an international audit and supervision. The paradox was that despite the fact that the great powers treated Greece very unfairly and hard, control was proved successful for both the lenders and for Greece itself, which saw significant progress.

Indeed, by the imposition of international control, Greece managed to bring order to public finances, to proceed with development investment and organize the armed forces that, when the Balkan wars erupted in 1912, the country was prepared for success actually achieved.

During the Balkan wars, Greece doubled its size and achieved a critical size to establish an independent sovereign state.

The period after the First World War. The Great Betrayal

This increased significantly the country’s credibility and reliability. This success enabled the New Greek Prime Minister, Eleftherios Venizelos to negotiate from a position of strength with the winners of the First World War.

From this position the undeniable power, Greece experienced the biggest national and economic disaster of all times and the cause was twofold, on the one hand the usual, disastrous for Greece divisive politics and on the other hand the usual shift of interests of its allied partners.

In one of the most critical moments in modern European history, the postwar period after the First World War Greece was literally abandoned and betrayed by its allies.

So, in 1922, after the advance of the Greek army in Asia Minor, at the instigation of its allies, (Let’s not forget the defeat of the Allied forces at Gallipoli) followed the Asia Minor catastrophe. (Thus destroying the middle class which had been created there based on Greek and Armenian population, active for hundreds of years.)

This was the biggest disaster in the history of Hellenism and the biggest, for the period, global refugee population displacement. No wonder why the scars of this disaster stay in the memory of Greek populations around the world.

The reader who may be specifically interested, can get a fuller account of the events that took place during this period by looking at the site,  www.nick-kouzos.info and appreciate why Greeks believe that their country was “literally misled and betrayed by its allies, mainly UK”. Especially is worth reading a speech made by Nancy Horton, who is the daughter of George Horton the Consulate of United States, officially representing USA government in Smyrna, during the last tragic days and the destruction during 1922. The speech of Nancy Horton is included in the above site.

The period of the third bankruptcy. 1932

The next failure-bankruptcy happened during 1932 with Venizelos.  This bankruptcy opened the way to the dictatorship of Metaxas.

1929 appeared to be an optimistic year. The repayment of debt was one of the largest funds. It was essentially a «balance of terror» and did not seem to concern Venizelos, as long as the money came from abroad, he did not take into account the global financial crisis of October 1929.

Again, some warned, the disease of the Greek economy was the spoils, and patronage, bureaucracy, excessive creation of useless government agencies, political corruption, etc.

I will not consume any more time on detailed parliamentary, political and economic events, local and international. .

We emphasize, however, that history repeats itself again and the period before the default of 1932, was characterized by the inability to find lenders.

This made the internal situation dramatic.

Padlocks, bankruptcies of commercial and industrial enterprises continued to grow. The unemployed had overcome a ¼ of a million, wages fell and the banks had liquidity problems.

Borrowing terms worsened by the global crisis.  (German, Middle European, and finally English).

Europeans ask again harsh austerity measures.

The French representative, in the Financial Committee, said to his Greek counterpart:

«If you will deny your obligations abroad, you must first make tough economies. Pause employees, because you have many. Limit the salaries. Otherwise, it is justified to get the suspension of the amortization. «

Venizelos was very embarrassed and wanted to create universal government that could give it more credibility.

Venizelos’s main opponent, Tsaldaris, did not agree.

Venizelos was forced to announce the inability to pay debts under the Council of the League of Nations, on April 16, 1931,

The government immediately began cutting wages and benefits, cut missions abroad and government cars.

This was followed by strikes, layoffs   of leaders of employee unions who steered political mobilization.

The main leftist newspaper supported escalation of strikes and wrote articles against the government and the other moderate parties, calling them, even fascist.

Venizelos resigned and the parliamentary crisis led to a dictatorship that Metaxas imposed during 1936.

The Second World War and the Marshal Plan

The heroic resistance of the Greek army and the people during the Second World War was not enough to change neither the fate of Greece nor the mentality of the Greek establishment.

Greece has emerged from the war and the ensuing civil grief totally destroyed.

Under this devastating situation the government has requested urgent help from United States.

The impression about situation in Greece conveyed to US government was not good, not only for the ruins that the war had left but for the lack of mobilization of the Greek politicians as well.

The lack of trust between government and society to the ability of Greece to get out of the situation gave the impression to everybody that everything was expected to be done with outside help.

Huge social and economic disparity was evident everywhere.

The industrialists, traders, speculators, black marketers lived comfortably, while the masses, lived in a wretched condition.

Unemployment was high, while 20% of the population was dependent for its survival, somehow, from the state.

With the start of the flow of American aid, the Marshall Plan, the US representatives get the first findings.

U.S. officials were surprised by the size of bureaucracy and corruption prevailing in public administration.

The situation was such that the U.S. government, demanded special conditions and control for the rational use of aid.

“Petite” political approach by the opposition, raised many unimportant issues about the terms, such as immunity, the transfer of sovereignty and other low level maters such as lack of sufficient time to study the contract etc.

Finally, after sending large sums of money the American officials were frustrated with the lack of proper results.

Edward Tenenbaum, in their report wrote:

«We stopped communism, but we have nothing in place viable.

We gave much help to Greece, but little came to the Greeks

who needed it most.

We paid expensive investment, to no avail.

Restore order. But this class is protected by successive weak governments, unpopular, unreliable and corroded.

We built roads that will soon collapse

Raise wages but prices rose faster. We gave ships, but the income does not return to Greece.

No Greek public servant would move an inch from his program for the support of the agricultural, industrial and medical salvation of Greece.

No employee of the State Department would agree to measures challenging members of the governing parties.

No Greek Minister would risk losing votes getting read of useless employees.

No Greek businessman would sell his fixed assets.

No union would minimize or reduce the requirements for salary increases.

Nothing will change ….. «

The current situation -conclusions.

I think that it is not difficult to draw conclusions and parallels among the current situation and the rest of the stories and deeds that took place over the years.

Unfortunately things have not changed much neither in politics or the society.

The story is repeated except for the names and roles. It is now Europe, IMF, the Mediterranean programs, Memorandums, etc.

Things have not changed, neither for the political parties supporting the government or the opposition which, to my understanding are equally responsible.

But things are now more serious, what is at stake is not just a political confrontation, but a series of compromises needed to ensure survival.

In my opinion, the problem is as serious as the survival of Hellenism and there is a need for urgent adaptations, to a new reality that evolves within a new dramatically changing world.

The problem is much bigger than the assignment of part of our sovereignty, which anyway is partially transferred, with the entry of Greece to the European Monetary Union.

The problem has now been extended to a much bigger dimension that deals with the  survival of Europe itself; the risk for failure, has become real and disaster is lurking over us, if Europe fails to demonstrate that it can be a successful model for multinational coexistence based on new principles that can contribute towards compromising conflicts and National interest.

Regardless of what economic or political theory, one professes global upheavals overcome relatively minor challenges we experience today.

The game is played in much wider framework and financial – economic parameters and theories, whether they are based on free enterprise, liberal, capitalist or socialist, can not give easy answers.

The new prevailing conditions are more related to problems such as population explosion, migration, impending ecological disasters, consumption of raw materials, nuclear risk, poverty which is hitting large percentage of world population.

These problems can not be solved by outdated ideas of nationalism and local isolation neither with temporally financial dominance.

Greece is 2% of the European economy and only within this Union of Nations can hope for its economic survival, while it has and hope to salvage the cultural heritage, which helped to keep our National existence. Let us also hope that European Nations learn their lesson as well because references to this story include their own grave mistakes that need not be repeated. The cost will be higher this time. It is the obligation of the politicians of both North and South European countries to explain to their public, in great detail, what is at stake and avoid populist approaches which for the moment are prevailing.

      

Nick Kouzos

 July 10th, 2012  

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