The Greek Economy

Although Greece as a whole did not enter the war until the summer of 1917 the repercussions of the war had already been felt much earlier than the actual entanglement of the country in it. War expenditure due to the Greco-Turkish crisis of 1914, although Greece was not yet belligerent, amounted to 757.228.640 dr., a sum which represented 2/3rds of expenditure during the period of the actual involvement in the war in 1917 and 1918.

Apart from extra expenditure due to the war, an increase was also noted in regular expenditure after 1914 because of the rise of administrative costs due to the newly-won territories and the rehabilitation of a large number of refugees. The rise of prices also played an important role in the increase of regular and extra expenditure.

Although the drachma retained its nominal value during the war, the implications of the rise of the cost of living were significant. Prices quadrupled between 1914 and 1918 while simultaneously the public debt increased substantially. During the same period the total amount of debts exclusively covering war expenditure amounted to 1,115,000,000 dr. of which only 10,000,000 dr. was a short-term loan. Total expenditure relating to the war amounted to 1,982,896,650 dr. (£79,315,866)

To calculate the total cost of the war we need to take into account expenditure in the form of pensions for war victims, of the replacement cost of military equipment as well as the cost of damages and losses suffered by the country's merchant marine. However expenditure in the form of pensions can-not easily be measured since the war continued for Greece until 1922. Moreover , the cost of damages caused by the Allies, before Greece's actual involvement in the war should also be added.

According to the calculations of the Greek government the cost of damages caused by allied troops was estimated to rise to the amount of 1,126,500,000 dr. At the end of the war the Allies agreed to pay only a small amount of the estimated cost of damages while, ultimately, they paid a trilling sum. Such damages caused by allied troops were included by the Allies in the indemnities which the defeated states were required to pay. The total amount of indemnities claimed by Greece was 4,922,788,736 golden francs.

However, according to the decisions of the indemnities commission, the share of indemnities to which Greece was entitled represented only 0.4% of the total amount which Germany was required to pay and 12.7% of this which Bulgaria was required to pay. In other words, Greece was entitled to receiving 528,000 golden francs from Germany and 292,000,000 golden francs from Bulgaria and Austro-Hungary.

Nevertheless, Greece was given no priority in the issue of indemnities for regions ravaged by the war. In the end it only received an insignificant part of the amount originally designated by the indemnities commission. War expenditure surpassed the economic potential of the country. It was eventually covered by taxation, by the issuing of banknotes and by international loans.

In order for Greece to be able to conduct the war, the Allies made a loan to the Greek government through the National Bank. This amounted of £12,000,000, 300,000,000 French francs and 50,000,000 U.S. dollars. On the basis of these loans, to which Greece would be eligible only after the end of the war, the National Bank of Greece issued 850.000.000 dr. worth of banknotes. By the end of 1920 the total of the French loan, half of the English and 2/3 of the American one were still intact. When King Constantine resumed his throne in 1920 all loans were revoked.

In conclusion we might say that Greece emerged from the war a country gravely in debt, with its currency on the verge of destruction, its core economic structure devoid of any substantial, qualitative change, with an obsolete tax system, with large areas devastated by the war and with an acute refugee problem. Most importantly, however the polarization of political powers foretold of destruction and there was no hopeful sign in the horizon apart from the expectation of satisfaction of the country's territorial claims at the table of negotiations.