While studying the history of Greece in the 19th Century in the last month I realized that the past may tell us more about the present than I thought. A little summary of my déjà-vu backwards, meeting austerity, speculation and European crisis in 1898.
To understand the background of the past, I will start out with a little summary of events in the past. Everything started in 1879. Greece returned (after a debt default earlier in the Century) to the international capital markets. This coincided with the biggest economies at the time, the English one followed by France, having a budget surplus.
In the time from 1879 until 1893 Greece had made six loans. Mostly French and from the 1890s German money flew into the country. The loans were on onerous conditions for Greece, marked by making the country repay the debt in gold, thus putting the exchange rate risk fully on the new nation, high interest rates, as well as state specific state revenues as securities. After 20 years Greece had paid back all the money that it borrowed, but the biggest percentage of its debt were still outstanding. In 1893 the country reached full bankruptcy and defaulted its debt, by lowering the interest rate and not paying in gold anymore.
In 1893 Greece had reached full bankruptcy
Hard negotiations followed which span until 1898 when a compromise was finally found. However, the resulting contract was never signed, because a war between Greece and Turkey brought out. Greece was defeated already after 30 days and had to turn to the Great Powers in order to negotiate peace with Turkey. Those were willing to do so under the condition that Greece would accept any agreement reached. Greece agreed, not anticipating the financial crisis being brought in. However, this was the case.
And that’s how the first European Fiscal Supervision Organization in Greece was established. It supervised certain state taxes, of which a fixed percentage had to be given to the debt repayments. The rest was divided between money to higher the interest rate and the Greek household, leading to a mutual decrease in debt and increase in interest rate (and thus increase in debt again).
This makes me remember my Greek friends who tell me about their high water and electricity bill, because a new European debt tax has been introduced. It reminds me about other friends, who want to become orchestra musicians, and who see one of the main national orchestras being closed down, due to European conditions leading policies trying to “clean up” the public service. It makes me also remember my friends whose relatives are public servants and who see their wages cut enormously.
The public outcry which accompanies these new policy measures, not only in Greece, but all over Europe, always made me think that we are confronted with a new step of globalization and Europeanization. History however tells another story: It just happens again.