340 



GREECE. 



cent.; 133.225,000 drachma! of the 4-per-cent. 

 loan of 1887; 155,000,000 drachma! of conver- 

 sion loans of 1889, paying 4 per cent.; and 

 59,928,000 drachmai of the railroad loan of 

 1890, borrowed at 5 per cent., to build the Pirse- 

 us-Larissa Railroad. This statement does not 

 include the loan amounting to over 100,000,000 

 drachmai raised for stores and munitions dur- 

 ing the war of independence, and assumed by 

 the 3 protecting powers, on which nothing has 

 been paid since 1833, until, under a settlement 

 negotiated in 1879, a certain amount of interest 

 has been paid. 



State Bankruptcy. The national debt of 

 Greece was incurred partly to build roads and 

 railroads, partly to maintain an army sufficient 

 to keep the Bulgarians out of Macedonia, and to 

 acquire a navy superior to that of Turkey, but 

 the greater part is the result of financial opera- 

 tions undertaken to preserve the national credit 

 and meet the liabilities entered into lightly on 

 too onerous terms for the sake of the Hellenic 

 idea and in the hope of developing the resources 

 and trade of the country and increasing its tax- 

 paying powers sufficiently to enable the Govern- 

 ment to obtain gold for the interest of the 

 foreign debt. The issue of paper money for the 

 expenses of the mobilization of 1885 complicated 

 the financial situation, already difficult, for the 

 exports and shipping did not bring enough gold 

 into the country to meet the coupons, which the 

 Government increased by converting internal 

 loans into a gold foreign debt. The Govern- 

 ment could not collect taxes in gold, and when 

 it attempted to buy gold in the market to pay 

 the coupons in London, Paris, and Berlin, the 

 premium on gold rose at once to high figures, 

 not only destroying the equilibrium of the budg- 

 et, but disturbing and depressing the produc- 

 tion and export trade of the country. For this 

 reason Tricoupis year after year raised new gold 

 loans in the money markets of Europe on usuri- 

 ous terms in order to pay the interest on the debt 

 already existing. He attempted to increase taxes, 

 but economic and monetary causes made it im- 

 possible to raise gold by taxation. He made a 

 show of reducing expenses, but political and 

 patriotic considerations prevented trenchant 

 economies. He hoped to save the situation by 

 gradually extinguishing the forced paper cur- 

 rency and thus restoring the par of gold, and 

 early in 1892 entered into negotiations with 

 bankers in London representing heavy holders 

 of Greek bonds for a gold loan of 100,000;000 

 francs. The bankers demanded not only that the 

 best revenues should be hypothecated to secure 

 the loan, but that they should have representa- 

 tives in Athens to watch and control their col- 

 lection and application. Foreign control, such 

 as has imposed its yoke upon Turkey and Egypt, 

 no Greek would wish or dare to propose to his 

 countrymen. When Tricoupis resigned after the 

 failure of his negotiations, his successor agreed 

 to a so-called funding loan, which was nothing 

 more than an official acknowledgment of national 

 bankruptcy. 



After Tricoupis resumed power in November, 

 1893, he declared the state to be temporarily un- 

 able to meet its liabilities, and sequestrated the 

 revenues that had been specifically pledged to the 

 service of the monopoly and the funding loans. 



His announcement drew out strong protests from 

 the German and other bondholders, and in Jan- 

 uary, 1894, he assured the bondholders that ' no 

 obligations or securities can undergo any modifi- 

 cation of a permanent character except by agree- 

 ment with them." The funding loan, which lie 

 abolished, had been accepted by the Sotiropouloa 

 ministry at the dictation of Lo'ndon financiers as 

 a temporary makeshift, and was in fact no loan, 

 but an operation for paying the interest and sink- 

 ing fund by means of new bonds at usurious 

 rates, which would simply have the effect of add- 

 ing -100,000,000 drachmai to the debt without 

 furnishing any relief. The scrip issued under 

 this arrangement was sustained for four months 

 by the agents of the Greek Government, but 

 when they received no more funds for the pur- 

 pose the price fell from 65 to 30. When Tri- 

 coupis returned to office another proposition had 

 been advanced by the Ornstein group, composed 

 of some of the same Levantine and European 

 financiers who had preyed on the finances of 

 Turkey ; it was, to loan 100,000,000 drachmai at 

 7 per cent, interest, on condition that various 

 revenues, including a tobacco regie, should be 

 hypothecated and their collection intrusted to 

 Europeans, who were to be placed in control of 

 the National Bank. Tricoupis discovered that 

 the plan was to establish a foreign control in 

 disguise, and, moreover, that the interest on the 

 money obtained would be nearer 21 than 7 per 

 cent. Rejecting this proposition, he had no al- 

 ternative but to announce that the Government 

 could not pay the interest in full. The hypothe- 

 cated revenues he seized under some color of law 

 and on the equitable ground that the other bond- 

 holders were entitled to equal protection. He 

 annulled the law by which the export duty on 

 currants and certain other revenues should be 

 collected in gold and reserved for the payment 

 of the funding loan, on the ground that when he 

 procured the passage of that law it was in con- 

 templation of a real loan, and he asserted that 

 the action of his successor in publishing the act 

 to secure the fictitious funding loan, which had 

 never received the assent of the Chamber, was 

 illegal. In framing his budget he found that he 

 could calculate on no more than 10,000,000 drach- 

 mai for the service of the foreign loans, and an- 

 nounced therefore that 30 per cent, of the inter- 

 est only would be paid. Even at this rate gold 

 could not be raised for payment of coupons next 

 falling due, and these he offered to meet by pay- 

 ing in paper 50 per cent, of their face. 



Negotiations for a settlement were entered 

 into between Tricoupis and delegates of the 

 English, German, and French bondholders, Sir 

 Mountstuart Grant-Duff, Herr Stavie, and M. 

 Ornstein, who proceeded to Athens to consult 

 with him and to study the question. Tricoupis 

 proposed that the Government should guarantee 

 an annual payment of 30 per cent, for three 

 years, and then increase the payment 1 per cent. 

 a year for ten years and 2 per cent, for the five 

 years following, when it would be 50 per cent, 

 of the nominal amount. The bondholders de- 

 manded that the payments of interest and sink- 

 ing fund should still be increased until eventu- 

 ally, if at the end of one hundred years, they 

 should receive the full face value. 'Following 

 the lead of the Ornstein group, the French and 



