San José State University
Department of Economics

applet-magic.com
Thayer Watkins
Silicon Valley
& Tornado Alley
USA

The Economic History and
the Economy of Greece,
the Hellenic Republic

For Zander

Names

The name Greece does not derive from Hellenic sources. Instead it is from the Latin Graeci, which was the name of the people the Romans first came into contact with in the region of Greece and they applied to all the residents of the peninsula. The official title of Greece is the Hellenic Republic and the Greeks call themselves Hellas. In ancient times the Greeks identified with their city-state rather than the region of those speaking the same language.

The Economy of Ancient Greece

Greece is, as is Europe itself, a peninsula of peninsulas and islands. The terrain of Greece strongly encouraged the development of seamanship. Limited land and abundant sheltered harbors put a great premium on learning to sail. Sailing may have initially have been pursued for fishing and warfare but later it was utilized for trading, or maybe it was the other way around. In any case the glory of Greece stemmed from the cosmopolitaness engendered by its environment.

There were people and cultures in Greece before the people known as Greeks moved into the region. Some of those known as the People of Sea who attacked the Egyptian Empire in the eastern Mediterranean area came from the land of Greece. Some of those people were allowed to settle in Egyptian territory at the east end of the Mediterranean and were known as Philistines. This was the origin of the name Palestine.

The ancient Greeks spoke a language in the Indo-European family of languages which meant that their ancestors probably migrated out of the Caucasian Mountains between the Black Sea and the Caspian Sea and subsequent generations crossed the steppes north of the Black Sea before coming into the Balkan Penensula.

There was a well developed civilization on the island of Crete when the Greeks came. This civilization had well developed links to the Middle East. Among other things that the Greeks got from this civilization was the alphabet. The Greeks augmented the Phoenician alphabet with signs for vowels and used it to record a great literature. They also passed this alphabet on to the Romans and the Slavs.

(To be continued.)


Timeline of Modern Greece History

The National Schism

The dictionary definition of schism (sizm) is in terms of a division within a religion. For Greece the word refers to a division of the population concerning political issues into camps such that each treats the other as the bitterest enemy. Initially the issue was monarchy versus democracy. Later it was over communism. But whatever the issue the national schism in Greece was not just a difference of opinion. The bitterness ran so deep that when one faction gained control of the government they fired the government employees, police and army officers belonging to the other faction and replaced them with members of their faction.

Initially the National Schism in Greece was associated with Eleutherios Venizélos.

Eleutherios
Venizélos

He was an able and forceful political leader. He was born on the island of Crete when it was part of the Ottoman Empire. His father was involved in an insurrection against the Ottoman Sultan and had been exiled from Crete to the much smaller island of Síros. Eleutherios eventually ended up in Athens and attended and graduated from the law school there.

After graduation Eleutherios settled Crete as a lawyer and journalist. Soon he went into local politics. He organized the Liberal Party, the first modern political part of Greece. Venizélos participated in the Greco-Turkish War of 1897.

After the war, Britain and France forced the Ottoman Sultan to grant autonomy to Crete. Venizélos was made minister of justice under Prince George, the son of the king of Greece, George I. There were disputes between Venizélos and Prince George, ultimately leading Eleutherios Venizélos to organize a rebellion against Prince Geroge. Venizélos was forced to leave Crete but was later brought back by the successor to Prince George.

Venizélos had developed such a reputation for administrative ability that when a group of military officers organized a movement in Athens they asked Venizélos to join them as a top leader.

In the election of representatives to the national legislature Venizélos won as a representative for Athens. By October of that year he was made prime minister of the legislative assembly. Venizélos was able in 1911 to secure acceptance of a new constitution. That constitution gave great powers to an elected government. He immediately began reorganizing and building up the army. He contracted an alliance with Serbia and Bulgaria to drive the Ottoman Empire out of southeast Europe. The confrontation with the Ottoman Empire came soon. It was called the Balkan War of 1912. The alliance was succesful in driving the Turks out of most of the Balkan Peninsula, but they never made provision for the division of the spoils. The Balkan War continued during 1913, but between the erstwhile aliens rather than between them and the Turks.

Greece proved to be quite successful in the Balkan wars. She acquired twice the land area and double the prewar population. The acquired population was Greek-speaking. Venizélos was revered for his role in bringing more of the Greek-speaking population of the Balkans and their territory under Greek control.

The tension between the Greek monarchy and popular government came with World War I. Venizélos and his supporters favored the side of Britain and France and their allies. In part this was due to the historical support that Britain and France had given to Greek independence. The other part was that the Ottoman Empire had joined the enemies of Britain and France, the German and the Austro-Hungarian Empires. It would seem that it was obvious that Greece would support Britain, France and their allies. However there were special conditions. The king of Greece, Constantine, was married to the sister of Kaiser Wilhelm of Germany. Furthermore many of the top officers in the Greek military had undergone training in Germany and sympathized with her. Constantine had no illusions that he could bring Greece into the war on the side of Germany but he thought that he could keep Greece neutral. The supporters of the monarchy in Greece then supported Constantine's preferences in the matter.

Venizélos and his side won out and, with the help of Britain and France, they forced Constantine to relinquish power in favor of his son, Alexander. Venizélos and his Liberal Party ruled supreme.

The 1911 constitution did not provide for limitations in the power of a majority-supported government. In effect, Venizélos could rule as a dictator. This prompted his political opponents to unite into a coalition that defeated Venizélos and his party in the 1920 election. Venizélos demonstrated his adherence to democratic principles by peacefully relinquishing power to the newly elected leaders. King Constatine, who had not formally abdicated, was brought back as king of Greece. The arrogance of Venizélos while he was in power promoted a similar arrogance of his opponents when they acquired power.

The National Schism was not just the political polarization of Greece on the issue of popular power versus monarchical power. It also involved displacing the supporters of the opposition from positions in the bureaucracy, in the police and in the leadership of the military. In effect it divided Greece into two camps in which each side viewed the other as alien as foreigners. This dichasmos or political polarization continued long after the issue of monarchy versus democracy was settled by the disappearance of the Greek monarchy. It became a fact of life in Greek politics.

Although Venizélos lost political power in 1920 that was not the end of his political career. He did leave Greece for Paris in 1920. Greece suffered a devastating military defeat in Anatolia in 1922, largely as a result of military overconfidence. King Constantine was again deprived of his kingship and replaced by his son, George. Venizélos was brought back into Greek politics and became prime minister in 1924 and again in 1928. His prime ministership in 1928 continued until 1930. By that time he was about 66 years old and not able to cope with the demands of governing Greece as it succumbed to the world-wide economic depression of the 1930's. His Liberal Party was defeated in the election of 1932. He continued to be active in Greek politics until 1935 when he failed to prevent the legislature from bringing back monarchy to Greece. He left Greece for Paris once again and died in Paris in 1936 at age 72.

The Communist Party of Greece

Although there was a boshevik style party formed in Greece in the early twentieth century the Bolshevik leaders in Russia did not see much revolutionary potential in such a backward, semifeudal society without much of a proletariat. Nevertheless the Socialist Workers' Party of Greece was formed in November of 1918 and became a member of the Third Communist International (Comintern) in 1919. Eventually the name was changed to the Communist Party of Greece (Kommunistikon Komma Ellados KKE).

A special problem for the KKE was that the bolshevik position was that wars were solely in the interest of the capitalists. Therefore the Comintern would not let the KKE support wars of liberation. Thus the KKE could not support Greek wars against Turkey, wars which were immensely popular with the Greeks. The Comintern also did not support the partitioning of Macedonia. When Greece acquired in the Balkan wars new territory which had minority populations of Slavic Macedonian, Vlachs (Romanians) and Muslims these populations became fertile recruiting grounds for the KKE.

The 1920's passed without the KKE able to make major gains among the general population of Greeks. The Great Depression of the 1930's changed that. Through union organizing the KKE was becoming a political force. Even electorally the KKE was becoming important. It had 15 deputies in the national legislature and they became the swing votes that could determine the outcome for any legislation upon which the liberals and the royalists were divided.

The Dictatorship of Ioannis Metaxas

Ioannis
Metaxas

Ioannis Metaxas was a military leader of Greece who was drawn into politics as a result of his strong political support of monarchism. Metaxas participated in the Greco-Turkish war of 1897. Afterwards Metaxas went to Germany for further training as an officer. When Greece entered the Balkan Wars in 1912 he was made a member of the general staff of the Greek Army and rose to being chief of that organization by the end of the Balkan Wars in 1913. He was promoted to general in 1916, before Greece joined the Allies in World War I. He shared King Constantine's desire to keep Greece neutral in that war. When Constantine was forced into exile over that issue in 1917, Metaxas also left Greece. He returned in 1920 when Constantine was brought back as King of Greece.

When Constantine was forced to abdicate in 1923 Metaxas again went into exile as well. He returned later and went into politics as a supporter of monarchism. In 1928 he held office for a short while as a minister.

Metaxas remained in politics as the leader of a minor political party supporting monarchism. When monarchism was re-instituted in Greece in 1935 the new king appointed Metaxas as premier. This was in April of 1936. On the fourth of August of the same year Metaxas declared a dictatorship, supposedly to forestall a communist coup d'etat. This was with the approval of the king. Metaxas then suppressed political opposition and started carrying out economic projects intended to alleviate the conditions of the Great Depression. These included establishing higher wages and improved working conditions. These were analogous to the programs which had been carried out by Adolph Hitler in Germany and Benito Mussolini in Italy. Metaxas' program also included, as in the Roosevelt New Deal raising agricultural prices. Metaxis named his regime the Third Hellenic Civilization. Although living conditions for the working class did improve somewhat under Metaxas' program there was not popular support for it. On the other hand there was not general opposition to it either.

As a result of suppression by Metaxas the communist party of Greece went underground and developed as an organized resistance. The Greek communists that Metaxas imprisoned and exiled maintained their organization and when released established links with the underground. The imprisoned communists gained a special status among the Greeks who did not support the Metaxas dictatorship.

Philosophically Metaxas could have been expected to ally himself with the fascist powers. However Mussolini was intent upon recreating some semblance of the Roman Empire and sort to gain control in Albania and western Greece. Italy annexed Albania in 1939 and demanded that the Italian army be allowed to occupy strategic areas in Greece. When Metaxas, out of Greek nationalism, opposed Mussolini in his imperialistic endeavors Mussolini ordered an attack of Greece. Metaxas then allied Greece with Britain in 1939.

Metaxas and the Greek people effectively countered that attack and the Greek army occupied parts of Albania. Metaxas at age 69 died in Athens at the end of January of 1941, thus depriving Greece of his military expertise.

Hitler then chose to save Mussolini militarily. German units were readied to march to Greece. Hitler demanded that these units be allowed to pass through Yugoslavia. When Yugoslavia declined to permit this the German army invaded Yugoslavia. It took two weeks to subdue Yugoslavia. Subsequently the German army invaded Greece in April of 1941 and quickly conquered it. The invasion of the island of Crete was notable for being the first major airborne invasion. The occupation of Greece was carried out by the Italian and Bulgarian armies as well as the German army.

The official government fled to exile in Egypt. The communists who had been operating as an underground resistance group since their suppression by Metaxas in 1936 were ready and able to lead the resistance of the Greeks to the occupation. Times were very hard. Britain created a blockade that resulted in food shortages and these food shortages hit the Greek population harder than they did the occupying forces. Famine conditions prevailed. The Greek people were conscious that the Greek king and the official government were not undergoing these privations. They were relatively comfortable in Egypt. In contrast the communists were undergoing the privations and taking risks. The communists gained the respect of the general population at this time. Furthermore during that period the communists did not emphasize their ideology.

The resistance force contolled by the communists was a merger of the National Liberation Front (EAM) and the National Popular Liberation Army (ELLAS). It was known by the initials EAM-ELLAS. The other resistance group was the Greek Democratic National Army (EDES) and was not controlled by communists. Only once did the EAM-ELLAS and EDES cooperate in a coordinated attack on the German occupiers. Generally they acted entirely independent of one another.

Toward the end of World War II EAM-ELAS was devoting much of its activity to preparing for communist domination of post-war Greece. The EAM-ELLAS carried attacks on rival resistance groups until it had eliminated all rivals except EDES. After coming to dominate the resistance EAM-ELLAS set up a government in the mountains. EAM-ELLAS denied the legitimacy of the government in exile in Egypt.

Britain tried to induce EAM-ELAS to moderate its antagonism toward its rivals, the other resistance group EDES and the government-in-exile in Cairo. Britain promised additional aid to ELAS if it did so. ELAS was willing to do so only if: 1. A plebiscite on the monarchy be help before the king of Greece returned to Greece, 2. the post-war government include ELAS members in the cabinet who were ministers of war, the interior and justice. This was too much for the government-in-exile to agree to. No compromise was reached. In fact, hostilies between ELAS and EDES immediately broke out. Furthermore ELAS set up a separate government in the territory it controlled. It was named the Politiki Epitropi Ethnikis Apeleftheroseos (PEEA) (Political Committee for National Liberation). The PEEA attracted allegiance of people in the mountainous areas who felt they had been neglected by all previous governments.

Winston Churchill, in a effort to head off communist control of Greece, concluded an agreement with Joseph Stalin that Greece would be in the British sphere of influence in return for Romania being accepted as within the Soviet sphere of influence.

A new government of national unity was organized in Lebanon under the leadership of Georgios Papandreou. ELAS was not inclined to accept this government of national unity but as a result of the agreement Churchill and Stalin had concluded the Soviet Union put pressure on the ELAS leadership to accept the arrangement made in Lebanon.

When the German army began withdrawing from Greece there was a briefly observed truce between EAM-ELLAS and the exile government. Georgios Papandreou and a contingent of British soldiers set up a government in Athens in October of 1944.

The Lebanon arrangement called for most of the ELAS soldiers to disarm in December but Papandreou demanded all ELAS soldiers disarm. In December of 1944 EAM called for a mass rally to protest the actions of the government of national unity. With the police fearing that the demostrations were only a cover for a communist coup d'etat it was inevitable that hostilities would break out. The police fired on demonstrators and the demostrators retaliated. The battle lasted for a month with the police and the British troops being the victors. The old National Schism was still operating.

In February of 1945 the leaders of both sides concluded an agreement, called the Varkiza Agreement. This agreement called for:

Although the leaders executed this agreement in good faith, they did not have the power to make sure the police abided by the agreement. The police continued to harass and persecute those they suspected were communists. Vigilante groups escalated the violence.

The Civil War in Post-World War II Greece

In July of 1946 a former leader of ELAS, Markos Vafiadis, was made leader of the guerilla units of the Communist Party of Greece KKE. Later that year ELAS was re-formed under the name the Democratic Army of Greece (DAG). It was on a much smaller scale. ELAS had more than 60,000 troops during the war; DAG had less than half that amount. However even though the national government had about ten times that amount a guerilla army of twenty to thirty thousand could effectively disrupt the economy and prevent recovery for the war.

The burden of supporting the Greek government battle against the DAG became too much. In 1947 President Harry S. Truman agreed to take over Britain's role in supply arms and aid to the Greek government in its civil war. Truman generalized his policy of support for the Greek government as a policy of containment of communism around the world. This policy became known as the Truman Doctrine.

Greece received $400 million in supplies and military advisers to train the Greek army and the Greek security forces.

In the middle of 1947 the leader of the KKE, Nikolaos Zachariadis, removed Vafiadis from command the changed the tactics of the DAG from hit-and-run guerilla actions to direct pitched battles against the national army. This was a disasterous mistake militarily for the communists.

Markos
Vafiadis
Nikolaos Zachariadis

The communist army was driven to the northern border areas because these were mountainous and supplied protection, but these areas had the additional advantage of providing access to the bordering communist states.

Although Stalin kept to his agreement with Churchill and did not provide direct support to the communist rebels, the states such as Yugoslavia did provide aid. However when Stalin became angry with Tito, the leader of Yugoslavia, over past insubordination Tito sought a rapprochement with the West and closed the supply routes for DAG through Yugoslavia.

The Greek Civil War came to a close in August of 1949 when the Greek National Army captured the last DAG stronghold in the mountains of northern Greece.

The Reconstruction of Greece Starting in 1950

It was very difficult for Greece to make an economic progress during the Civil War. Basically it had twenty to thirty thousand organized terrorist operating in the country. The terrorists could not hope to win but they could disrupt any progress. The Civil War was terminated when the General Secretary of the Communist Party KKE, Zachariadis, became deluded that the terrorist could match the national army in military confrontations. However even after the military defeat of the terrorist there was a legacy that plagued Greece politics for decades. That was that American interference had prevented Greece from achieving communism. Communism is a religion and like most religions its adherents have firm beliefs in the most ridiculous things. Communism promises a paradise on Earth but delivers a feudalistic society devoid of eminities and personal freedoms.

In 1950 Greece was ready for elections and some semblance of normality. However in the election there were over forty separate parties vying against each other for political control, most of them representing no particular political program except trying to bring their leaders to power.

No party won as much as a quarter of the vote. Three center-right parties formed a coalition to organize the govenment. These were:

Nikolaos Plastiras became the prime minister for this government.

The coalition proved to be unstable and elections were held in 1951. A new party, the Greek Rally Party, gained nearly a majority (114 out of 250) but the government was formed by a coalition of Plastiras' National Progressive CenterUnion and the Liberal Party which did have a majority, 131 out of 250. A party representing the communists got ten seats.

The U.S. being disenchanted with the British-type of arrangement for party proportional division of the legislature put pressure on Greece to change to an arrangement more like the American system in which the representatives were elected by district. The number of seats was increased from 250 to 300. The Greek Rally Party under the leadership of General Alexander Papagos who was the commander of the national forces when they defeated the communists won 247 out of the 300 seats.

Papagos then had a mandate for implementing a program to improve the Greek economy. The first step was to devalue Greek currency to increase exports and reduce imports. Papagos then sort to improve the security of Greece by entering into alliances. Greece joined the North Atlantic Treaty Organization (NATO). Papagos, without success, tried to alter the political status of the island of Cyprus. Cyprus at that time was a British Crown Colony with a population that was 80 percent Greek and 20 percent Turkish. Britain was adamant about maintaining its control over Cyprus to protect petroleum shipments from the Middle East. Turkey did not want Cyprus to fall under Greeek control. Papagos died in 1955 without having resolved the situation concerning Cyprus.

When Papagos died the Greek king, Paul, passed over two more senior politicians in Papagos' Greek Rally Party and selected a younger, more dynamic member of the party, Konstantinos Karamanlis, to be prime minister.

Konstantinos
Karamanlis

Karamanlis had been minister of public works under the Papagos government and was noted for getting things done. Karamanlis inherited an economy that was largely government controlled so it was quite feasible for him to direct economic growth. He also encouraged private indusry such as the development of the shipping and tourism industries. Aristotle Onassis and his brother-in-law, Stavros Niarchos, became fabulously rich and established the worled renown of Greek shipping, especially in the oil tanker field.

Karamanlis worked to bring Greece into the European Community (EC). In 1962 Greece was granted associate status in the EC and eventually (in 1984) gained full membership. But that was long after Karamanlis was out of power.

Karamanlis had early on changed the name of the Greek Rally Party, which Papagos had given it, to Ethniki Rizopastiki Enosis ERE (the National Radical Union). Karamanlis' electoral support eroded in part because of the excessive bureaucracy that grew over the years and due to his acceptance of the compromise resolution of the Cyprus situation. Greeks generally wanted to bring Cyprus into the Greek nation. The 20 percent Turkish population made that infeasible so Cyprus made into an independent nation, jointly ruled by the Greek and Turkish population.

In 1958 Karamanlis' ERE lost support to parties on the left, including a party that represented the communist party. This party was called Eniea Dimokratiki Aristera EDA (United Democratic Left). Karamanlis called for new elections in 1961. He regained support and his major political competitor was no longer the communist-backed EDA. Instead the opposition was the party of former prime minister Georgios Papandreou, called Enosis Kentrou (Center Union). In the election, the police, fearing a strong showing for the communist EDA, intimidated voters particularly in districts known to support the EDA. This led Georgios Papandreou to charge election fraud and call for a new election.

Meanwhile Karamanlis was feuding with King Paul, the man who had appointed prime minister in 1955. The issue was the old one which had produced the original national schism; i.e., the power and perogatives of the monarchy with respect to the elected government. There was also issue of the relation of the military to the monarchy and the government. Karamanlis, feeling he could no longer deal with the problems of Greece resigned his office in 1963 and went into voluntary exile in Paris.

The Political Turmoil After Karamanlis' Departure

With Karamanlis out of power, economic and political conditions worsened. The problem of the migrants from rural areas to Athens worsened. Political conditions in Cyprus worsened and led nearly to war. Only the intervention of the American president in 1964 prevented civil war in Cyprus from breaking out and turning into a war between Greece and Turkey. The the political situation worsened when King Paul died in 1964 and his young son, Constantine II, became king. Shortly thereafter there was a new election and Georgios Papandreou's Center Union Party won a clear majority in the legislature.

Georgios Papandreou became prime minister and released all political prisoners. He called upon his son, Andreas Papandreou, to return to Greece to deal with the economic problems of the country. Andreas Papandreou had been the chairman of the economics department at the University of California at Berkeley. The reaction of the students at Berkeley was that Andreas Papandreou had been called home to take over his family's political party.

For the military the loss of an experienced king and a tense situation concerning Cyprus and Turkey was ominous. Furthermore, Andreas Papandreou was considerably more radically left than his father. He was clearly a socialist.

Andreas
Papandreou

The military felt threatened. Georgios Papandreou tried to assume direct control of the military by becoming, in addition to being prime minister, the minister of defense. This was a highly unusual move that portended major changes in the military. The young king refused to approve Georgios Papandreou's request to be appointed minister of defense. Georgios Papandreou then resigned his prime ministership in July of 1965. Papandreou perhaps did not expect his resignation to be accepted by the king but it was.

Papandreou's resignation created a political crisis because no stable government could be established. In 1967 King Constantine called for new elections. Papandreou's Center Union was likely to be the overwhelming victor. The king tries unsuccessfully to get the Papandreous to agree to a postponement of the election.

Coup d'Etat of the Colonels and
Their Subsequent Rule as the Junta

With the previous attempt of the Papandreou father to gain direct control of the military it was easy for the military officers to believe that they would purged from the military for right-wing sympathies. There were rumors of a cabal of left-wing officers who were working with Andreas Papandreou to carry out a coup. This supposed conspiracy was called Aspida (Shield).

If such a left wing coup occurred the careers of many officers would then be ended and they and their families could be destitute. It was not surprising that many officers' minds turned to planning a coup d'etat.

The coup was carried out by colonels rather than generals. Generals would typically be close to retirement, but that was not the case for colonels.

The coup was relatively easy to implement. The colonels simply siezed all major channels of communication and announced that they had taken over the government. Three colonels announced that they would rule as a junta to preserve Hellenic civilization. When the junta did not get voluntary cooperation the opposition was arrested and imprisoned. Of course Andreas Papandreou was preceived as the juna's principal enemy and he was arrested and imprisoned. An international outcry forced his release and he went into exile.

Colonel
Georgios
Papadopoulos

The dominant leader of the Junta was Georgios Papadopoulos. The Junta did not get cooperation even from the king. King Constantine, in fact, tried to organize an overthrow of the junta. When this failed the king went into exile. Other nations and international organizations condemned the junta. The United States temporarily ended diplomatic relations with Greece. In 1969 Greece ended its associate status in the European Community EC. Even its NATO membership was at risk.

The Junta did not have an organized program that it wanted to implement. Its primary reason for its existence was to prevent socialists or communists from coming to power. It banned mini-skirts for women and long hair for men. Soon its primary focus was destroying the opposition. The king tried to organize a counter-coup but that failed and he went into exile.

However when Greece was perceived as safe for foreign investment a good deal of foreign investment did come in and that led to some degree of economic growth.

Although opposition to the Junta was muted it was not nonexistent. In August of 1968 there was failed assassination attempt on the life of Papadopoulos. In November of 1968 Georgios Papandreou died. The Junta forbid any public gathering at his funeral but nevertheless there was a massive demonstration of respect for the former leader. Music became a major channel of protest against the Juna.

The Junta nevertheless managed to maintain control for five more years. By 1973 the Junta thinks it can reduce restrictions and allow elections which will legitimize the coup. Georgios Papadopoulos declares himself president. However there are a number of isolated rebellions within the military against the Junta. Students at the National Polytechnic University in Athens go into open rebellion broadcasting calls for a national uprising from the university radio station. They stop going to classes and the Junta announces that any students not attending classes will be drafted into the army.

On the 17th of November of 1973 the Junta sends in tanks to destroy the barricades the protesting students have put up around the campus of the National Polytechnic University. A vicious Marxist terrorist group took the name 17 November from that incident.

The Junta crushes the rebellion at the Polytechnic University but all is not going well within the regime. The head of the secret police, Dimitrios Ioannides, deposed Papadopoulos and took control of the government.

Ioannides, realizing that the people of Greece are growing more and more tired of the Junta and there failures, tries to unite Greeks behind him by creating a political confrontation with Turkey. This fails and the Junta collapses. The leaders of Greece realize that there is only one man who will be widely enough respected to create a new government. That man was none other than the former prime minister, Konstantinos Karamanlis.

The Second Period of Rule of Greece by Konstantinos Karamanlis

The astute Karamanlis returned to power knowing that major changes needed to be made in the Greek political system. At the top of the list was the resolving of the matter of the monarchy and the military and their relationship to the elected government. Karamanlis wanted a referendum on whether the monarchy should continue or whether Greece should become a republic. However before that matter was dealt with Karamanlis wanted to recreate normal political life in Greece. This required an election to install a government that had a mandate from the Greek electorate. He called for an election in 1974 with all parties allowed to participate. The line up and the results were as follows.

The Election of November 1974 in Greece
Political
Party
Principal
Leader
IdeologyProportion
of popular vote
Seats in
Legislature
(out of 300)
Nea Demokratia ND
(New Democracy)
Konstantinos
Karamanlis
Center-right54%219
Enosis Kentrou
(Center Union)
Georgios
Papandreou
(deceased)
Center-left21%
Panhellinion
Socialistiko
Kinima PASOK
(Panhellenic
Socialist
Movement)
Andreas
Papandreou
Socialist14%
Enomeni Aristera
(United Left Party)
Communist9%

Having held the elections and received a substantial legislative majority, Karamanlis was ready for the next item on his agenda, the referendum on the monarchy. It was held shortly after the legislative election and the Greeks voted overwhelmingly to abolish the monarchy (70 percent) and make Greece a pure republic. Karamanlis was on a roll.

The next item on the agenda was the punishment of the Junta. Again this was handled very astutely. Karamanlis wanted the punishment to be severe enough to discourage any future coup planners but he did not want to perpetuate the cycle of revenge and counter-revenge that had plagued Greek politics since the national schism. The Junta leaders and Ioannides, the head of the secret police, were found guilty of treason and sentenced to death, but the death sentences were commuted to life imprisonment. The lower level officials in the regime were not punished nor purged.

The next item on the agenda was the formulation and acceptance of a new constitution. This was completed in 1975. Aside from the elimination of the monarchy the most significant feature of the new constitution was the creation of the office of president. The president would have strong powers such as the power to veto legislation passed by the legislature. The president could dissolve the legislative assembly and schedule new elections. These were powers that would only be exercised in an extreme situation but they were there if needed.

Karamanlis' only failures had to do with the situation in Cyprus. Cyprus was independent of Greece and there was supposed to be a sharing of power between the 80 percent of the population that were ethnically Greek and the 20 percent who were ethnically Turkish. In 1974 when political turmoil among the Greek elements of Cyprus arose, Turkey invaded Cyprus supposedly to protect the ethnically Turkish elements of the population. Turkey chose to partition the island and take 37 percent of island for a Turkish cypriot state. Karamanlis wisely chose not to confront Turkey militarily. Hotheaded Greece nationalists criticized Karamanlis for not being more aggressive. Furthermore those same nationalists felt that NATO should prevented or thwarted the Turkish invasion of Cyprus. They blamed the United States for the Turkish occupation in Cyprus and asserted that Greece was gaining nothing by participating in alliances with the West.

Karamanlis however was more convinced than ever that Greece's future lay with strengthening its ties with the West. Greece still functioned as state capitalism, a legacy of the devastation of World War II and the Greek Civil War. For Karamanlis there was a need to move Greece toward a market economy.

Andreas Papandreou, on the other hand, was campaigning on a more socialist program for the economy and the ending of Greek alliances with the West. He sought the development of economic ties to the Soviet Union and eastern Europe. Karamanlis sought a vindication of his program in a new election in 1977. The results were as follows.

The Election of November 1977 in Greece
Political
Party
Principal
Leader
IdeologyProportion
of popular vote
Seats in
Legislature
(out of 300)
Nea Demokratia ND
(New Democracy)
Konstantinos
Karamanlis
Center-right42%172
Enosis Kentrou
(Center Union)
Georgios
Papandreou
(deceased)
Center-left12%15
Panhellinion
Socialistiko
Kinima PASOK
(Panhellenic
Socialist
Movement)
Andreas
Papandreou
Socialist25%93
Kommunistokon
Komma Ellados KKE
Communist Party
of Greece
Communist10%11

It was now Andreas Papandreou and his PSOK that was on a roll. Papandreou promised socialism internally and nationalism externally with nonalignment. Karamanlis was reaching his seventies and not as vigorous as he once was. In 1980 Karamanlis gave up being prime minister, a very demanding job, and arranged his becoming president, a powerful but less demanding position. An election was held in October of 1981. Here are the results.

The Election of October 1981 in Greece
Political
Party
Principal
Leader
IdeologyProportion
of popular vote
Seats in
Legislature
(out of 300)
Nea Demokratia ND
(New Democracy)
Konstantinos
Karamanlis
Center-right36%115
Panhellinion
Socialistiko
Kinima PASOK
(Panhellenic
Socialist
Movement)
Andreas
Papandreou
Socialist48%172
Kommunistokon
Komma Ellados KKE
Communist Party
of Greece
Communist11%13

Imagine the consternation in Washington, D.C. American had spent billions to keep Greece from going to the extreme left politically. The election brought to power a socialist who wanted to dissolve the alliances of Greece with the West. Ironically the leader of this move to socialism and nonalignment, Andreas Papandreou, was someone who had spent years in America, was educated at Harvard University, had taught at a number of American universities, had become an American citizen and was married to an American.

The Panhellenic Socialist Movement (PASOK) in Power

Andreas
Papandreou

Papandreou and PASOK had a program of changes they wanted to bring about. These fell under the categories of changes in social policies, environmental policies, regional development policies and economic policies with an additional element of national reconciliation. Here are the details of these policy changes. Their results will be covered later.

 
 

 
 

 
 

When it came to delivering on its promises PASOK proved to be ineffectual. For example, it promised to reduce the smog hovering over Athens. The air pollution level was not reduced. It promised to give greater freedom to unions but ended up put them more or less under the direct control of PASOK. It attempted to decentralize government but it did not provide funds for the local governments that were to receive more power.

PASOK lost the election of 1989 but was able to retain power because its opponents could not create a stable coalition. In the election of 1990 the New Democratic Party gained a slight majority of the seats and PASOK was out of power. PASOK's loss may have had more to do with scandals that touched it than its ineffectualness. An associate of PASOK politicians absconded with a large amount funds from the Bank of Crete. Then Andreas Papandreou decided to divorce his wife whom he had been married to for 37 years. Papandreou at age 68 wanted to marry a 34 year old airline stewardess. Additionally he scandalized the nation by refusing to relinquish power while he was undergoing very serious heart surgery. He recovered from the surgery and went on to make a political comeback when his party won the election of 1993. However his health was failing and he lived only three years more, dying at age 77.

During the period 1990 to 1993 the Nea Demokratia (New Democracy) (ND) party under the leadership of Konstantinos Mitsotakis was in power. This government undertook to undo the socialization created by PASOK. This involves privatizing state-owned enterprises and reducing tax rates. However the efforts to desocialize the Greek economy had the short run effect of increasing unemployment. This led to increased demand for social welfare services at the same time tax revenues decreased due to the reduction in tax rates. It was the hope of Mitsotakis and the ND that the tax rate reduction would stimulate the economy sufficiently to result in higher taxable income and thus compensate for the reduced tax rates. This supply side economic scenario did not take place. The depressed economic conditions reduced incentives for business to invest in increased capacity, including the purchase of state-owned enterprises. Thus it was not a surprise that the ND lost the election of 1993 to PASOK.

The PASOK government presided over the preparations for the 2004 Summer Olympics and these were barely finished in time. There was an excessive budget deficit that resulted in criticism of Greek fiscal policies by the European Commission. There was also criticism of the quality and veracity of Greek economic statistics by Eurostat, the agency of the European Union that monitors the economic statistics of the member states. Under the PASOK government the unemployment rate rose to over 11 percent.

Kostas Karamanlis
In the March 2004 election the ND won and its leader, Kostas Karamanlis, became prime minister. Kostas Karamanlis is the nephew of the former prime minister, Konstantinos Karamanlis. The program of the ND was to reduce the unemployment rate and the government deficit. This also involved privatization and a program to improve the higher educational opportunities with Greece to reduce the migration of Greek students to other countries to obtain quality training. Karamanlis himself had traveled to Tufts University in Boston to obtain his master's degree and doctrate.

The Karamanlis government carried out an audit of the economic statistics that had been prepared by the PASOK government. After the audit was concluded Karamanlis announced that under the previous government,

Social policy was done with borrowed cash, military spending did not show up on the budget, debts were created in secret.

Although the Karamanlis ND government initially reduced the budget deficit it was not successful in significantly reducing the unemployment rate. And under the burden of the cost of the 2004 Olympics the budget deficit rose again to its previous level. Strikes plagued the economy and the government was criticized for inadequate response to the wild fires that occurred in 2007. The ND was able to pass legislation which allowed the formation of private universities in Greece which would give an alternative to the state universities.

In September of 2007 Kostas Karamanlis and the ND won re-election but with reduced support.

In 2010 the Panhellenic Socialist Movement (PASOK), the party of the Papandreous, returned to power.

(To be continued.)

An Assessment of the Greek Political Economy

Michael Lewis, a writer on finance, visited Greece in the course of gathering material on the financial debacles of the 2010's. He had some cogent, vivid remarks to make about the Greek economic situation. Here is what he had to say in his recent book Boomerang: Travels in the New Third World

As it turned out, what the Greeks wanted to do, once the lights went out and they were alone in the dark with a pile of borrowed money, was turn their government into a piñata stuffed with fantastic sums and give as many citizens as possible a whack at it. In just the past twelve years the wage bill of the Greek public sector has doubled, in real terms--and that number does not take into account the bribes collected by public officials. The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million euros, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stafanos Manos pointed out that it would be cheaper to put all Greece's rail passengers into taxicabs; it's still true. "We have a railroad company which is bankrupt beyond comprehension," Manos put it to me. "And yet there isn't a single private company in Greece with that kind of average pay."

In Greece the retirement age for jobs which are classified as "arduous" is 55 for men and 50 for women. The retirement pensions are generous. Somehow occupations such as waiters and hairdressers, along with 600 other occupations, have been classified as "arduous."

Michael Lewis noted that in Greece it assumed that anyone working for the government needs to be bribed to do their job. This means that at public health facilities one does not get the free services unless one pays a bribe to the medical professionals.

Michael Lewis was able to meet with a finance minister of Greece. After disclosing the way expenditures were hidden by the previous government he informed Lewis that tax revenues in 2009 collapse. The reason was that 2009 was an election year and in an election year the government stopped the collection of taxes in order not to offend supporters.

Greece offers a sad example of what the outcome is of politicians buying support with taxpayers funds. If one party buys support then the other party has to do it in order to survive. Soon the voters presume that they should choose leaders not on the basis of their wise economic policies but instead on how much they will get from the various candidates.


National Income Account Statistics for Greece

Real Gross Domestic Product (GDP) of Greece,
Aggregate and Percapita, for 1968-1994
YearGDP
1990 prices
(trillions
of drachmas)
Population
(millions)
Percapita GDP
1990 prices
(thousands of
drachmas)
19686.0158.74688
19696.6128.77754
19707.1388.79812
19717.6468.83866
19728.3248.89936
19738.9338.931000
19748.6088.96961
19759.1319.051009
19769.7129.171059
197710.1469.271094
197810.7179.361145
197911.1139.451176
198011.3079.641173
198111.3149.731163
198211.3599.791160
198311.4059.851159
198411.7179.901184
198512.0839.931217
198612.2799.971232
198712.22110.001222
198812.76610.041272
198913.21710.091310
199013.14310.161294
199113.59710.251327
199213.65610.321323
199313.53210.381304
199413.73110.431316
Source: IMF Financital Statistics

The graphs of the data on GGP and per capita GDP shows a significant upward trend, but with growth leveling off around 1990.

   


HOME PAGE OF applet-magic
HOME PAGE OF Thayer Watkins