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The book presents the first comprehensive account of how economists, engineers and industrialists mapped out the economic future of Greece in the aftermath of civil war devastation. It documents the policy debate that took place among Greece and its sponsors about the future course of the economy, the required investment and their financing. Through historical narrative, archival sources and oral history, this book offers a better understanding of the achievements proclaimed by many economists as an “economic miracle”.



Chapter 1. Introduction

Modern Greece emerged out of poverty status in the early 1970s. That it is faced with the challenge of a declining wealth status from advanced to emerging economy within a generation is no small feat. In the latest (2017) IMF review of the Greek economy, it is shown that while the depth of the decline in output is only matched by the USA during the 1929 crisis, Greece is remaining at the bottom of the barrel in its eighth year, compared to four for the USA.
George Politakis

Chapter 2. Greece’s Pre-war Economic Development and External Economic Relations

The Greeks became independent from Ottoman rule in 1832, ahead of their Balkan neighbors. The small size of the initial Greek state, its level of economic development, and the time it took to establish frontiers acceptable to the Greeks as definitive cast serious doubts on its viability as an independent entity. For a long time to come, the number of Greeks living within Greek frontiers was to remain smaller than those under Ottoman rule. So in the era of nationalism, the issue of the unredeemed (the liberation of ethnic Greeks living under Ottoman rule) became a key reference of the new country’s foreign policy.
George Politakis

Chapter 3. Wartime and Liberation Economic Policy

Italy invaded Greek territory on 28 October 1940. After some initial Greek setbacks, the Italian forces were pushed back deep into Albanian territory. The Greeks refused to seek an armistice on favorable terms, which would have allowed them neutrality and some territorial expansion, and this brought Nazi Germany onto the scene. The Reich attacked on two fronts, which in turn attacked Greece on 6 April through the frontier with Bulgaria and Yugoslavia. Mainland Greece was occupied by the end of the month, Crete by May.
George Politakis

Chapter 4. The Varvaressos Experiment

Peaceful demobilization of the guerilla forces was a crucial test of the National Unity Government’s coherence and authority. Papandreou had realized the importance the demobilization issue held for the fragile political consensus upon which the existence of his National Unity Government relied. However a tentative political agreement Papandreou reached with the Left came short of the cast iron guarantees the British Government required for their future presence in Greece. Under pressure from the British Ambassador and the British Military Commander, who were acting on Churchill’s direct instructions, Papandreou withdrew from the agreement. Civil Conflict ensued. It ended with the defeat of the Left and brought the downfall of Papandreou and the Government of National Unity. An armistice was signed which provided for the demobilization of guerillas in exchange for an amnesty. In order to split republicans from communists, Churchill consented that the King could not return before a plebiscite was held. In the interim period, Archbishop Damaskinos would act as Regent.
George Politakis

Chapter 5. Greek External Economic Relations Until the End of 1946

Frustrated in his efforts, Varvaressos submitted his resignation as Deputy Prime Minister and Minister of Supply on 1 September, charging he had been “ganged upon” by industrialists, who were later joined by the Left in an opportunistic tactical alliance. This act has been recorded as an admission of failure. However it is doubtful whether Varvaressos intended his resignation to be seen as such. It rather seems his intention was to bring ultimate pressure upon the decision-makers in Greece. To MacVeagh Varvaressos confided that he expected his resignation to be “a severe shock resulting in economic chaos and the subsequent recall of his services”. Varvaressos apparently expected that in the absence of alternatives, the Government would make the concessions necessary for his stabilization to be given a new impetus and succeed.
George Politakis

Chapter 6. From Liberalization of Foreign Trade to the Exhaustion of Reserves

Prior to the creation of the Currency Committee (CC) in February 1946, functions related to the exercise of general economic policy were assigned to the Government Economic Council, established in June 1945 at the suggestion of Varvaressos. After February 1946, credit and monetary policy were taken over by the CC.
George Politakis

Chapter 7. The First Year of American Aid: The Porter Mission, the Amag, and Initial Setbacks

The decision of the Currency Committee (CC) of 12 December 1946 to stop all imports immediately, and to freeze all unused credits, was followed by an urgent examination of the imports problem. The question of an imports program for future imports was at last being studied. In the meantime the situation remained critical. On 6 January, the E-I Bank refused Greece the right to use the balance of the $25 million credit to pay for current imports. Though the British Government credited the Bank of Greece with £5million out of accumulated credits of £17 million extended by Greece to the British military forces stationed there, these were not convertible into dollars. At that very moment, the Foreign Members of the CC tried forcefully to seize the opportunity offered by the foreign exchange crisis, and the strong dependency already created in expectation of US aid to Greece, and force an austerity package on the Greek Government. Their goal was to reduce the Government’s appetite for foreign exchange, in order to effect gold sales to the public and to operate a policy of free imports. The ground for such an austerity policy had been prepared by the careless exhaustion of the reserves and the absence of other resources except US aid.
George Politakis

Chapter 8. Greece’s Association with the Recovery and Reconstruction of Europe: The Lessons from 1948

During the last quarter of 1947, in the face of an unsettled economic situation in Greece, the American Mission and the Embassy had forced the Department of State and the Treasury to accept some significant deviations from the previously authorized American policy in Greece. This policy deviation was made under pressure from the Greek leadership, and on the basis that in Greece, more than anywhere else in Europe, the geo-political arm of the US aid program was paramount.
George Politakis

Chapter 9. Defining and Implementing Economic and Political Priorities in Post–Civil War Greece

Up till now we have been following the spirals of a vicious circle in which even the most ambitious economic plans were canceled. High-ranking officials in the Greek Agency responsible for reconstruction had made void American support for Greek industrialization plans. Greek leaders, across party lines, had pressed forcefully for the suspension of the industrialization program and the militarization of the aid program, against the wishes of American staff. But for how long would this vicious circle be allowed to continue? Would this process be arrested with the end of the Civil War? Should the situation that had been created by the end of 1948 in Greece be interpreted as the final abandonment by the Americans of the aims of the ERP for Greece, or was it that local developments had made a deviation from the aims of the ERP, a course the Americans were prepared to condone temporarily? To find the answer, one should wait until the tide of Civil War turned definitely to the side of the Government’s forces.
George Politakis

Chapter 10. Conclusion

The history of Greek post-war recovery and reconstruction, 1944–1952, represents the first effort at reconnecting Greece to the international economy after the war. This process cannot be understood independently of what had preceded it. The targets set and the policies followed during the period of Greek recovery and reconstruction, namely from 1944 to 1952, were the culmination of the earlier process of economic development that had followed the creation of an integral and sizeable Greek economy in the interwar period. After the setbacks of the war, the idea of returning productive capacity to 1938 level was to be confronted with the critical appraisal of the development process that had been followed after 1922. (This time, however, these earlier directions were, fortunately, reconsidered.)
George Politakis


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