Athens First Cemetery in English: Andreas Louriotis and the Greek Debt of 1824-5

Andreas Louriotis ΑΝΔΡΕΑΣ ΛΟΥΡΙΩΤΗΣ

Born 1789 in Ioannina Died 1854 in Athens

Section One, Number 466

Money Often Costs too Much (Ralph Waldo Emerson)

Picture the Scene: a group of revolutionaries have had amazing success at the beginning of their rebellion against Ottoman oppression. Local leaders, foreign philhellenes, and Greeks from other areas in the Ottoman Empire and Europe, have been united in their cause.

Then two things happen.

The Ottomans begin pushing back in earnest just as the leaders of the rebellion are attempting to create a constitutional framework for their proposed republic. As this effort progresses, the participants not only realize that they are on very different pages when it comes to the set up of the new country and just who should be in charge, but also that the money gathered for the cause was not nearly enough.

In the beginning, the insurgents had had the rudiments of the way in which to begin the struggle: money brought by wealthy Greeks or Philhellenes (contributors such as IoannisVarvakis and Alexandros Mavrokordatos to name two) as well as money gathered by Philhellenic institutions such as the London Philhellenic Committee. The existing Greek fleet that comprised of at least 650 ships and many thousands of sailors, not to mention the many willing fighters on the ground were sufficient at the start. But the nascent state could not continue the struggle without cash – and lots of it... Revolutions cost money.

A Loan would have to be sought.

The Greeks had some advantages on the world stage: a great deal of public sympathy and the support of liberal thinkers such Jeremy Bentham and Lord Byron. European intellectuals, especially those of liberal persuasion, had become very aware of their debt to ancient Greece, and their struggle for freedom struck a sympathetic chord because it echoed their own struggles for a more liberal society. On another plane altogether, there were many Europeans who saw the struggle as a struggle for Christianity as well as freedom. And there were the Greeks of the diaspora: Greek businessmen in many European centres of commerce and Greek intellectuals like Adamantios Korais who were ready and willing to use their influence to garner European sympathy. In a way, also, Greece was the ‘fashion’ in the run up to the revolution. Every neoclassical building in Europe and America (and there were many) served to bring to mind the glory that was Greece.

But the minus column was daunting.

The Greeks were not in an enviable position. In 1822, there was no Greek nation. The provisional government was a shaky entity situated in various freed towns or islands, very much in the process of becoming. Greece, as a state, was not internationally recognized at the time. What could they use as collateral?

Then there was the fact that each large European power was far more interested in preserving its own spheres of influence and balance of power than freedom for Greece. When it suited them, the Ottoman Empire was not seen as a natural enemy and, even if it was, it was powers like France, Russia, and England that wanted the lion’s share in the event that it was broken up. It is a sad fact of financial life all through the nineteenth century that many European bankers were lending money to Greece and to the Ottomans at the same time...

In this shifting political sea, Greece was a tiny ship tossed in a storm of conflicting interests: sometimes on the crest – but just as often in the trough!

Money Has No Politics

As luck would have it, the Greeks’ need for a loan in 1823 coincided with an economic boom in England, one that had created a great deal of surplus cash looking for a profitable home. Greek legislators called upon Ioannis Orlandos and Andreas Louriotes and Andreas Zaimis to form a committee and the first two travelled to London in 1823 to secure some of that loose cash for the Greek Cause.

Louriotis in old age

Andreas Louriotis had been educated in Ioannina, Germany, and France, had joined the Filiki Etairia, returned to Greece when the fighting began, and became a close political ally of Alexandros Mavrokordatos. Orlandos was a ship owner from Hydra with close connections to the Koundouriotis family and Andreas Zaimis was from the Peloponnese, so there was some attempt to represent various political factions.

In London they were greeted by none other than the Secretary of State for Foreign Affairs George Canning (whose contribution as a Philhellene got a square in central Athens named after him) and in due course, the First British Loan of 800,000 pounds became a reality. A second London Loan would follow in 1825.

These two loans were considered a real coup for the fledgling state and, to be honest, many Greek nationalists felt that this money was no more than their due for having contributed so much to European culture.

The Fatal Consequences

It is possible that no one predicted at the time that these two Greek loans, one in 1824 and one in 1825 would set off a chain of events that would lead to Greece becoming an monarchy instead of a republic, of having her finances overseen throughout most of her history by foreign creditors and their governments, and to having her internal finances crippled because of a debt it was nigh impossible to repay: – each new debt incurred was, in fact, secured to repay the previous one – a poisoned chalice indeed!

Perhaps the initial negotiators were naive. Or maybe they just had no other choice. I have to admit to a certain naiveté as well because, during my early readings of Greek history, I had assumed that the famous ‘London Loans’ were, in fact government loans, and I felt a kind of satisfaction that Britain was on the right side of history. But these were not government loans: they were private loans on the part of London financial speculators who expected a good return on their money and proved more than willing to call on government intervention when necessary to see than they got it.

Were the Terms Fair?

Not really, although I have read serious articles that claim they were. One problem was collateral. At one point the Greeks demanded changes in the terms so it would not appear that they were offering future Greek territory as collateral. But, whether they knew it or not, they were offering up future Greek citizens as collateral.

The Loan:

Bankers issued sovereign bonds in the name of Greece and sold them on the London Stock Exchange. They were sold for far less than their face value. A hundred pound bond could be bought for 59 pounds, but the debtor was responsible for the face value of the bond. Not only that, the issuing bank took a hefty commission.

From the outset, Greece only received 1.3 million pounds of two loans valued at 2.8 million. The interest was 5% and that was expected to be paid for the face value of the bond regardless of what had been paid for it in the first place.

Beggars Cannot be Choosers:

(On a personal note, our one and only foray into borrowing in Greece came during the same year as the Cyprus crisis. As a naive Canadian, I was shocked that a thousand dollar loan for a year was calculated in this way: the bank gave us only 700 dollars (I was thinking in Canadian dollars in those days) and 1000 dollars was to be paid in full in a year. There was no reduction allowed for early repayment. Highway robbery I thought at the time, but we were broke and my parents were coming. We paid and I have had a jaundiced view of debt and creditors ever since.)

In 1826, the Greek provisional government had to suspend debt payments. Partly this was because of the high cost of the fighting (some mismanagement too probably) but mostly because London and other European centres were no longer flush with extra money, Their own financial bubble had burst and banks were in no mood to lend more - something that debtors like the provisional Greek government had counted on. In 1829 the provisional government did offer to resume payments if the debt was reduced. This was refused by the creditors who wanted a one hundred percent return.

How to Get Blood Out of a Stone

The United Kingdom, France and Russia formed a Troika (that word!) and the first order of business was to find a suitable prince. The proposed republic was in disarray and could not pay, and Greece was involved in civil strife, so Othon the son of King Ludwig of Bavaria was to become the first in a string of kings in Greece.

Somehow sanctioned by God as well as by creditors!

At the same time, the Troika agreed that any British or European banks holding the Greek bonds should be supported. The plan was to exact full payment of the loans of 1824 and 1825. The Troika asked French banks to issue a loan of 2.4 million pounds and they promised to pay if Greece defaulted. This loan was meted out in 1833 and it is interesting to note how it was handed out.

Of the 44.5 million Greek drachmas, only 9 million (20 percent) actually went to the Greek State treasury. The Rothschild bank took a ten percent commission, advance interest was paid to the creditors, and just under 30% was paid to the Ottoman Empire as compensation for their loss of Greece. The creditors of the original loan got 2 million GDR and 7 million went to King Othon to give him and his regency a good start. This included 3500 mercenaries recruited in Bavaria and sent to Greece.

Otto’s Bavarian troops sightseeing

On May 7, 1832 King Ludwig signed an agreement with the great powers requiring the new independent state to give absolute priority to the repayment of the debt. Lord Palmerston signed for England, Talleyrand for the Tsar, and a representative of the King of Bavaria for Greece.

17 Year Old King Othon was in debt before he ever set foot in the new kingdom!

Protocole de Londres 1832 - London Protocol, 1832

In reality, the Troika controlled everything via the king. Although the Fifth National Assembly had legislated that the king could not act alone in levying taxes, he could and he did. Until 1843 Greece was ruled by an absolute monarchy. Things got better after 1843 and 1860 but not much.

And whenever the horrible spectre of arrears on the Greek debt came up, foreign governments were always ready to interfere to protect their own interests, and did. This had a disastrous effect on social spending and on any kind of public investment.
This story has repeated itself again and again, really until the 2008 financial crisis when another troika took charge.

Whom to Blame?

When the ramifications of the London Loans began to sink in, the negotiators, including Andreas Louriotis began to be accused of financial misconduct, of commissions taken but not earned etc. They were still refuting those claims as late as 1839.

Were the Greeks totally innocent bystanders in all this? Of course not. Many Greek financiers bought the bonds and probably wanted their money back too. Greek politicians have had difficulty uniting either themselves or the country all during modern Greek history and that has not helped. But being in constant debt is part of that too. It is hard to see how the Greek dependence on Europe which has been such a large part of our story could have been handled differently given our debt situation. Greece has always had to react to events –fifth business on the European stage.

Could It Have Been Any other Way?

I would love to think so. In the best of all possible worlds, things may have been different. But not in this one, a world that seems to insist that paying ‘one’s debts’ is the essence of morality and that the ‘one’ mentioned in the last sentence can be a forefather or a former corrupt leader or a good leader. We live in a system where debt is encouraged when times are good and yet debtors in over their heads immediately assume a cloak of moral degeneration if they cannot pay. Debt is never really forgiven.
We Greeks not only have had to put up with a national debt that would have choked the Trojan horse, but also the sneers of our creditors who, unwilling to accept any complicity in offering bad loans, have no problem is assuming that not paying theirs is tantamount to the original sin.

Today

We are still paying our debts here in Greece and the Corona virus has hi-jacked our efforts to rebuild our economy. And now the debate rages in Europe over as to whether the richer members should participate in a new loan to folks like us or whether Europe as a whole should assume the debt in a bond issue. I can see the point of view of the well off countries who think a loan would be just dandy. After all, they manage to get paid somehow no matter what - or when. But I am all for a bond. It would nice to be part-creditor as well as a debtor for a change!

The Grave