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Greece and the Inter-War Economic Crisis$

Mark Mazower

Print publication date: 1991

Print ISBN-13: 9780198202059

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780198202059.001.0001

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(p.313) (p.314) Appendix 2: Debt Default on the Periphery

(p.313) (p.314) Appendix 2: Debt Default on the Periphery

Source:
Greece and the Inter-War Economic Crisis
Publisher:
Oxford University Press

The Greek experience of default should be put in perspective. If we take default to cover unilateral reductions in debt servicing by the debtor as well as outright repudiation then we can find many examples of this phenomenon among debtor nations after 1929. Scholars have stressed the burden of indebtedness before the crisis but have paid less attention to the benefits that accrued from default, though this may be less due to ethical qualms than to the extreme difficulty of finding reliable data. Despite data problems I have thought it worth while to attempt crude estimates of savings from debt default for the countries listed below. Latin American countries were large (and early) defaulters on dollar loans, while Greece was one of the worst defaulters (in percentage terms) in Europe.

Column 6 in Table A2.1 provides one measure of a country’s ability to repay its debts on the eve of the crisis: Greece emerges as the most unrealistic debtor of this group, though the disparity between her export earnings and her foreign debt would be somewhat mitigated if invisible earnings were taken into account. However, savings on the scale which accrued to Greece (columns 3 and 4 for alternative measures) were found in at least half a dozen countries of central/ Eastern Europe, and in several important Latin American states as well. Default acted as an important adjustment mechanism in many debtor countries, cushioning the effects of falling exports and budget revenues.

(p.315) (p.316)

Table A2.1 Savings from debt default on the periphery

Country

Total savings, 1931–5 (millions national currency unit)

(2) as % of export earnings 1931–5

(2) as % of total government expenditures 1931–5

Date of suspension of foreign debt service

Export earnings/ total value of foreign debt, 1928–30

(1)

(2)

(3)

(4)

(5)

(6)

Greece

4,131a

18.1

11.0

1932

21.3

Czechoslovakia

356.4

Hungary

117b

74

2.4

1931–2

69.9

Poland

67.5

Romania

11,726c

19.1

13.6

1932

33.6d

Bulgaria

2,323e

19.3

11.1

1932

36.8

Yugoslavia

3,182f

16.6

6.0

1932

545.7

Argentina

186.3

Brazil

971g

6.6

7.4

1931

291.5

Chile

701h

19.1

1931

77.1

Mexico

126i

5.3

10.0

1928

53.2

Peru

97j

7.6

17.3

1931

118.3

(a) Derived from Table 7.4, col. 1.

(b) Net balance of Foreign Creditors’ Fund (1935, Foreign Credits Cash Office), 30.6.32–30.6.35. These sums underestimate total savings from default.

(c) Difference between foreign debt service as entered in the Budget for 1931 and that for subsequent years (1932–35/6).

(d) 1929–30.

(e) Difference between foreign debt service paid in 1931–2 and subsequent years (1932/3–z35/6).

(f) Difference between foreign debt service paid in 1930–1 and subsequent years (1931–5).

(g) Untransferred portion of foreign debt service employed as special funds.

(h) No foreign debt service in these years; gains estimated equivalent to six times the domestic debt service 1932–5 (this was the average ratio of foreign debt service to domestic debt service in 1929–31).

(i) Foreign debt interest arrears 1931–5.

(j) Difference between 1930 public debt service and that for subsequent years. These sums overestimate total savings from default.

Sources: M. Jackson and J. Lampe, Balkan Economic History 1550–1950 (Bloomington, Ind., 1982), 480–1; B. Mitchell, European Historical Statistics 1750–1970 (London, 1976), 304–6, 376–9; LN, Public Debt, 1914–1946 (New- York, 1946); LN, Public Finances, 1928–1935 (Geneva, 1936); LN, Public Finances, 1928–1937 (Geneva, 1938).