On this day: Greece declared bankruptcy in 1893

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By Victoria Loutas.

“Regretfully, we are bankrupt.” The four words Prime Minister Charilaos Trikoupis uttered in Parliament on December 10, 1893, which became one of the most famous phrases in modern Greek history. 

There were several factors which led the Greek state to declare bankruptcy in 1893, primarily their excessive borrowing, the collapse of Greek currant export trade and the effects of the Long Depression. 

With hopes to modernise and grow the Greek economy, the ambitious Prime Minister Trikoupis had woefully over-borrowed. Trikoupis gambled on achieving economic development by means of attracting foreign investors and of infrastructure building.

Prime Minister Charilaos Trikoupis.

The low European interest rates at the time made Greece an attractive state for foreign investors to lend money to. But, by mid 1893, the majority of the borrowed funds were being used to pay off existing debt. This inevitably led to a vicious cycle of foreign debt. 

Like most European nations, the Greek state was severely impacted by the global impacts of the Long Depression, depreciating the Greek currency and negatively affecting Greek exports. 

On top of this, Greece’s most successful export trades, currants, unfortunately collapsed in the mid 1870s. Corinthian currents accounted for 50-70% of the total value of Greece’s exports, essentially being the backbone of the Greek economy. 

By the early 1890’s, the Greek currant export had completely fallen and created severe social and economic consequences. 

All of the above causes demonstrate extreme economic instability, ultimately forcing Prime Minister Trikoupis to declare bankruptcy in 1893. Foreign lenders acted in outrage, with fears for their own financial stability. 

In an effort to restore the economy, Trikoupis reduced interest rates of external loans by 70% and tried to reach a compromise between the Greek state and the capital owners. But he did not succeed. 

Greece was inevitably in a havoc at this time, as the citizens were dealing with an economic crisis, political instability and social unrest. The Greek population were subsequently extremely dissatisfied with their leadership. Trikoupis lost the 1895 election and sadly passed a year later.

It took the Greek state many years to overcome the impacts of the 1893 bankruptcy. 

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