ABSTRACT
Identifying the entire region running southeast from Slovenia to Greece and Turkey as South-eastern Europe, rather than subdividing it between Central Europe and the Balkans, makes sense across the economic history of the entire twentieth century if we concentrate on modern banking. Both industry and agriculture fall too far short of European aggregates in production and vary too much in practice across the region to merit early membership in a modern, integrating European economy. But domestic central and commercial banking, interconnected with Western banks and bank practice, has belonged to that economy since the 1920s. This brief inquiry cannot attempt a full account of those connections.
Existing scholarship has addressed that account in appropriate detail (Notel, 1986, pp. 170-295; Lampe and Jackson, 1982, pp. 202-309, 329-482, 549-56). The purpose here is to concentrate on the political and economic crises that periodically confronted those connections and the responses which they prompted from both sides. This account will provide no comfort to the two simplified approaches that have characterized too much of the attention previously paid to the region’s economic history. One is the originally Marxist assumption of control and exploitation flowing from Western financial contact with the region. As articulated by Immanuel Wallerstein in the 1970s, this still influential critique rejects any reciprocal, comparative advantage to trade. It defines international capitalism as nothing more than the Western ‘core’s’ penetration to capture the higher surplus value available from low-wage labour in the non-Western ‘periphery’ or ‘semi-periphery’ (Wallerstein, 1979, pp. 1-118). But we may also be wary of an Anglo-American approach that assumed, after the collapse of Communist regimes in 1989, that an inter-war framework for a market economy had existed and could easily be revived. Stock markets, stable exchange rates and newly privatized banks would mobilize the private
capital needed to effect a smooth transition. During the Cold War, Western analysis had concentrated on Soviet-bloc economies where banks were dependent and basically incidental institutions. In the process, the former Yugoslavia’s more complex financial structure and its socially-owned commercial banks received too little early attention, and non-Communist Greece’s, none at all. As we shall see, Greece’s experience in particular supports neither the Wallerstein nor the market assumptions just noted (Turkey’s experience is omitted here solely for lack of space). This paper examines five periods of crisis in relations between South-
eastern European banks and Western banking, beginning with the 1920s and ending with the 1990s. The decade following the First World War was a period of crisis despite the apparent spread of Western bank presence and enterprise investment. Western banks counted for less, it is argued here, than the combined failure of Western governments to resume the pre-war level of state lending and of newly established or reconstituted regional governments to avoid overvalued exchange rates all the same. The crisis of the 1930s derived from the retreat of Western commercial and investment banking but was also significant for the reforms, sometimes with French or British technical assistance, by the region’s central banks. The wartime that followed was longest for Greece, from 1941 to 1952, and involved its central bank in first German and then similar British measures which, ironically, helped to constrain any significant Western presence in Greek banking until the 1990s. For the 1970s and 1980s, I focus on Yugoslavia’s debt crisis and the role of Western and Yugoslav banks in first creating and then responding jointly to it. Both the Bulgarian and Romanian economies would face similar repayment problems during the 1980s, but their governments would respond only with administrative restrictions on imports, disastrously deep ones in Ceausescu’s Romania. Then in the first post-Communist decade, central banks – even in the new successor states to the former Yugoslavia – established convertible currencies more easily than expected. The region’s commercial banks still struggled to find the legal framework that would mobilize badly needed domestic capital and also attract the sort of Western investment that has advanced the Hungarian economy to the front of the line for admission to the European Union.
