ABSTRACT
The title, at least at first glance, appears to define the subject of this chapter with a great deal of accuracy. In reality, however, it is not possible to be so precise. The changes which were observed in the Greek monetary and financial system during the civil war – even if we ignore what is called its ‘first round’, which took place during the Occupation – are impossible to understand without a sound knowledge of the changes which took place in the Greek credit sector from 1941-44. Even if we limit our study to the exact period of the civil war (1946-49), it is impossible to ignore the effects of the Marshall Plan upon the evolution of the Greek monetary and credit system. While its implementation coincided with the period of the civil war and the immediate post-civil war years, its goals were more or less independent with regard to Greek political situation. Consequently, the title of this chapter can be nothing more than a starting point. The effects of the civil war on the Greek monetary and banking field must be studied taking into account other factors which as a whole shaped the political and economic framework within which the Greek banking system was reformed. In 1952, K. Varvaressos, an outstanding Greek economist and Governor
of the Bank of Greece for many years, commented as follows on the performance of the Greek banking system prior to the Second World War: ‘In Greece, prior to the war, the Banks did not have . . . the ability to influence the monetary situation. From a monetary point of view, their role was a neutral one, accepting deposits and lending based on these deposits’ (Varvaressos, 1952, p. 67). This was a viewpoint, once very widespread, which ignored the basic parameters of the functioning of the Greek banks. The absence of a capital market and the oligopolistic character of the Greek banking system, for example, had implications both for the way in which credit was handled in the economy and the cost of money. The Greek banking system, prior to the Second World War, was made up
of 35 banks. Two of these, the Agricultural Bank and the National Mortgage Bank, had an exclusive privilege over the exercise of agricultural
and mortgage credit respectively. In the field of commercial banks, the National Bank of Greece dominated, and on the eve of the war more than 60 per cent of the credits and deposits of the commercial banks were concentrated in the National Bank. In one way or another, it was also in a position to control some other commercial banks and to maintain absolute control of the National Mortgage Bank. This was an exceptionally high concentration, which developed simultaneously with the cartelization of the market by the Hellenic Banks Association. A counterweight to the exceptional strength of the National Bank was the central bank of the country, the Bank of Greece. Theoretically its great distinction was to carry through a central banking policy on the British pattern. In reality, it exercised a broad range of commercial activities in order to be able to guarantee such profits as would allow its survival, but also to control the money market (Kostis, 1999). Thus, prior to the outbreak of the Second World War, in the Greek banking system there was an oligopolistic situation in which the central bank was a constituent factor as it did not hesitate to participate in the banking cartel. This organization had consequences both for the level of interest rates and for the amount of credit which was channelled into the market, while two banks – the Bank of Greece and the National Bank – played the role of lender of last resort.1
