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FINANCE] for the service of foreign loans altogether disproportionate to the revenue. (3) Remissness in the collection of taxation: the total loss through arrears in a period of ten years (1882–1891) was 36,549,202 dr., being in the main attributable to non-payment of direct taxes. (4) The adverse balance of trade, largely due to the neglected condition of agriculture; in the five years preceding the crisis (1888–1892) the exports were stated to amount to £19,578,973, while the imports reached £24,890,146; foreign live stock and cereals being imported to the amount of £6,193,579. The proximate cause of the crisis was the rise in the exchange owing to the excessive amount of paper money in circulation. Forced currency was first introduced in 1868, when 15,000,000 dr. in paper money was issued; it was abolished in the following year, but reintroduced in 1877 with a paper issue of 44,000,000 dr. It was abolished a second time in 1884, but again put into circulation in 1885, when paper loans to the amount of 45,000,000 dr. were authorized. In 1893 the total authorized forced currency was 146,000,000 dr., of which 88,000,000 (including 14,000,000 dr. in small notes) was on account of the government. The gold and silver coinage had practically disappeared from circulation. The rate of exchange, as a rule, varies directly with the amount of paper money in circulation, but, owing to speculation, it is liable to violent fluctuations whenever there is an exceptional demand for gold in the market. In 1893 the gold franc stood at the ratio of 1·60 to the paper drachma; the service of the foreign loans required upwards of 31,000,000 dr. in gold, and any attempt to realize this sum in the market would have involved an outlay equivalent to at least half the budget. With the failure of the projected loan for the withdrawal of the forced currency repudiation became inevitable. The law of the 13th of December was not recognized by the national creditors: prolonged negotiations followed, but no arrangement was arrived at till 1897, when the intervention of the powers after the war with Turkey furnished the opportunity for a definite settlement. It was stipulated that Turkey should receive an indemnity of £T4,000,000 contingent on the evacuation of Thessaly; in order to secure the payment of this sum by Greece without prejudice to the interests of her creditors, and to enable the country to recover from the economic consequences of the war, Great Britain, France and Russia undertook to guarantee a 2% loan of 170,000,000 fr., of which 150,000,000 fr. has been issued. By the preliminary treaty of peace (18th of September 1897) an International Financial Commission, composed of six representatives of the powers, was charged with the payment of the indemnity to Turkey, and with “absolute control” over the collection and employment of revenues sufficient for the service of the foreign debt. A law defining the powers of the Commission was passed by the Chamber, 26th of February 1898 (o.s.). The revenues assigned to its supervision were the five government monopolies, the tobacco and stamp duties, and the import duties of Peiraeus (total annual value estimated at 39,600,000 dr.): the collection was entrusted to a Greek society, which is under the absolute control of the Commission. The returns of Peiraeus customs (estimated at 10,700,000 dr.) are regarded as an extra guarantee, and are handed over to the Greek government; when the produce of the other revenues exceeds 28,900,000 dr. the “plus value” or surplus is divided in the proportion of 50·8% to the Greek government and 49·2% to the creditors. The plus values amounted to 3,301,481 dr. in 1898, 3,533,755 dr. in 1899, and 3,442,713 dr. in 1900. Simultaneously with the establishment of the control the interest for the Monopoly Loan was fixed at 43%, for the Funding Loan at 40%, and for the other loans at 32% of the original interest. With the revenues at its disposal the International Commission has already been enabled to make certain augmentations in the service of the foreign debt; since 1900 it has begun to take measures for the reduction of the forced currency, of which 2,000,000 dr. will be annually bought up and destroyed till the amount in circulation is reduced to 40,000,000 dr. On the 1st of January 1901 the authorized paper issue was 164,000,000 dr., of which 92,000,000 (including 18,000,000 in fractional currency) was on account of the government; the amount in actual circulation was 148,619,618 dr. On the 31st of July 1906 the paper issue had been reduced to 152,775,975 dr., and the amount in circulation was 124,668,057 dr. The financial commission retains its powers until the extinction of all the foreign loans contracted since 1881. Though its activity is mainly limited to the administration of the assigned revenues, it has exercised a beneficial influence over the whole domain of Greek finance; the effect may be observed in the greatly enhanced value of Greek securities since its institution, averaging 25·76% in 1906. No change can be made in its composition or working without the consent of the six powers, and none of the officials employed in the collection of the revenues subject to its control can be dismissed or transferred without its consent. It thus constitutes an element of stability and order which cannot fail to react on the general administration. It is unable, however, to control the expenditure or to assert any direct influence over the government, with which the responsibility still rests for an improved system of collection, a more efficient staff of functionaries and the repression of smuggling. The country has shown a remarkable vitality in recovering from the disasters of 1897, and should it in future obtain a respite from paroxysms of military and political excitement, its financial regeneration will be assured.

The following table gives the actual expenditure and receipts for the period 1889–1906 inclusive:

The steady increase of receipts since 1898 attests the growing prosperity of the country, but expenditure has been allowed to outstrip revenue, and, notwithstanding the official figures which represent a series of surpluses, the accumulated deficit in 1905 amounted to about 14,000,000, dr. in addition to treasury bonds for 8,000,000 dr. A remarkable feature has been the rapid fall in the exchange since 1903; the gold franc, which stood at 1·63 dr. in 1902, had fallen to 1.08 in October 1906. The decline, a favourable symptom if resulting from normal economic factors, is apparently due to a combination of exceptional circumstances, and consequently may not be maintained; it has imposed a considerable strain on the financial and commercial situation. The purchasing power of the drachma remains almost stationary and the price of imported commodities continues high; import dues, which since 1904 are payable in drachmae at the fixed rate of 1·45 to the franc, have been practically increased by more than 30%. In April 1900 a 4% loan of 43,750,000 francs for the completion of the railway from Peiraeus to the Turkish frontier, and another loan of 11,750,000 drachmae for the construction of a line from Pyrgos to Meligala, linking up the Morea railway system, were sanctioned by the Chamber; the first-named, the “Greek Railways Loan,” was taken up at 80 by the syndicate contracting for the works and was placed on the market in 1902. The service of both loans is provided by the International Commission from the surplus funds of the assigned revenues. On the 1st of January 1906 the external debt amounted to 725,939,500 francs and the internal (including the paper circulation) to 171,629,436 drachmae.

The budget estimates for 1906 were as follows: Civil list, 1,325,000 dr.; pensions, payment of deputies, &amp;c., 7,706,676 dr.; public debt, 34,253,471 dr.; foreign affairs, 3,563,994 dr.; justice, 6,240,271 dr.; interior, 13,890,927 dr.; religion and education, 7,143,924 dr.; army, 20,618,563 dr.; navy, 7,583,369 dr.; finance, 2,362,143 dr.; collection of revenue, 10,650,487 dr.; various expenditure, 9,122,752 dr.; total, 124,461,577 dr.

The two privileged banks in Greece are the National Bank, founded in 1841; capital 20,000,000 drachmae in 20,000 shares of 1000 dr. each, fully paid up; reserve fund 13,500,000 dr.; notes in circulation (September 1906) 126,721,887 dr., of which 76,360,905 dr. on account of the government; and the Ionian Bank, incorporated in 1839; capital paid up £315,500 in 63,102 shares, of £5 each; notes in circulation, 10,200,000 drachmae, of which 3,500,000 (in fractional notes of 1 and 2 dr.) on account of the government. The notes issued by these two banks constitute the forced paper currency circulating throughout the kingdom. In the case of the Ionian Bank the privilege of issuing notes, originally limited to the Ionian Islands, will expire in 1920. The National Bank is a private institution under supervision of the government, which is represented by a royal commissioner on the board of administration; the central establishment is at Athens with forty-two branches throughout the country. The headquarters of the Ionian Bank, which is a British institution, are in London; the bank has a central office at Athens and five branches in Greece. The privileged Epiro-Thessalian Bank ceased to exist from the 4th of January 1900, when it was amalgamated with the National Bank. There are several other banking companies, as well as private banks, at Athens. The most important is the Bank of Athens (capital 40,000,000 dr.), founded in 1893; it possesses five branches in Greece and six abroad.

Greece entered the Latin Monetary Union in 1868. The monetary unit is the new drachma, equivalent to the franc, and divided into