Policy Paradigms, Financial Intervention, and the Limits of Developmentalism

Abstract

In line with other European countries, the 1946 establishment of the Currency Committee centralized government control over the economic and financial system. This was largely inevitable given the immediate postwar circumstances. Bank assets were depleted, no new savings were flowing in, and hyperinflation remained persistent until 1951. Greece had been left in ruins, and reconstruction required new investment (frozen for nearly a decade), extensive replacement of antiquated or destroyed capital stock, and massive inflow of funds, as the banking system’s lending capacity was weak. The Currency Committee supplanted the BoG in undertaking all monetary, credit, and foreign exchange policies. The Currency Committee consisted of the ministers of coordination¹ (chair), finance, agriculture, commerce, and industry, and the BoG governor;² decision-making was based on majority vote. The committee determined the volume of bank credit, the sectors or activities entitled to it, the exact percentages of expenditures entitled to bank finance, the specific interest rates, the terms and security to be demanded by the banks, and the exact procedures to be followed (Halikias 1978: 27–31).