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The economic consequences of World War II for Greece were staggering. Greece like most countries stayed out of the War and remain neutral. The Greeks has some hope of this because it was basically a Fascist country at the time of the War. Mussolini ended any possibility of this when without consulting Hitler, he ordered an invasion (October 1940). Greece was not a wealthy country to begin with. The initial Italain invasion from Albania did not damage the economy significantly. The Greek Army not only held the Itlaians in the birder mountains, but drove them back into Albania. The British provided some $1.2 billion (2004 dollaras) in war assistance. [Ioannides, p. 2.] The German invasion quickly defeated the Yugoslav and Greek Armies even when the British intervened (April 1941). The resulting Axis (Gerrman, Itlalian, and Bulgarian) occupation did massive damage to the economy. The three invading armies established their own occupation zones and actually four currences. (There was a special currenvcy for the Greek Islands.) These currencies had no real value and were worthless outside occupued Greece. The Axis occupation, especially the German occupation was a disaster for the Greek people. The Bulgarians occupying northeaster Greece were also brutal. The Grrman occupatioin was the worse. German policy as in other occupied countries was to exploit the country to support the German war effort.
A huge inflation problem developed. One economist explains what happened, "Then in August 1941, the German military administration decided to keep the drachma as the only means of payment. The occupation forces took as much money as they wanted from the puppet Greek government and the Bank of Greece. These requests and so-called 'loans' from the Greek state were completely arbitrary and honored by virtue of force. The occupation forceswere able to extract a lot of resources from the Greek people by the printing of ultimately worthless currency for several years." [Ioannides, p. 2.]
The Greek puppet Government also printed mniney for its oin purposes. The result was hperinflation.
The inflation was virtually uncaluable. Paper money became virtually worthless. It was one of the worst inflations in economic history.
Greece was not self-sufficent in food. And with th occupoation, not only could Greece continue to import, but the German Wehrmacht began seizing food for its occuoation force. Greece was a largely agriculturl country, but dependent on food imports. A combinarion of the Whermacht seizing food supplies, shipments of food to the Reich, and the British naval blockade led to a deadly famine. The result was a terrible famine. Although emegency relief supplies were arranged, serious food shortages persisted.
The Axis forces occupying Greece also caused enormous infrastructure danmage as it attempoted to supress the growing resistanc movement. Greek resistance to Axis occupation led to brutal German reprisals, often against innocent civilians because the resistance fighters were more difficult to find. The resistance attacks and German reprisals caused additiional damage, esoecially to the already basic infrastructure rural areas. The combintion of Axis anti-resistance actions and food shortages resulted in heavy mortalities. Historians estimate that something like 7 percent of the population peroshed because of the Axis occupation, most due to civiliazn death. The Germans deported Greeks for slave/forced labor in the Reich war economy. The Germans began withdrawing from Greece (September 1944). The British landed to formalize the country's liberation. Conditions fdid not, howver, improve as the withdrawl of the Germans set in motion a civil war. The resistance had been split duing the occupation between royalists and communists. These two groups as the Germns departed descended into open warefare to determine the country's future.
The Greek economy was devestated by the World War II Axis occupation. The initial physical damage was limited, because the German viuctories were so rapid. It was the Axis policies during the occupation that did much of the economic damage along with the resistance and anti-resistance operations. The ELAS Communist Guerrillas gained control of much of ther countryside. And this was the situation at the time of liberation (September 1944). ELAS was reorhganized as DAG under the control of the Greek Communist Psrty (KKE) to fight a Civil War after the Communisdts did poorly in the first electiion after liberatiin (1946). The economy was further damaged by the ensuing Communist inspired Civil War. Efforts to revitalize the economy were difficult during the Civil War.
In fact, the DAG strategy was to conduct small scale attacks, in opart to dange the economy and prevebt any economic recovery. DAG hoped that the resulting econmomic paralysis would increase support for the KKE. The British and eventually the Americans supported the royalists. The insuing Greek Civil War raged (1944-49) and added to the damaged during the World War II Axis occupation, especially in rural areas. It was not just the physical damage. No one was going to make important efforts to build business or make major investments as long as there was a belief that the Communists were going to prevail. As a result, not only was very little progress made repairing the economy. Greece arguably faced the most difficult recovery in all of non-Comminist Europe. As one author explians it, "It was very difficult for Greece to make an economic progress during the Civil War. Basically it had twenty to thirty thousand organized terrorist operating in the country. The terrorists could not hope to win but they could disrupt any progress. The Civil War was terminated when the General Secretary of the Communist Party KKE, Zachariadis, became deluded that the terrorist could match the national army in military confrontations. However even after the military defeat of the terrorist there was a legacy that plagued Greece politics for decades." [Watkins] Living standardards remined far below pre-War levels. Per capita income levels were below that of the poorer European countries as well as the Third World countries like Mexico. Only American food aid prevented another terrible famine. Amerivan military and economic aid as part of the Truman Dictrine meant that DAG initial hit and run tactics were not proving effective. When FAg shidted to oopen conat, the superioir Greek Army defaeted DAG, driviung them to border areas.
Britain was unable to maintain its former international commitments, in large measure because of its faltering economy. President Harry S. Truman declared in an address to Congress that the foreign policy of the United States was to assist any country whose stability was threatened by Soviet-backed communism (March 1947). His initial request to Congress was $400 million to assist Greece and Turkey. Congress quickly approved. This became known as the Truman Doctrine. Greece and Turkey became primary beneficiaries of the Truman Doctrine. After the Civil War, Greece began benefitting from a recovering European economy. Greeks moved to countries like Germany and their remitences became an important part of the economy. Greece became a popular tourist destination and tourism became an important part of the Greek economy as the European economy rebounded an average Europeans could afford vacation trips. Shipping also rebounded as an important sector. Shipbuilding also became important. Greece began to report enviable economic growth, albeit from a low base. Living standards began rising toward those of prosperous European countries.
Ioannides, Yannis M. "Economic consequences of World War II for Greece," Talk at OXI Day at -Maliotis Center (October 31, 2004).
Watkins, Thayer. "The economic history and the economy of Greece, the Hellenic Republic," applet-magic.com.
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