FROM A CRISIS TO A WAR (1930-1939)

<< FROM WAR TO CRISIS (1919-1929) DECIMATION OF THE FLEET (1940-1945) >>


The global financial crisis that was brought on by the Wall Street Crash in 1929 lasted a long time. It tormented the shipping industry for many years and the exit from the recession proved an extremely slow process.


The causes of the crisis had origins dating back to the aftermath of World War I, when most countries began to adopt policies of economic self-sufficiency. They opted for developing their own production sources and, by limiting international transactions to a minimum, they reduced both import and export trade. At the same time, the drastic reduction in global consumption, especially in countries with large populations such as India and China, in conjunction with diversified trade relations imposed by the new regime in Russia, set new standards in the global economy. The war also had a great impact on the political stability of many European countries, which in turn forced changes in their trade policies. Last but not least, the appreciation of the role of the merchant marine in wartime led not only to the strengthening but also to the creation of new national fleets. 


At this time of radical change, the prospects of the Greek shipping industry, which was serving solely the transportation needs of third parties, seemed bleak. Amidst such a crisis, the obvious future of a fleet comprising mainly of over-aged steamers would be for it to end up in scrapyards or, in the best case scenario, in lay-up berths that had already started being occupied by many Greek ships.


However, problems were not confined only to the Greek shipping industry, whose financial exposure was relatively modest compared to others. Perhaps for the first time, British owners were being faced with an unprecedented crisis that threatened the foundations of their powerful maritime industry. British banks, which had hitherto generously supported the development of the British merchant fleet, started demanding the sale of heavily indebted vessels. This led to massive sales of entire fleets, resulting in the complete collapse of ship values. Eventually, the situation compelled the British government to adopt protective measures and financial subsidies for its ailing shipping industry. These were deemed necessary given that, traditionally, the shipping sector had always been important in sustaining the UK shipbuilding industry.


Meanwhile in Greece the situation was very different. The government was still failing to adopt a policy of supporting, even indirectly, the operation of merchant ships. In fact, with the tolerance of the state, the seafarers’ unions were constantly demanding wage increases and various other privileges, with the cases of insubordination proliferating on board Greek steamships. In addition, bureaucracy prevented the settlement of various issues concerning ship operation. To add to the hardships of the time, the government imposed a special tax on imaginary profits at a time of heavy financial losses. Under these adverse circumstances, the Union of Greek Shipowners sent a memorandum to Prime Minister Venizelos in September 1932, informing him of the problems that had led to the use of the Panamanian flag on many newly acquired vessels. 


But Venizelos did not have the time to respond, as two months later Panaghis Tsaldaris was sworn in as Prime Minister. Subsequently, the Union of Greek Shipowners had no other alternative but to submit to the government a resolution signed by its members in which they stated that it was no longer possible for them to operate their fleets under the Greek flag. Tsaldaris reacted immediately and following brief meetings held between shipowners’ representatives, the Minister for the Marine and the director of the division for Merchant Marine Affairs, it was decided that a new, drastically reduced payroll should be adopted for all seafarers. Signed by the majority of the seafarers’ unions in April 1933, it went on record as the “hunger payroll”, but at the same time it allowed Greek-flagged ships to remain competitive. As a good-will gesture by the shipowners, several of the ships that had been acquired and registered in Panama were placed under the Greek flag. Unfortunately, a number of seafarers continued to create problems, mainly through recurrent cases of sickness and injury, generating unjustifiable claims that eventually forced British insurers to take action at the end of 1935.


From the beginning of the crisis, Greek owners were aware that they did not have the luxury to wait for the freight market to improve. Time was not on their side as their fleets comprised mostly of over-aged ships. Those vessels could not be easily reactivated after being laid up for long periods, so shipowners began to consider replacing them with newer tonnage. 


At this critical juncture, Manolis E. Kulukundis, heading the largest Greek shipping office in London, devised a realistic plan to dispose of old steamers and have them replaced with newer ones. As most of the Greek ships were not highly leveraged, the plan found support among bankers and led to the eventual replacement of most old steamers within the Greek fleet. Thus, when the market began to improve in 1934, Greek shipping was operating a more dynamic, high quality fleet, enabling it to successfully face competition from other nations which had in the meantime taken protectionist measures in order to safeguard their shipping industries.


Despite the gradual improvement in the market, many issues affecting ship operations remained unresolved. An International Maritime Conference was set up in London on January 1935 with the participation of nations from around the globe. During the conference, a plan for the rationalisation of the shipping industry was put in place, aiming at the improvement of the market by adjusting the availability of the world’s fleet according to global supply and demand. 


Following an initiative by Manolis Kulukundis, a meeting between British and Greek shipowners was held a few days later. Kulukundis presented his plan for addressing market problems encountered in grain transportation from Argentina’s River Plate to Europe. The proposed plan, which became known as the “minimum rate scheme”, was adopted by both parties as well as by owners from several other countries. This gave a boost to the freight market, which was further strengthened by the outbreak of the Italian-Abyssinian war in October 1935. The successful adoption of the plan led to the establishment of the Tramp Shipping Co-operation Committee, an informal body whose role was to monitor adherence to regulations. In essence, this was the precursor to the Greek Shipping Co-operation Committee, which provided invaluable service to the advancement of Greek Shipping over the next decades.


The gradual momentum gained by the market led a number of powerful Greek shipowners once again to British shipyards, placing orders for ships that began to be delivered in 1936. 


In July 1936 another war broke out, this time in Spain. Throughout its duration, many Greek vessels were lost whilst Franco’s forces seized others. A month later, Greek shipping marked one of the most significant milestones in its history, the establishment of an autonomous governing body. Previously, on 23 March 1936, a sub-ministry of Merchant Marine was established as part of the Ministry of the Navy, in order to serve the needs of the sector; Deucalion Rediadis, a distinguished lawyer, was sworn in as under-secretary.


In the meantime, Greece had been in constant political turmoil. Both Venizelos and Tsaldaris passed away in 1936. Prime minister George Condylis had declared a dictatorship in October 1935, abolishing democracy and preparing a referendum to reinstate the monarchy, but he was soon replaced by Constantine Demertzis. The sudden passing of the latter brought to power Ioannis Metaxas, who established a dictatorship on 4 August 1936, changing the political scene in the country once more. Coming from a military background, Metaxas foresaw the clouds of war over Europe and began to prepare the country for this eventuality. Being fully aware of the importance of the merchant fleet at wartime, he immediately started organising and strengthening the operation of the shipping industry. He founded an autonomous sub-ministry of Merchant Marine, maintaining Deucalion Rediadis at its helm. A few months later, he established the Hellenic Chamber of Shipping with George E. Embiricos, its first elected president.


The violation of the Plate Agreement by several shipowners and the inability of industry representatives to persuade the sub-ministry of Merchant Marine to take appropriate measures to combat the situation, forced a delegation of shipowners to appeal to Metaxas himself. They urged him to adopt legislation which would compel all Greek owners to comply with the scheme’s provisions agreed upon with their British counterparts. Metaxas acted immediately, and from 12 September 1938, the implementation of the plan was obligatory by law for all shipowners. At the same meeting, he publicly declared for the first time that if ever Greece went to war, it would never be against Britain.


At this time, Europe was under the shadow of an imminent conflict and this gradually led to the degeneration of international agreements. Protectionist measures intensified and the British began to abandon liberalist ideas. The priority line for loading Plate cargoes was abolished by the Tramp Shipping Co-operation Committee, giving preference to British ships. 


The Spanish Civil War ended in April 1939. A few months later, on 3 September 1939, another war broke out, leading to an unprecedented global conflict that caused havoc and destruction. The following day, the Greek vessel KOSTI was destroyed after hitting a mine, while the Tramp Shipping Co-operation Committee sent a concise telegram, informing the shipping world of the abolition of the Plate scheme.

A month after the declaration of World War II, the neutral Greek steamship DIAMANTIS was torpedoed by a German submarine and sank off the British coast. The nightmare for Greek shipping had begun.

« From a War to a Crisis (1919-1929) The Decimation of the Fleet (1940-1945) »
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