In the mid 1920s, the Greek economy was suffering from a number of problems, such as lack of capital and investment and an overburdened trade balance. These structural weaknesses in the economy and public finances were on the one hand undermining parliamentary stability, and on the other were encouraging the intervention of foreign powers (Britain) into the political and strategic choices of the country.
The regime of Pangalos chose to contract an internal loan, imposing indirect taxes on all consumers. This measure was accompanied by the simultaneous reduction of state expenditure, with the exception of the purchase of war equipment. The general conslusion reached from the events of 1925-26 is that the dictatorship basically took up the policy of its predecessors. State interventionism tended to reinforce the private sector with monetary means but also with unpopular laws, such as the dismissal of civil servants and the cutting down of salaries. The continually pressing need of the state to reduce deficits, in combination with the low rate of investment, eliminated the capacity of the public sector to formulate long-term development objectives and policies.