Throughout the wars of the 1910s, the drachma maintained its stability, despite the economic agitation engendered by the war. From 1921, but mostly right after the Asia Minor disaster, the national currency went into a course of continuous devaluation. The British pound, which was equal to 24 drachmae in 1920, reached 326 drachmae in 1926. Throughout this period the devaluation of the drachma was considered a means of protection and reinforcement of domestic growth and industry in particular. However, this situation worsened the country's image on an international level. As a result, Greece did not have the support, in reference to a second foreign refugee loan, of the international community and mainly the support of the League of Nations, which was necessary for its economic reconstruction.

Right after the fall of the Pangalos dictatorship (1926) the country's bad economic situation called for radical and direct interventions. The all-party government that assumed its duties in 1926, ought to proceed to the rationalisation of economic activity on the basis of the propositions presented by the special committee of the League of Nations. These concerned the stabilisation of the currency and the establishment of a central state bank, which would have the exclusive privilege of issuing banknotes. These propositions were adopted to a large extent.