The period following the Greek defeat in the Greco-Turkish war of 1897 was characterized by universal discontent and demand for renewal of national life in all sectors and especially the restructuring of the state.

The 'shame of 1897' left an indelible mark on the political climate until the end of the first decade of the twentieth century, and functioned as a catalyst in arousing awareness of the insufficiency of the political status quo and of the need for political reformation both in terms of structure and human resources.

In the army, and especially in the lower ranks, there was widespread feeling that the involvement of the princes in the leadership of the army and the overall inability and corruption of political and military officers were directly to blame for the national failure. But the keen expression of popular indignation and a generalized anti-dynastic feeling in the period after the defeat did not lead to immediate overthrow, as for a while seemed imminent, thanks to the intervention of the Great Powers in favour of the monarchy and also to efforts of the statesmen who were afraid for their own fate. Thus, despite its lack of popularity, the monarchy preserved its authority intact.

At the same time, economic problems took on crisis dimensions which became even more acute with the establishment of the International Financial Control Commission, which taxed national humiliation yet further. In the first decade of the century a massive wave of immigration particularly to the USA took place, reinforced to a great extent by the raisin crisis, while in 1908 the international economic slowdown decreased the migrant remittances of Greeks abroad and as a result the income of the native Greek population.

The political instability of the first period after the 1897 war terminated in some respects in 1899 with the electoral victory of the Trikoupist party, under the leadership of Georgios Theotokis. The reform programme announced by Theotokis roused the hopes and the confidence of the masses. In his first period of office (1899-1901) Theotokis dealt especially with the army and the raisin issue. But it was an irrelevant event, the 'Evangelika' (Gospel riots), that brought about his downfall. The downfall of Theotokis's government caused a new political anomaly, culminating in violent incidents such as the 'Sanidika', while governmental instability in the subsequent period (1902-4) made the country's impasse (or 'ill luck, as it was commonly called) even more keenly felt. The Trikoupist and Deliyannist party alternated in power. In 1905 Prime Minister Deliyannis was assassinated.
The ensuing economic crisis after the temporary recovery following the end of the war, the towering social discontent and rioting, the ideological confusion manifested with incidents such as the 'Oresteiaka' (a translation of Oresteia in Demotic Greek) in 1903, all led to a pressing demand for an end to stagnation. In 1906 Theotokis formed a new government after winning the elections.

In the autumn of that same year a small but militant opposition group of independent deputies made its presence felt by proposing reforms and castigating the government's bad management of politics and the administration. Their militancy and dynamism reminded the publisher of the newspaper Acropolis, Vlassis Gavriilidis, of the Japanese reformers who turned their country in to a number one world power and defeated the Russians in 1905; for this reason he called them 'the Japanese Group'. This group was strongly supported by the press. Among its members were Stephanos Dragoumis, Dimitrios Gounaris, Petros Protopapadakis, Emmanouil Repoulis, Haralambos Vozikis and Apostolos Alexandris. Dimitrios Gounaris became minister in the reshuffle of Theotokis's government in 1908, a fact that led to the dissolution of the group; neither did Gounaris promote any of his reform plans.

Georgios Theotokis, who was Prime Minister for approximately a ten-year period, notwithstanding certain interruptions, slowly reorganized the country after the defeat, despite his gradual retreat from the progressive and reform programme of Trikoupis. He dealt in particular with the reconstruction of the economy after the bankruptcy, and, especially in the period 1906-9, with the reorganization of the army, bearing in mind that international politics aimed to divide up the Ottoman Empire and that Greece should be in readiness to stand up against imminent military confrontations. The government's policy concerning the defence of the country and army equipment did not allow for any measures related to social wellfare or for building up an infrastructure in the period 1906-9.

This unsettled situation, manifest already from the beginning of 1909, led to the definitive resignation of Theotokis (after his first resignation that was revoked in May of that same year) in the summer of 1909. He was succeeded by Dimitrios Rallis (the fourth Prime Minister in this period), who was summoned to deal with the aftermath of the military coup of Goudi.