Foreign Relations of the United States: Diplomatic Papers, 1945, The Near East and Africa, Volume VIII

868.51/12–545

The British Embassy to the Department of State

Memorandum

As the Department of State are aware, the Greek Minister of Coordination, M. Tsouderos, has written to His Majesty’s Ambassador at Athens urging the necessity of extending financial credits to the Greek Government in addition to the assistance in goods and supplies which was promised by Mr. Hector McNeil, the Parliamentary Under-Secretary of State for Foreign Affairs, during his recent visit to Athens. M. Tsouderos affirms that without such an assurance the Greek Government cannot make a public declaration on Greece’s economic position since, unless such a declaration were specific on the subject of credits, it would cause uncertainty among the Greek population and lead to speculation resulting in a serious depreciation of the drachma.

2. M. Tsouderos considers that any announcement should indicate,

a) that the Bank of Greece’s credit at the Bank of England arising out of the expenditure of the British forces in Greece will not be subject to any restrictions but may be utilised for the purchase of goods;

b) that the Allied governments agree to discount a part of the total amount due to Greece by way of reparations, in particular the amount due to Greece from a loan which was granted to the Germans and Italians during the period of enemy occupation;

c) that a proportion of the German gold captured by the Allied governments in Germany will be ceded to Greece against German reparations liabilities to Greece.

3. In the view of His Majesty’s Government, it may well be that rise in the price of the gold sovereign is partly due, as M. Tsouderos states, to a campaign by industrialists who are opposed to the Government on political grounds. There can, however, be no doubt that part of the responsibility rests on the Greek Government, who have been more than a week in office without announcing any financial or economic programme which might allay public anxiety. Even if His Majesty’s Government and the United States Government were able to give the most ample promises of assistance, it is clear that the Greek Government’s political opponents would not be prevented from trying to bring down the Government by means of the gold market, and the effect of any announcement would therefore be very short-lived unless the Government took adequate steps against speculators and also announced measures which would restore public confidence in their ability to achieve economic stability.

4. A foreign loan would be of no immediate value to Greece, but the proposal has been so played up in the Greek press that most Greeks believe that a foreign loan is essential to Greek reconstruction. An early announcement that Greece will be granted a foreign loan might, therefore, contribute to the restoration of confidence provided that it were coupled with strong measures on the part of the Greek Government. His Majesty’s Government are, however, not in a position to grant a loan. In any case the Greek Government now hold 25,000,000 pounds sterling which is the balance of the 46,000,000 pounds sterling lent them in 1941, none of which has been repaid.

5. His Majesty’s Government consider that it would be very difficult to meet M. Tsouderos’ points (a), (b) and (c) in paragraph 2 above. They would be quite prepared to put the proceeds of British Army expenditure at the disposal of the Greek Government within the sterling area, but the total sum due to the Greek Government under this head will be much less than the Greeks suppose, since it is intended to set off against it considerable debts owed to His Majesty’s Government by the Greek Government. An announcement on this point might therefore be more of a disappointment than an encouragement. As regards German reparations, it is clear that any arrangement must await the decision of the Reparations Committee in Paris.³⁹ It looks, however, as though all the gold seized in Germany will be required for restitution to countries which have been robbed of gold by Germany, and Greece does not come in this category. As regards M. Tsouderos’ point (b), reparations receipts will be related to the total claims put forward by each country and not to individual items in these claims. The receipts will moreover be infinitely small as compared with the claims. Apart from these considerations there is the further point that the bulk of reparations receipts will take the form of capital goods. There would be no advantage in trying to raise a loan on these, since Greece needs commodities and not money.

6. His Majesty’s Government consider however, that an adequate measure of confidence could be secured by an announcement issued in London and Washington by His Majesty’s Government and the United States Government, and they have prepared a draft text which is annexed as Annex A.

7. His Majesty’s Government would be grateful for the views of the United States Government on this proposal and on the text of the suggested announcement.

Washington , December 5, 1945.

annex “a”

The Greek Government have approached the British and United States Governments for assistance in dealing with the continued deterioration in the economic and financial situation in Greece and with the speculation which is forcing up the price of the gold sovereign. In their opinion there can be no excuse for such speculation since there is no reason why Greek economy and finances should not be placed on a secure footing. The measures which the Greek Government now propose to take to deal with this speculation should in the opinion of the two Governments go far to remedy the situation. U.N.R.R.A. has imported into Greece during the past nine months over 1,500,000 tons of goods valued at some $300,000,000. Both in quantity and in value these supplies are substantially above the total Greek imports before the war and should be fully sufficient to enable the reconstruction of the country’s economy to get under way. In addition the Greek Government have substantial reserves of sterling and dollars with which to supplement the U.N.R.R.A. programme. By this assistance the Allied Governments have given practical proof that they are not asking Greece to stand alone and unaided. Nevertheless the value of this assistance in rehabilitating Greek economy will be wasted unless the present rapid increase in the note issue is halted by heavy taxation, which can only be imposed by the Greeks on themselves. The British and United States Governments realise that when U.N.R.R.A. supplies cease Greece will have difficulty in obtaining her essential imports, and they will therefore consider what assistance they can give in order that the progress of Greek reconstruction should not be held up. Meanwhile, U.N.R.R.A. supplies are continuing, and the British and United States Governments will examine sympathetically the possibility of providing materials for the reconstruction of Greece over and above the U.N.R.R.A. programme or for projects which U.N.R.R.A. is not in a position to undertake. Greece is therefore in an exceptionally favourable position and there is no reason why there should not be a rapid and lasting improvement in the economic and financial situation provided that all sections of the Greek people unite their efforts to achieve this end.

39. The reference is to the meeting of the Inter-Allied Reparations Agency which met in Paris, November 9–December 21, 1945; for documentation on the subject of German reparations, see vol. iii, pp. 1169 ff.