868.51/12–2045: Telegram
The Ambassador in Greece (MacVeagh) to the Secretary of State
[Received December 22—1:10 p.m.]
1467. Minister Finance called on me again yesterday to repeat with increased urgency his requests transmitted mytel 1447, Dec 14.
Gold sovereign reached 120,000 drachmas yesterday with commodity prices up 25% during first half Dec.
Under such circumstances, Mylonas considers further wage salary increases unavoidable with resulting acceleration inflationary movement. He particularly fears exploitation labor situation for political ends.
Meanwhile General Clark’s arrival delayed by illness, but first two members British Economic Mission to reach Athens have completed preliminary survey and expect return London tomorrow to report findings and endeavor obtain approval their recommendations. Edward Grove, financial expert formerly with Lazard Frères has prepared excellent memorandum monetary situation revealing thorough comprehension peculiarities present Greek situation. Regards position paper drachma hopeless and emphasizes difficulty using any unconvertible paper currency while country effectively on gold coin basis. Believes laws and police measures against use gold impracticable and restoration confidence only solution. Grove expects recommend British Treasury make available to bank Greece 1,000,000 sovereigns actual gold coin charging Greek gold reserves abroad for use redemption entire drachma note issue at realistic rate. Amounts equivalent one sovereign or more would be paid out in actual gold coin and existing notes surcharged “blank gold drachmas payable in gold on demand”. If such operation had been possible last few days, Grove would have suggested rate 20 paper drachmas to 1 gold drachma and 5,000 gold drachmas to 1 sovereign with total bank note circulation about 80 billion drachmas. Step would act as automatic control Greek expenditures by eliminating further issues flat [fiat] currency.
Grove also recommends new British loan to Greece 5 million sterling for purchase capital goods and that British waive Greek 20 million sterling debt incurred war purposes and fund expended balance 26 million credit obtained same connection. Also would fund 8 million due under Angelopoulos agreement52 for maintenance Greek [Page 294] armed forces [and] refugees in Africa; also sterling expenditures of Greek armed forces next 3 years estimated 39 million pounds as amounts fall due. On entire amount recommends interest and sinking fund at rate equal or lower than accorded by US to UK. Grove would have US and UK assure Greeks they will not be allowed to starve after end UNRRA period. To obtain maximum benefit above measures Grove would expect Greeks create small financial committee with full powers over Govt revenues and expenditures and including one British adviser who would be expected play decisive if inconspicuous role.
Sir Vyvyan Board, industrial control expert with considerable British Govt experience, favors Greeks inviting prominent foreign firm chartered accountants become official Govt agents on cost questions as means obtaining reliable data on profits to justify commodity prices. Board would also have Greek Govt request a foreign expert “coordinator” for each branch industry to act as buffer between latter and Greek Govt. Coordinators would be under general supervision of “senior British civil servant” attached to British Economic Mission. Board states his conversations with Greek Govt officials and industrialists indicate latter would welcome scheme and only some members Govt hesitant for political reasons.
In latter connection British Ambassador emphasized to Grove and Board great importance saving face of Greek Govt in connection imposition financial industrial controls and they agreed advisability stress scheme as answer to Greek Govt’s requests and expression willingness extend help. Otherwise Extreme Left and Eight almost certain raise issue of interference Greek independence resulting possible fall present Govt which most undesirable before elections. Proposals appear sound this Embassy from economic standpoint but will require most careful selection advisers and coordinators to insure both competence and qualities of tact and patience.
Reference Deptel 1275, Dec 17 hope loan announcement can be made soonest.
British Embassy requests above points should not be discussed with British in Washington and London until latter bring up matter since experts are carrying details with them to London and prefer no action be taken until they can present case personally.
- Data in the Department records is not entirely clear as to the nature of this agreement and the date of its signature. Probably, it was the agreement signed at London by the British and Greek Governments regarding the emergency use of British Military Authority notes in Greece. The text of this agreement was sent to the Department in airgram 37, October 24, 1944, 12 m., from Caserta (868.515/10–2444).↩