Foreign Relations of the United States, 1947, The Near East and Africa, Volume V

868.20/10–2847

Memorandum of Conversation, by the Acting Chief of the Division of Greek, Turkish and Iranian Affairs (Jernegan)

secret

[Washington,] October 28, 1947.

Participants:	Mr. Constantine Tsaldaris, Foreign Minister of Greece.
	Ambassador Dendramis.
	Mr. Gouras, Counselor of the Greek Embassy.
	Mr. Henderson, NEA.
	Mr. McGhee, U/GT.
	Mr. Jernegan, GTI.

Mr. Tsaldaris raised the question of the creation of a national guard in Greece to relieve the Greek Army of the necessity of protecting villages and towns against guerrilla attack so that it could be concentrated for offensive operations. Mr. McGhee said we had just received a telegram from the American military group in Athens saying that it had been agreed with the Greek Government to allocate to the national guard the six million dollars previously earmarked to support a permanent increase of 10,000 men in the Greek Army. It was calculated that this sum of money, plus the funds which could be made available by savings through disbanding the existing irregular forces and reduction in the size of the gendarmerie would permit the formation of thirty-two national guard battalions or a total of 16,000 men. The American Mission for Aid to Greece considered that any greater expenditures in this field would produce a ruinous inflation in Greece.

The Foreign Minister remarked that he could not understand how a force of 16,000 men could meet the needs of the situation.¹ He inquired whether the Department could not instruct Governor Griswold to authorize a larger force. Mr. Henderson said that we must depend on our representatives on the spot who know all the facts and are in direct contact with the Greek Government. He knew that Governor Griswold was just as interested as the Department of State in restoring order in Greece, but had to consider economic as well as military aspects of the problem. Mr. McGhee added that the Greek Government’s budget is already out of balance by one trillion drachma. This kind of budgetary situation could bring on runaway inflation from which Greece might never recover.

Mr. Tsaldaris then asked whether the quantity of supplies which could be furnished under the funds already allocated to military expenditures could not be increased by reducing the price being charged by the United States for surplus items. Mr. McGhee said he did not believe this could be done since it would have the effect of circumventing the intention of Congress when it appropriated the Aid funds. Congress had designated a certain sum of money to be spent for aid to Greece, and this amount had been calculated on the basis of our standard pricing policy. To change that policy would amount to increasing total expenditures without the consent of Congress.

1. In a conversation with Mr. Lovett on October 29, Mr. Tsaldaris expressed the hope that some means would be found to increase the national guard to 50,000 men (868.00/10–2947).