Foreign Relations of the United States, 1950, The Near East, South Asia, and Africa, Volume V

881.00R/10–2350

Economic Cooperation Administration Mission to Greece Monthly Report for September 1950 ( R –41)¹

[Extract]

confidential

Athens, October 20, 1950.

I. Greek Government

A. Greek Aid Cut

1. The Chief of Mission, on September 15, informed the Greek Government’s Economic Policy Committee that there would be a reduction in the amount of American aid to Greece for the current year. The Economic Policy Committee consists of the Prime Minister, the two Deputy Prime Ministers and the Ministers of Coordination, Finance, National Economy and National Defense. This reduction was not to be attributed to the decrease in the Congressional appropriation. The decision to reduce the aid was taken only after considerable deliberation which yielded the conviction that present conditions in Greece were not such as to guarantee a prudent and effective use of the previously anticipated amount of American assistance. The amount of the reduction was not disclosed at the September 15 meeting.

2. On September 27, the Mission was notified by OSR that the amount of direct aid to Greece for the current year had been reduced to $91.8 million. This sum combined with the credit equivalent to $115 million established for the account of Greece by the European Payments Union, brought the total of ECA aid to Greece for the current year to $206.8 million instead of $271.3 million as had originally been planned under the Snoy²–Marjolin³ formula⁴ adjusted in favor of Greece. The Mission communicated to the Government a formal notification of the exact amount of aid for the current year. This notification was in the form of a letter from the Chief of Mission to the Prime Minister,⁵ explaining why the Mission had recommended that the aid be reduced and setting forth the specific steps which the Mission believed the Government should take to make proper and effective use of the reduced amount of aid.

3. The letter was delivered to the Prime Minister on September 27. All Greek newspapers carried rumors of its contents for the next two or three days, but the Government did not release the text until October 2.⁶

4. The letter presents a comprehensive view of conditions in Greece for the whole period since the beginning of American aid in 1947. It refers pointedly to a provision in the note of the Greek Government to the American Government on June 15, 1947,⁷ pledging certain reforms as a condition of receiving American aid granted under Public Law 75 of the 80th Congress⁸ (the AMAG Program). This note provides as follows:

“The Greek people realize that ultimate solution of their problem requires great and continuous effort by themselves. They are aware that the extensive aid of the United States will not alone be sufficient to meet the large costs of restoring public order and reconstructing productive facilities over a period of years. The Greek Government will lead its people in their effort to achieve these ends. This responsibility entails the composing of internal differences, the collection of more revenues, the rebuilding of foreign trade, the conservation of foreign exchange, the reconstruction of public works, the improvement of Government administration, assistance and guidance to agriculture and industry, establishment of protective labor measures, encouragement of democratic organizations among economic and social groups, measures to control inflation and assure equitable distribution of supplies and services, and the restraint of excesses and extravagances on the part of any segment of the population. The Greek Government will undertake these and all other necessary measures to marshal Greece’s own resources to the fullest extent in attaining the ends for which American assistance may be extended.”

5. After observing that fulfillment of these conditions is still essential, the Mission’s letter outlines the measures which the Greek Government should adopt to increase its foreign exchange earnings, to reduce its expenditures and generally to improve conditions for the most effective utilization of American aid. Briefly, the letter suggests the following: (1) a more satisfactory execution of American assistance in investment projects, including a more complete use of existing materials and stocks and an improvement in competent administration of the projects; (2) a rigorous adherence to the adopted budget and an avoidance of new expenditures; (3) an increase in revenues, derived from more effective tax assessments and collections, a simplification and revision of the existing tax system and the enactment of measures, such as the registration of the ownership of capital shares, necessary to permit the tax authorities to detect evasions, and the elimination of useless and obsolete taxes; (4) an increase in foreign exchange from exports, shipping and tourism; (5) a vigilant conservation of the existing foreign exchange resources of the country, precluding their use for the import of luxury items; (6) the stabilization of prices and the elimination of monopolistic practices; (7) encouragement of private capital, both foreign and domestic, to induce local capital to invest in the more productive enterprises in the country, as opposed to non-productive projects, such as the erection of luxury apartment houses; the attraction of foreign capital by establishing a “climate” that would induce foreign capital to come to Greece through expectation of proper treatment and a fair return on its investment; (8) enforcement of controls on credit to assure a maximum use of bank credit; (9) enactment of administrative reforms necessary to good management and the effective utilization of American assistance.

6. The Government inquired what particular steps the Mission would recommend to accomplish the above objectives. Accordingly, the Office of the Chief requested each Division in the Mission to submit a list of the legislation it regarded as essential to the maximum utilization of American assistance. From this list, a final compilation was made. The Mission delivered to the Minister of Coordination, on October 2, a memorandum describing the particular proposals which the Mission believed would accomplish these objectives.⁹

7. These proposals fell into two general categories: proposals on which action was urgently required; and those which were of a less immediate nature but nevertheless had been agreed upon between the Mission and the Government and on which action was desirable.

8. The first category of proposals relate to fiscal reform and effective administration of the government. The Mission believes that the Government should undertake a revision of income tax legislation and enact measures necessary to improve tax enforcement. Compulsory registration of the ownership of capital shares should be provided. There should be a revision of the basic income tax laws permitting the tax burden to shift to those most able to pay and assuring a simplification of the tax system. There should be a vigorous assessment and collection of income taxes, equitably, and without discrimination, for past years as well as for the current year. Unjustified exemptions from income and other taxes should be eliminated. Miscellaneous indirect taxes which burden productive enterprises and which are uneconomical to collect should also be eliminated. Third party taxes which cannot be justified should be abolished. Public funds and accounts outside the budget should not be tolerated but should be assimilated into the budget. The budget itself, as adopted by the Government, should be adhered to rigorously and new revenues should be provided from acceptable sources to meet any additional necessary expenditures.

9. With respect to the effective administration of the Government, the Mission believes that certain measures are required to improve the Government machinery to facilitate a more effective administration of the recovery program. Certain of the Government Services should be reorganized. The Ministry of National Economy should be reorganized and, at the same time, the Ministry of Supply and Distribution should be abolished, and its principal functions transferred to the Ministry of National Economy. A new and independent Tourism Service should be established. The Port of Piraeus Authority should be completely reorganized. The Royal Decree establishing the structure of the new Ministry of Coordination should be issued. The Civil Service Code should be-ratified, but with certain necessary amendments. The Government should take immediate steps to enact the General Statistics Law. In continuation of the program of Administrative Decentralization, measures should be adopted for the revitalization of local governments, and steps should be taken to delegate to them local taxing authority. The Royal Decree establishing the structure of the new Power Agency should be completed and issued at an early date. There should be prepared and enacted a Law designed to attract foreign capital. The Government should take steps to secure the ratification of the Emergency Laws relating to the Recovery Program, the validity of which has been challenged.

10. The second general category of proposals consisted of a list of certain other recommendations which, while not of the same high priority, are nevertheless directly related to the efficient execution of certain sectors of the recovery program. Certain of these proposals, which were agreed upon between the Mission and the Services of the Greek Government, were listed in a letter from the Mission to the Minister of Coordination on May 17, 1950 (see Mission Report for May, R–26, paragraph 2).¹⁰ This letter stated that the proposals had been agreed upon and were in final form, ready for legislative action. The letter listed proposals for the creation of a Directorate of Labor Statistics in the Ministry of Labor; the creation of an apprenticeship training service in the Ministry of Labor; the establishment of a nutrition service in the Ministry of Agriculture; the establishment of an agricultural extension service in the Ministry of Agriculture; the establishment of a tuberculosis directorate in the Ministry of Hygiene; and a Law providing Army commissions to Greek Army nurses. In addition to these proposals, there are two recommendations which are ready for final action and which may now be added to this list—the establishment of a veterinary college at Salonika and the creation of an automotive directorate in the Ministry of Transport.

11. The Government has specifically agreed to most of the above proposals listed in the memorandum of October 2 and has agreed “in principle” with the balance of the proposals. At the Government Economic Policy Committee meeting held on October 6, the Prime Minister stated that the Government would enact all these measures within thirty days. If this were to be done, it would represent the most significant effort made by any Greek Government in over three years to carry out the commitments contained in the note of June 15, 1947.

12. Dating from the first rumors of the reduction in aid, the Greek press had been sharply critical of the Mission in particular and Americans in general—to the point that the Prime Minister felt it necessary to issue a sharp rebuke. The revised spirit of cooperation between the Mission and the Government, after the October 6 meeting, was hailed on the front page by all papers except “Dimokratikos”, the hardly disguised mouthpiece for the Communist Party in Greece.

13. The most important accomplishment to date in implementing these proposals has been the signing of the Royal Decree setting up the structure of the Ministry of Coordination. Discussions on many others are proceeding.

14. The Mission has suggested that discussions on the content of the Royal Decree establishing the Power Agency should be accelerated and that a Decree should be drafted as soon as possible, not only to permit the Agency to come into being but also to enable EBASCO¹¹ to fulfill important obligations. Representatives of EBASCO are now participating with the representative of the Mission and with a representative of the Ministry of Coordination in meetings on this draft proposal.

15. The memorandum of the Mission on the attraction of foreign capital, which had been transmitted to the Plastiras Government in August, had never been discussed with that Government, and copies of it have now been communicated to the Minister of Coordination and the Minister of National Economy for their study and comments. The Government has expressed a desire to enact such a law at the earliest possible opportunity.

16. Clearly, the Mission’s success in securing such a large measure of cooperation from the Greek Government is not free of implicit risks. For one thing, the local press is fostering the belief that no action may be taken by the government without active Mission concurrence. ECA will certainly bear the brunt—in the minds of most Greeks—of any and all future failures. Moreover, should the present government fall when Parliament reconvenes, ECA will be accused of interference. In the final analysis, this only means that the Mission must be prepared to be criticized for every unpopular move taken by the Greek Government, and must be doubly vigilant for signs of future shortcomings.

. . . . . . . . . . . . . .

1. Copy transmitted to the Department of State by Counselor of Embassy for Economic Affairs, David M. Maynard, in his despatch 632, October 23, from Athens.
2. Baron Jean-Charles Snoy et d’Oppuers, former Chairman of the Council, Organization for European Economic Cooperation.
3. Robert E. Marjolin, Secretary General, Organization for European Economic Cooperation.
4. The Greek share under the Snoy-Marjolin formula was 5.088 percent of total direct country economic aid to Europe.
5. Not found in Department of State files.
6. Athens newspaper ‘H’ Καφήμερινή (Daily), October 3, 1950.
7. See Foreign Relations, 1947, vol. v, pp. 182 and 204.
8. Approved May 22, 1947; 61 Stat. 103.
9. Not printed; text in Athens Embassy Files, Lot 58F6, 500 ECA.
10. Not printed.
11. EBASCO Services, Inc., a company of engineers, constructors, and management consultants, with headquarters in New York.