No. 185.
Mr. Schuyler to Mr. Frelinghuysen.
Athens, January 31, 1884. (Received February 22.)
Sir: I have the honor to inform you that within the last few days the law recently passed by the Chamber for a loan of 170,000,000 francs [Page 258] (about $34,000,000) has been signed by the King and promulgated. The discussion on the law was long and very serious, and before its passage the Chamber remained in session from 3 o’clock in the afternoon until 2 o’clock at night, a thing unprecedented in Greek history.
The proceeds of the loan are to be employed exclusively for paying off the debt to the National and Ionian Banks of about $13,700,000, in order to put an end to the forced circulation of bank notes, and for expenditure on railways and on naval and military preparations, for which, by two previous laws of July 4, 1882, and April 12, 1883, permission had been granted to contract loans of $8,000,000 nominal and $2,500,000 effective, respectively. These permissions are replaced by the present loan.
The loan is made with the Epiro-Thessalian Bank, the Bank of Constantinople and a syndicate comprising the latter, the Comptoir d’Escompte of Paris, the Société Générale of Paris, the Banque Générale d’Egypte, the Banque de Paris et des Pays Bas, the National Bank of Greece, the Bank of General Credit, and the Industrial Bank of Greece, &c.
The loan of 170,000,000 francs nominal is divided into 340,000 bonds of 500 francs or £20 sterling each, with a yearly interest, payable half-yearly, at the rate of 5 per cent., namely, 25 francs or £1 per bond. It is to be paid off in thirty-seven and a half years, by half-yearly drawings by lot, according to a scale of amortization printed on the back of the bonds. The interest is payable in Athens, Paris, London, and Alexandria.
As special security for the service of the loan, the Greek Government mortgages the customs revenues of the Piræus, Athens, Patros, Syra, Katakolo, Kalamata, Cephalonia, Zante, and Corfu, the stamp duties, the installments paid for national lands, and the tobacco tax, so far as not previously mortgaged for other loans, and the whole of the customs revenue of Volo, Tzagasi, and Asta.
The revenue appropriated to the loan is to be deposited in the offices of the Bank of Constantinople and the Epiro-Thessalian Bank in Greece.
The arrangement with the syndicate is so made that they take 55,000,000 francs ferme at the fixed price of 68½, or 342½ francs for a bond of 500 francs, and advance immediately after the promulgation 35,000,000 francs ($7,000,000) in gold, in Paris, which is to be used for beginning the resumption of specie payments. Sixty million nominal of the loan the Government reserves for itself to issue, and agrees to open the remainder, 55,000,000 francs, to public subscription, at any time within eighteen months, whenever the Government may think it advisable, the profit above the fixed price of 68½ to be divided between the Government and the syndicate.
The loan from the banks of $13,700,000 is to be repaid in three installments within nine months, and specie payments will not be really resumed until the expiration of that time, although we may expect the price of gold constantly to fall.
As the loan is not to be put upon the market until specie payments are resumed—in nine months’ time—it is thought that it will be easily taken at a premium on the price issued.
There can be but one opinion as to the advisability of resuming specie payments in any country, even if the Government has to suffer a loss, but especially where, owing to a forced circulation, the Government is in the hands of bankers for the purchase of gold necessary to meet their loan and other expenses abroad. This will bring the annual [Page 259] indebtedness for the purposes of the public debt up to over $6,000,000, which the country is perfectly capable of sustaining, but the increase is outweighed by other advantages.
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I have, &c.,