868.51 War Credits/478½

The Acting Secretary of the Treasury (Mills) to the Secretary of State

My Dear Mr. Secretary: I had an informal talk with the Greek Minister in Newport during my weekend visit. While insisting on the validity of the claim of the Greek Government for an additional loan up to the full amount of the credits granted under the terms of the 1918 agreement, the Greek Minister, speaking as an individual rather than in his official capacity, agreed that there was little prospect of a settlement if discussions were resumed on the basis of the legal contentions set forth in the briefs embodying the positions taken respectively by the United States and Greek Governments when the matter was before the Debt Commission last year. He concurred in the suggestion which I made that as a practical proposition we should lay aside the past history and consider the problem from the standpoint of the present situation, in which the United States Government desires the Greek Government to recognize and fund a debt of [Page 10] some $18,000,000, while the Greek Government desires to obtain an additional loan. I suggested to him that the first question that should be answered was the extent of the foreign credits actually needed by Greece at the present time, taking into consideration the fact that Greece expects to float a loan of nine million sterling in London in October. I told him that if he would ascertain this figure and if Greece would settle her debt to our Government, the opening of the American market would facilitate the obtaining of the additional amount as well as make it possible to obtain the nine million pounds in the London market on more favorable terms. He readily agreed that the actual amount needed by the Greek Government was a very pertinent question, and he said he would obtain the figure, but insisted that the new money to be obtained in this country should be loaned by the United States Government, rather than borrowed in the open market, his reason being, of course, that the money could be obtained more cheaply from the Government than from private investors. In answer I stated that we saw no reason why we should receive less favorable treatment than Great Britain. He then stated that he thought that the British agreement would furnish a basis for the settlement of their debt to us, but that we could not expect to obtain all of the favorable elements without at the same time accepting some of the unfavorable ones. He stated that what he meant by this was that he thought we should loan an amount equal to that loaned by the Government of Great Britain under the 1918 agreement, that is, some 6,250,000 pounds. He stated that he made this suggestion as an individual and that he expected that he would have some difficulty in persuading his Government to accept it but he asked me to think it over as a basis for settling the question.

This would mean an additional loan of approximately $12,000,000, the $30,000,000 to be funded at a low interest rate and paid over a period of sixty-two years. If any new money is to be advanced by our Government, and I assume that some will have to be if we are to reach an agreement, this proposition does not seem to me to be an unreasonable one. In any event, it is something definite which the President, yourself and Mr. Mellon can consider in September. The amount of new money to be loaned can probably be reduced in the course of further negotiations, but I want to suggest that following the lines of the British agreement offers some very positive advantages; whereas the additional loan of an arbitrary amount would be conceding the validity of the Greek claim without adequate explanation for scaling it down.

Very sincerely yours,

Ogden L. Mills