868.51 War Credits/481

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

My Dear Mr. Secretary: Enclosed is a copy of the statement issued yesterday by Secretary Mellon in connection with the proposed settlement of the indebtedness of the Greek Government to the United States.

Very truly yours,

Ogden L. Mills
[Enclosure]

Statement Issued to the Press by the Secretary of the Treasury (Mellon)

The Secretary of State and the Secretary of the Treasury have for some months past conducted conversations with the Greek Minister at Washington looking to the settlement of the indebtedness of the Greek Government to the Government of the United States, which as of January 1, 1928, will amount, principal and interest, to the sum of $19,659,836.

The indebtedness arose by virtue of an agreement dated February 10, 1918, under the terms of which the Governments of the United States, Great Britain, and France agreed to advance to the Greek Government by equal shares not to exceed 750 million francs. The object of this agreement was to aid the Greek Government in procuring in Greece the credits required for the conduct of Greece’s military operations against the Central Powers. Advances were to be subject to the approval of an Inter-Allied Financial Commission, [Page 17] composed of one representative from each of the signatory Governments, and the use of the funds was to be controlled by this Commission and by a military Commission similarly established. The reports of the American Consul General at Athens, who represented the United States on this Commission, show that Greek expenditures under the agreement reached the total of 682,134,693.54 drachmae (the drachma being equivalent at par to the gold franc). There is no doubt but that Greece expended for war purposes under the 1918 agreement an amount largely in excess of the advances she has since received.

Upon the recommendation of the American delegate on the Financial Commission, credits to the amount of $48,236,629.05 were established by the Treasury of the United States with the approval of President Wilson in favor of Greece from June 20, 1918, to July 31, 1919. The first actual advance was made by our Government to Greece on December 15, 1919, the second on January 16, 1920, and the third on September 24, 1920. All told, we actually advanced $15,000,000.

The Greek Government has consistently contended that it was entitled to further advances up to the full amount of the credits established by the Treasury of the United States. On the other hand, the Government of the United States has taken the position that events which transpired subsequent to November, 1920, relieved it from making any further advances. This difference of opinion has heretofore prevented the reaching of an agreement for the settlement of the indebtedness of the Government of Greece to the United States.

In April, 1927, the British and Greek Governments reached an agreement for the settlement of the indebtedness of the Greek Government to the British Government which had arisen under the terms of the agreement of February 10, 1918, Great Britain having advanced approximately 6,540,000 pounds, or $31,826,910. Under the terms of this settlement the obligation is to be discharged over a period of 62 years at a low rate of interest and all claims for further advances under the 1918 agreement were waived by the Greek Government.

In the recent conversations with the Greek Minister, the British debt settlement with Greece was taken as a basis, our position being that the United States Government was entitled to as favorable a settlement as that accorded to Great Britain. The Greek Government conceded the soundness of this contention, but pointed out that in order to enjoy as favorable a settlement as that accorded to Great Britain the United States Government should in fairness advance a sum as great as that advanced by Great Britain under the terms of the 1918 agreement. Great Britain having advanced the equivalent of approximately $31,826,910, and the sum advanced by the United [Page 18] States Government being $15,000,000, which with interest to January 1, 1928, at 5 per cent amounts to $19,659,836, the amount of new money to be advanced by our Government in order to reach the amount advanced by Great Britain is $12,167,074.

It is proposed, therefore, to recommend that the Congress authorize the concluding of an agreement with the Greek Government on the following basis:

The $15,000,000 of principal owed by the Greek Government with interest at 4¼ per cent up to the 15th of December, 1922, and on the amount then due interest at 3 per cent to January 1, 1928, to be funded over a period of 62 years on the basis of the Greco-British settlement, save that during the first three years the payments to be in reduced amounts.

The United States Government to advance $12,167,000 to the Greek Government at 4 per cent, with sinking fund for retirement in 20 years; the Greek Government to forego all claims for further advances under the 1918 agreement.

The Greek Government will furnish as security for the new loan the revenues at present under the control of the International Financial Commission established by the law of February 26, 1898, in so far as the yield of these revenues is not required for the service of the loans having a prior charge upon the said revenues.

The loan is to enjoy the same securities and guarantees as the 9 million pound loan sanctioned by the Council of the League of Nations, as set forth in the protocol dated Geneva, September 8, 1927, and the service of this loan is to be administered and assured by the International Financial Commission. As of 1927, the excess of revenues at present under the control of the International Financial Commission over those required for the service of the loans having a prior charge amounts to approximately $28,000,000, and therefore the service of the proposed $12,167,000 loan will be amply secured.

Pending the assumption of control by the International Financial Commission, the Greek Government undertakes to assign the unpledged revenues to the American Minister at Athens as security for the service of the loan.

Recent events in the Near East have involved for Greece a very considerable displacement of population. The total number of refugees added to the population of Greece amounts to about one million and a half, or more than 20 per cent of the population. In 1923 there was organized by formal and official agreement a Refugee Settlement Commission, of which the Chairman, according to the organic articles, must always be an American citizen. Mr. Henry Morgenthau was the first Chairman; and Mr. Charles B. Eddy is now Chairman. The task of this Commission is to establish the refugees in productive work. In 1924 a loan of over $59,000,000 was floated in [Page 19] the world markets under the auspices of the League of Nations for the purposes of the Refugee Settlement Commission. Great progress has been made, but much remains to be done to complete this humanitarian work. The proceeds of the $12,167,000 loan to be made by the United States Government to the Greek Government are to be applied in their entirety to the work of the Refugee Settlement Commission.