868.51 Public Works/86
The Ambassador in Great Britain (Dawes) to the Secretary of
State
London, August 12, 1929.
[Received August
21.]
No. 144
Sir: I have the honor to refer to my telegram
No. 231, August 12, 11 a.m., 1929,20 relating to the proposed Seligman loan to the Greek
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Government, and to forward
herewith a copy, in triplicate, of the Foreign Office note referred to
therein.
I am informed by Mr. Stephens, of Messrs. J. & W. Seligman & Co.,
referred to in the Department’s telegraphic instruction No. 181, July
17, 6 p.m., 1929, that Mr. Venizelos is, however, still optimistic in
servicing the proposed Seligman loan under the International Financial
Commission. Failing this, Mr. Stephens states that it is the intention
of the American company to inaugurate an American Commission in Greece
to service American loans.
I have [etc.]
(For the Ambassador)
Ray
Atherton
Counselor of
Embassy
[Enclosure]
The British Permanent Under Secretary of State
for Foreign Affairs (Lindsay) to
the American Ambassador (Dawes)
[London,] 8 August, 1929.
My Dear Ambassador: Mr. Henderson was very
sorry not to be able, before his departure for The Hague, to let you
have the statement which he promised you when you came to see him on
the 31st ultimo regarding the views of His Majesty’s Government as
to whether the International Financial Commission at Athens ought to
be requested to take control of the loan which the Greek Government
proposed to raise through the American firm of Seligman. In his
absence will you allow me to explain the position as it is seen by
His Majesty’s Government?
- 2.
- Let me begin by saying that His Majesty’s Government regard
with satisfaction every successful effort of American financial
houses and American enterprises of other kinds to assist Greece
in recovering from the effects of the war and solving the great
financial and economic difficulties which have been created by
the vast transfer of population from Asia Minor to Greece. The
participation of United States finance in Greek reconstruction
is recognized by His Majesty’s Government to be wholly
beneficial, and for this reason they do not entertain, and never
have entertained, the smallest intention or desire to
discriminate against the investment of American capital in
Greece. It is not, therefore, believe me, for motives of this
kind that they have felt it their duty to instruct the British
representative that the International Financial Commission
should not concern itself with the proposed Seligman
loan.
- 3.
- Whatever method is adopted for raising this or any other loan,
His Majesty’s Government consider that the overriding
consideration to be borne in mind must be the effect which would
be produced on Greek international credit and on the prudent
administration of
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Greek Government finances. His Majesty’s Government feel that
the true financial interests of Greece are that the Greek
Government should raise this loan on their own credit and
without relying on such guarantee as the administration by the
International Financial Commission could afford.
- 4.
- I can best explain the reasons which have led His Majesty’s
Government to this conclusion by reviewing the past history of
the International Financial Commission. The International
Financial Commission was set up at the end of the last century
when, as Your Excellency is no doubt aware, Greek finances were
in a difficult condition, in order to secure the services of
certain specified loans on which the Greek Government had
defaulted. Owing to the continued existence of these
difficulties certain further loans were later placed under the
control of the Commission, up to within a fairly recent period.
Latterly, however, the situation has completely changed. Greek
finances have been placed upon a sound footing thanks to the two
Greek reconstruction loans sponsored by the League of Nations,
and there is no reason to treat the Greek Government as if it
were in a state of chronic semi-bankruptcy. Greece’s economic
development and growing prosperity are now, I hope, assured, and
the recent issue of a loan by Messrs. Hambro quite independently
of the International Financial Commission seems to show that
this is the view held in financial circles.
- 5.
- It is generally recognized, and the United States Government
will I think share this view, that it is as a general rule
desirable that systems of financial control exercised by
Governments in foreign countries, perhaps as a legacy of the
past, should be limited as far as possible in their operations
and should certainly not be extended without very good reason
indeed. This principle applied to the operations of the
International Financial Commission in Athens. For the Commission
now to extend its activities by assuming control of the proposed
Seligman loan would, in the opinion of His Majesty’s Government,
be a retrograde step, and the mere fact of the Commission doing
so would be read as a reflection on the intrinsic value of Greek
credit. You will, I am sure, agree that this reflection would be
unjustified and that it would be wrong to give grounds for the
belief that Greece is unable to raise money on her own
responsibility.
- 6.
- So long as Governments who want to borrow are able to offer,
in addition to their own credit, the attraction of a
disinterested and honest debt administration such as that of the
International Financial Commission, experience shows that this
adventitious guarantee promotes a sense of irresponsibility both
in lender and borrower, which certainly ought not to be
encouraged. On the part of the
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borrowing Government more particularly it
offers a temptation to extravagance which is bound to be
prejudicial to the true economic interests of the State. The
Greek Government is as much liable to this temptation as any
other Government in the same position, and the existence of this
fact is an additional reason for limiting as far as possible the
future activities of the International Financial
Commission.
- 7.
- This brings me to the enquiry made by Your Excellency as to
whether the decision in regard to the Seligman loan will apply
to any future loans which Greece may desire to raise. As far as
His Majesty’s Government are concerned the answer to Your
Excellency’s question is certainly in the affirmative. There is
one exception. Part of the old Ottoman Debt falls, under the
Treaty of Lausanne,21 to be
served by Greece, and the origin and nature of the Ottoman Debt,
not to mention Article 48 of that treaty, will probably make it
necessary that this Greek share should be placed under the
control of the International Financial Commission. With this
exception, however, upon which it will be unnecessary for me to
enlarge, no further loans should, in the view of His Majesty’s
Government, be entrusted to the Commission.
- 8.
- I may add that the French and Italian Governments are in
agreement with the views which I have expressed above, and that
the reply from the International Financial Commission to the
Greek Government has only been delayed during the last few weeks
in order that it might be textually agreed to between the
Governments concerned, and because their representatives have
been on leave of absence from Athens. It ought now to be
delivered to the Greek Government before many days have
elapsed.
Yours sincerely,