868.51 Public Works/86

The Ambassador in Great Britain (Dawes) to the Secretary of State

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 [Page 103] 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

The British Permanent Under Secretary of State for Foreign Affairs (Lindsay) to the American Ambassador (Dawes)

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?

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.
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 [Page 104] 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.
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.
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.
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 [Page 105] 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.
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.
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,

R. C. Lindsay
  1. Not printed.
  2. See part ii, section i, of treaty of peace, signed at Lausanne, July 24, 1923; League of Nations Treaty Series, vol. xxviii, pp. 12, 37.