Foreign Relations of the United States Diplomatic Papers, 1932, The British Commonwealth, Europe, Near East and Africa, Volume II

868.51/1217a: Telegram

The Acting Secretary of State to the Chargé in Greece (Morris)

Washington, April 28, 1932—7 p.m.

16. It is reported to the Department that the Greek Government has forbidden the bank of Greece to make the necessary remittance for the May 1 maturities on the 1924 Greek Government 7 per cent loan,² though the revenues pledged to the loan and collected by the International Financial Commission and turned over to the Bank of Greece were ample for the purpose. It is further reported that this is indicative of the intention of the Greek Government to suspend transfer on all its external indebtedness.

Please check this report immediately. If it is correct, you are instructed to discuss the matter with your diplomatic colleagues and with the Greek Government. It is our understanding that the members of the International Financial Commission have already protested to the Greek Government and have been supported in their protests by the Governments which appointed them. If this is correct, you may join your protests to theirs.

In addition you are instructed to point out to the Greek Government that any general suspension of payments would affect the debts due to the American Government under the Agreement signed between the two Governments on May 10, 1929.³ Under Article 2 of Part 2 of this Agreement, the service of the loan then extended by the American Government was secured by a first charge on the revenues under the control of the International Financial Commission subject to prior liens, and the Greek Government “has given its irrevocable mandate to the International Financial Commission and has taken all other necessary and proper steps to assign and charge as security for the service of this new loan by the United States all the above mentioned revenues, and the International Financial Commission has irrevocably undertaken to deal with such revenues…” It is true that under the Hoover Proposal⁴ the service on all debts due by the Greek Government to the American Government until June 30 have been suspended. But the Greek Government has not yet signed the Agreement with the American Treasury legalizing this suspension of payment⁵ though the matter has been brought to the attention of the Greek Government several times. If the Greek Government signs this Agreement the immediate issue regarding the May 10 payment will be avoided. But continued suspension on all Greek Government debts would raise the question later on.

The Department is not unaware of the financial difficulties of the Greek Government. But in its opinion there are several strong reasons why the Greek Government should exert itself to the utmost to meet its external financial obligations and make all necessary sacrifice therefor. Among these reasons, which you may point out to the Greek Government, are the following:

(1) That loans were extended by the American people and the American Government because of the assurance of safety given by the Greek Government in setting aside revenues to be collected under the supervision of the International Financial Commission and giving this Commission an irrevocable mandate so to protect the interests of the foreign lenders. It appears to the Department that now to interfere with the carrying out of the Commission’s purposes would be a grave breach of faith to the lenders.

(2) In the case of the 1924 and 1928 loans,⁶ the lenders were influenced in part by the thought that they were assisting in the reconstruction of the Greek nation in a period of emergency. They felt that in return for financial assistance given at a time of such great need the Greek Government would not fail to fulfill its promises. This judgment was reinforced by the clear and emphatic declarations which the representatives of the Greek Government made to the Financial Committee and the Council of the League of Nations, and to the American Government. The fact that the Greek Government solicited these agencies to sponsor their application for financial assistance was taken as a guarantee that the Greek Government would always meet its responsibilities.

In the light of all these considerations, the Department hopes that the Greek Government will carry out the service of its external loans.

Confidential and for your information only. If the Greek Government signs the Agreement presented by the Treasury legalizing the Hoover year suspension, the American Government protest on its own behalf would only come in point next November. It is highly desirable that the Greek Government sign this Agreement at once.

To the best of the Department’s judgment, the Greek Government could meet its obligations by making the necessary sacrifices. But if the Greek Government cannot be persuaded to meet them fully, it is hoped that it will limit its curtailment of service on external debts as narrowly as possible; that it will, for example, continue to meet interest payments even if it must suspend amortization, and it will continue to permit the International Financial Commission to function. In the presentation of these protests, you are to be guided somewhat by the action taken by the governmental representatives on the International Financial Commission. Report fully to the Department.

Carr

2. The loan, generally referred to as the “Refugee Loan of 1924”, was issued under the auspices of the League of Nations. Of the total loan, $6,000,000 was raised in the United States (see ibid., pp. 288–289).
3. Annual Report of the Secretary of the Treasury … 1929, p. 308.
4. Foreign Relations, 1931, vol. i, p. 1.
5. The agreement was signed May 24, 1932; see vol. i, p. 627.
6. The Greek Stabilization and Refugee Loan of 1928, like the Refugee Loan of 1924, was sponsored by the League of Nations; with the approval of the Government of the United States, American bankers participated in its flotation (see Foreign Relations, 1927, vol. iii, pp. 1 ff., and telegram No. 7, January 30, 1928, to the Minister in Greece, ibid., 1928, vol. iii, p. 7).