868.51 Refugee Loan, 1924/94
The Chargé in Greece (Morris) to the Secretary of
State
No. 2156
Athens, May 24, 1932.
[Received June
8]
Sir: I have the honor to refer to my
despatch No. 2146 of May 16th relative to the protest against the
Greek foreign debt default. I am enclosing a copy and translation of
the reply addressed to me by the Hellenic Foreign Office and a copy
and translation of the reply addressed to the British Minister in
answer to his protest delivered the same day.10 I also enclose a copy of my Aide-Mémoire left with the Minister for
Foreign Affairs, Mr. Michalakopoulos, on May 7th, to which reference is
made in the reply of the Foreign Office to my note of May 14th.
It will be noted that the reply addressed to me by the Foreign Office
is identical with that addressed to the British Minister, leaving
out inappropriate sections of the reply to the British note. There
is only one thing in the Greek Government’s reply which introduces
any new element of argumentation to be added to those already used
both publicly and in previous official communications. That is the
statement that the total reserves of the Greek Government in the
hands of the Bank of Greece amount at the present time to only
$2,350,000. Just before Greece went off the gold standard Mr.
Veniselos made the statement in Parliament
that the Greek reserve had shrunk from some $30,000,000 in
September, 1931 to approximately $13,000,000 at that time. It is
difficult to reconcile the enormous divergence between the figures
which Mr. Veniselos gave out in April and the
figures given in the Foreign Office note. While it is certain that
the amount of foreign exchange in the hands of the Greek Government
is very small, compared to its needs, it may well be doubted whether
the sum of $2,350,000 is an accurate statement or whether it is not
scaled down for effect. The official figures of the Bank of Greece
indicate a larger sum of money on hand.…
On May 19th the French Chargé d’Affaires and the Italian Minister
handed notes to the Minister for Foreign Affairs identical in nature
to the protests made by the British Minister and by myself on May
14th. They received the same reply as that given to the British
Minister. Yesterday the British Minister visited Mr. Michalakopoulos informally and gave
him what he termed a “piece of friendly and unofficial advice from
Sir John Simon.”
Sir John Simon wished to
make it known to the Greek Government that it should in its own
interest not leave the Greek public to expect that definite relief
would [Page 393] be obtained by
Greece at the coming Lausanne Conference,11 and he
let it be known that Greece would make a much better showing at the
Lausanne Conference if before going there it took the necessary
steps to enter into contact with the British bond-holders in a
sincere effort to arrive at a mutual understanding in respect of the
debt default. Mr. Michalakopoulos told the British Minister in reply
that he was no longer in a position to state how far the advice of
Sir John Simon would be
followed, in view of the fact that the cabinet of which he is a
member had submitted its resignation.
Respectfully yours,
[Enclosure 1—Translation]
The Greek Minister for Foreign Affairs
(Michalakopoulos) to the American Chargé
(Morris)
Monsieur le Chargé d’affaires: With
reference to your Aide-Mémoire dated May
7th,12 as well as to your note
dated the 14th instant, No. 166, I hasten to bring to your
knowledge the following with regard to the question of the
transfers required for the service of the American loan placed
under the control of the International Financial Commission.
Greece has been almost the only one amongst the small countries
which took part in the War which, during its course and after
the catastrophe of Asia Minor, has continued to pay in full the
service of its debts in gold. If she now finds herself in the
inescapable necessity of delaying temporarily the transfer of
the necessary sums in foreign money for the service of her
foreign debt, this is entirely due to the monetary situation of
the country which is causing the deepest anxiety to the Hellenic
Government. In order to give an exact idea of this situation it
will suffice that I cite to Your Excellency the fact that the
total reserve of the Bank of Greece in gold and foreign money
amounts at the present moment to $2,350,000. Now the national
money has already suffered during these latter days a
depreciation which continues, of almost 50% of its value
without, however, stopping the tendency to a still more sensible
depreciation. To continue in these conditions to effect the
necessary transfers for the regular service of our foreign debt
could only bring about a complete collapse of the drachma with
all the disastrous consequences which this would have, not only
for the budget balance but also for the interior order and the
social peace of the country. In [Page 394] truth there would be no other remedy to
prevent the considerable deficit which would result to the
budget from this than to have recourse to new emissions of paper
money which would bring about with certainty a financial,
economic and social catastrophe such as was seen in Germany in
1922–1923. The first to feel the grave consequences of this
would be the creditors of Greece, seeing the material
impossibility which the latter would be in to continue to pay
her foreign and her domestic debts.
To the contrary of this, it is to be hoped that the temporary
suspension of the transfer of the sums in drachmas which the
Hellenic Government will be able to set aside by the budget of
the fiscal year 1932–1933 for the coupons of the foreign debt
will permit Greece to await the result of the approaching
Conference of Lausanne and to arrive at an agreement with her
creditors. Greece desires to hope that the decision of this
Conference and the measures to be taken to prevent economic
disaster in the countries of the Southeast of Europe will permit
her to avoid the grave dangers which she is facing at this
present moment. The creditors of Greece will only be the gainers
in these circumstances which would permit the Hellenic
Government, while at the same time looking out for the economic
and financial situation of the country, to make propositions in
the very near future of an equitable nature and as satisfying as
possible to the holders of the Greek debt.
In the meanwhile the Ministry of Finance is proceeding to a
complete study of the financial situation and in a few days will
be in a position to present the budget for the fiscal year
1932–1933 to the Chamber, and will not fail to follow very
closely the evolution of the financial situation to the best of
the interests of the country and of her creditors.
In order to give a proof of its respect for its international
engagements, the Hellenic Government desires to state that it
would be quite ready to submit the whole of this question to an
arbitral discussion. This arbitration could be extended
advantageously for all the parties concerned on the point of
learning what is really Greece’s capacity of payment.
The Government of the Republic likes to believe that the
Government of the United States of America which in all
circumstances has given proof of such good-will towards this
country, will appreciate with full understanding the gravity of
the moment which Greece is now passing—the Greece which, as I
have already said, has made an effort to execute its engagements
with a scrupulous precision—and will be good enough to recommend
to the American bond-holders not to adopt an attitude of
unreasonableness which for [Page 395] the reasons above mentioned would be
diametrically opposed to their own interests which are well
understood.
Please receive [etc.]
[Enclosure 2]
The American
Legation to the Greek Ministry
for Foreign Affairs
Aide-Mémoire
The American Chargé d’Affaires called upon the Hellenic Foreign
Minister and with further reference to the matter of the
suspension by Greece of the service upon her external debt held
in the United States, reiterated the views which his Government
held in this matter and which had been the subject of his verbal
representations to the Foreign Office on April the 30th.
Mr. Morris stated to His Excellency Mr.
Michalakopoulos that
the explanation contained in the Foreign Office’s Aide-Mémoire which Mr. Lambros handed Mr.
Morris on April 30th as to the
imperative necessity for the Greek Government’s action in
preventing the Bank of Greece from transferring the May 1st
maturities of the 1924 Greek Government 7% Loan, is not regarded
by the Secretary of State of the United States as adequate. The
Secretary of State has emphasized to the Hellenic Minister in
Washington his view that because of the commitments given by the
Greek Government to the International Financial Commission the
present action of the Greek Government assumes an unusually
serious aspect and if allowed to stand will add to the
disappointment and criticism with which Greek credit will be
viewed. The Hellenic Minister at Washington was also told of the
seriousness with which default in payment will be regarded by
American investors who have contributed so much to the
development of Greece and aided so greatly in meeting various
Greek national emergencies.
Mr. Morris reiterated several reasons why,
in the opinion of his Government, the Greek Government should
exert itself to the utmost to meet its external financial
obligations and to make all necessary sacrifice to that end. In
the case of the 1924 and 1928 loans 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 surely
fulfill its promises. Mr. Morris recalled
that there existed the strongest foundation for this belief
because the representatives of the Greek Government made a clear
and emphatic declaration in this sense to the Financial
Committee and to the Council of the League of [Page 396] Nations, and to the American
Government. The fact that the Greek Government requested the
support of these bodies in its application for financial
assistance was taken as a guarantee that the Greek Government
would always meet its responsibilities.
In view of the foregoing considerations, Mr.
Morris expressed to His Excellency the
Hellenic Foreign Minister the belief of his Government that the
Greek Government should exert itself to the utmost to meet its
obligations in the fullest possible measure.
