From my conversations with Mr. Varvaressos and
two officials of the Foreign Office who have been engaged in this
matter, it is evident that they do not share Mr.
Veniselos’ view-point and probably
endeavored unsuccessfully to have him look at this question in its
true light. The explanation of Mr. Veniselos’
attitude is to be found largely in the fact that the Stabilization
Loan arrangements were made by Mr. Kafandaris and it is well known here that all of the
financial arrangements made by Mr. Kafandaris have irked Mr.
Veniselos very greatly. It is probably as
much for this reason as for his desire to have the second part of
the 1929 debt settlement regarded as a war debt for any future
advantage that that might imply, that Mr.
Veniselos maintains so emphatically, as he
did in his conversation with me and as he has with his financial
advisers, his conception that the second part of the debt settled in
1929 must be regarded as a war debt and must not be looked at from
the actual terms of the settlement. In a few words, he is trying to
wipe out what Kafandaris did
and what he does not approve of.
[Enclosure—Translation]25
The Greek Prime Minister (Veniselos) to the American Chargé
(Morris)
Memorandum
The Greek Minister in Washington addressed himself on the 24th of
September to the American Government to request it, in taking
account of the extreme gravity of the economic and financial
situation of Greece, to consent to facilitate provisionally this
situation by accepting that the payment due to the American
Government the 10th of next November in connection with the
second part of the Greek debt to the United States should not be
paid when due but should be put off to some future date. The
Hellenic Government suggested, by way of an indication, the
granting of a suspension of two years and a half, according to
the mechanism provided in the Greco-American agreement for the
first part of the debt of Greece towards the United States; or,
if such a suspension was not judged possible
[Page 403]
by the American Government, the
finding of another solution which would permit a temporary
accommodation.
The American Government in answering this request not only does
not show itself disposed to grant the request of the Hellenic
Government, but, notwithstanding the fact that the next payment
of Greece does not become demandable until the 10th of November,
addresses to it a protest by anticipation against any treatment
of the holders of the Hellenic Stabilization Loan of 1928 more
favorable than that given to the American Government for the
second part of the debt of Greece towards America.
The attitude of the American Government in respect to the first
part of this debt has been quite otherwise. In effect, it lent
itself willingly, in conformity with the clause of the first
part, paragraph 2, of the agreement of May 10, 1929, to the
suspension during two years and a half of the semiannual payment
which should have been paid to it on the 1st of July.
Evidently the American Government, by the difference of its
attitude in respect of the two parts of the debt of Greece,
shows that in its opinion, although they were simultaneously
settled by the agreement of the 10th of May, 1929, these two
parts none the less constitute two debts entirely independent
one from the other and different by their nature. Certainly the
two parts of the Greek debt towards America are not governed by
the same dispositions, the payment for the first part benefiting
by the clause of suspension and being funded in 66 annuities
while those of the second part do not benefit by this clause and
are spread over 20 years only and, above all, are placed under
the control of the International Financial Commission. But in
reality the second part of the debt does not differ from the
first, neither by its origin nor by its nature, nor by the
objects for which it has been used; although in the final
settlement it took the form of a loan advanced to Greece in
1929, it was none the less an execution—and a partial one at
that—of the obligation towards Greece assumed by the United
States during the war for the pursuit of their program as
belligerents.
In order to leave no doubt on this point it suffices to recall
herein-under the history of the Greco-American financial
relations during the war and the conditions in which the
settlement of the Greek debt was effected. By the agreement of
February 10, 1918,26 the three Principal Allied and Associated
Powers—the United States, Great Britain and France—in order to
assure to Greece the necessary resources
[Page 404]
for the mobilization and equipment of her
Army and her Navy, and her participation in the military
operations, engaged themselves to grant to the Hellenic
Government for the expenses of the year 1918 advances amounting
to a total of 30 million Pounds Sterling, a third of which was
assumed as a charge by each one of the three powers. The
agreement was signed for America by the accredited
representative of its Treasury Department, Mr. Oscar T. Crosby. The part of
these advances falling upon the United States, expressed in
dollars, amounted to $48,236,629. During the duration of the war
these advances could be utilized by drawing upon one or the
other of the loaning states in the case where the credit abroad
of the Hellenic Treasury and of the National Bank should fall
below 100 million francs. Six months after the conclusion of
peace the balance of these advances might be made use of without
restriction. In the meanwhile, these advances were to serve as
cover for the issues of the National Bank of Greece which could
be utilized when needed for the military requirements of the
Hellenic Government and at its request, after agreement with the
two interallied commissions—the one financial and the other
military—set up for that purpose.
In conformity with the above dispositions of the agreement of the
10th of February, 1918, Greece proceeded to incur war expenses
which absorbed the total of the advances foreseen. These
expenses were always regularly entered into after the previous
consent of the two interallied commissions. On the
recommendation of the American delegate on these commissions,
the account of Greece between the 20th of June, 1918, and the
31st of July, 1919, was credited by the Treasury of the United
States, with the approval of President Wilson, with a sum equal
to the part of the interallied advances falling upon the United
States; that is, $48,236,629. Corresponding credits were opened
in the favor of Greece by the British and French Treasuries.
These credits altogether constituted the cover of the issues
made in Greece in conformity with the agreement of February 10,
1918, the sum of these issues being equal to the credits opened.
However, although the total of the sums thus issued might have
been regularly expended for its military needs, Greece had not,
until November, 1920, drawn on these credits except in a
moderate manner. By reason of the favorable situation of its
exchange which was of greater value than the franc, she did not
have recourse to the French credits, the total of which remained
due to her. She drew on Great Britain £6,540,000 (or
$31,826,910), and thus had a right still to receive the balance.
On the United States she made three drawings: the 15th of
December, 1919; the 16th of January, 1920; and the 24th
[Page 405]
of September, 1920;
drawing in all a total of $15,000,000. There remained therefore
to her to receive from the United States $33,236,629.
Such was the situation when, following upon the events connected
with the domestic political life of Greece, and in particular by
the decision of the Hellenic Government which issued from the
elections on the 13th of November, 1920, to restore
King Constantine to the throne, the
Governments of Great Britain and France notified Greece that “in
case King Constantine again mounts the throne, Greece will not
receive from the Allies any financial help.” Great Britain and
France, basing themselves on this notification which furthermore
did not in any manner authorize them to confiscate credits
already existing in favor of Greece, refused to permit the
Hellenic Government to draw upon the credits to which it had the
right. Following their example, the Government of the United
States, although it did not oppose the return of King
Constantine and thus as a consequence could not even invoke the
pretext of the warning made by the two other powers, none the
less did not proceed to the payment of the $33,236,629 which it
still owed to Greece.
Thus considerable sums issued by Greece and guaranteed by the
signature of the American Government and completely expended by
the Hellenic Government in accordance with the agreement of the
10th of February, 1918, for the common war objects of the Allied
and Associated Powers, became deprived of their security and
remained a charge on the Hellenic Treasury. It is accurate to
recognize that that was indeed a source of disastrous
consequences for Greece. The retention of the American credits
as well as credits due by the two other powers certainly
constitutes one of the factors of the Hellenic disaster in Asia
Minor and the determining cause of the breaking down of the
Greek currency system between 1920 and 1923. Moreover, without
this retention, Greece would not have been compelled to adopt
the policy of exterior loans on a large scale which she was
forced to practice, and in particular the Stabilization Loan of
1928 would not have been necessary, to which the United States
insisted in linking—and still today links—the second part of
their claim against Greece.
From 1920 Greece did not cease to invoke her rights by claiming
the total of the American credits, and, as the United States did
not show herself disposed to meet this demand, no agreement
could be brought about between the two countries until January
1928, when a compromise arrangement could at last be arrived at:
the American advances to Greece would be increased by
$12,167,074 which, added to the $15,000,000 already advanced up
to 1920, representing on the 1st of January, 1928, with interest
at 5 percent, the sum of $19,659,836,
[Page 406]
would bring up the total of the American
advances to $31,826,910; that is, to a sum equal to that which
Greece had actually received from Great Britain. Thus the
American advance became equalized with the British advance. By
reason of this advance Greece renounced the balance of its
credits on America. It was at the same time stipulated that this
new advance would be paid in 20 annuities and not in 66 as the
first part of the debt; that it would be effected, as Greece
proposed, to the establishment of the refugees of Asia Minor,
and that its service would be placed under the control of the
International Financial Commission on a parity with the
Stabilization Loan of 1928, a loan which furthermore it must be
recalled only became necessary because the retention of the
Allied credits had brought about the breakdown of the Hellenic
currency.
It is true that the stipulations of the Greco-American agreement
concerning the advance of $12,167,074 added supplementary
guarantees in respect of this advance, but as it appears clearly
from the history set out above, this advance none the less
constitutes a part of the Greek war debt to America. If the
United States had consented to pay the whole balance of the
credits—that is, $33,326,629—there could have been no doubt that
this payment would have represented for Greece a war debt. The
fact that Greece was only able to obtain a part of this balance
cannot alter the war debt character belonging to its obligation.
This character is not further altered by the fact that the sum
advanced by the United States in 1929 was employed by Greece for
the work of settling the refugees, which moreover constituted
the most pressing need which came to it as a legacy from the
war. What is of true importance is that the war expenses for
which the credits for 1918 had been agreed to were really
incurred during the hostilities for the total of the credits.
The partial payment of their balance by the United States in
1929 was no more than a reimbursement. This point of view is
furthermore confirmed by the report of Mr.
Mellon, submitting to the President of
the United States on the 4th of February, 1928, the stipulations
of the Greco-American settlement.27 In
this same report it is explicitly stated that if the American
negotiators fixed the amount of the sum advanced in 1929 by the
United States as $12,167,074, thus equalizing the part of the
United States with that of Great Britain, this was done
precisely because they considered that it would not be equitable
for the United States to impose upon Greece a settlement more
unfavorable than that which she had concluded with Great
Britain. Now, today, by its refusal to grant Greece for
[Page 407]
the second part of its
debt which does not benefit by a suspension clause, an
accommodation which Greece is forced to solicit by reason of the
gravity of its economic and financial situation, the United
States imposes not only a treatment less favorable than that of
the British settlement but even less than that which they have
granted to other rich and prosperous debtors.
The Hellenic Government cannot indeed refrain from recalling that
whilst, to obtain the reimbursement of a third only of the
credits which remained owed by the United States and which had
been expended in conformity with an international agreement in
the service of a common cause, a small and poor country like
Greece was forced to accept a schedule of payment incomparably
more heavy and more burdensome than that for the other war
debts, at the same time one of the richest powers in the world
was able to arrange that a commercial debt arising from the
purchase of American supplies which were on her territory at the
end of hostilities should be included in the settlement of her
war debt and paid in 66 annuities with all the facilities which
such an agreement implies. That indeed is not the only example
of this nature which may be brought forward by Greece. Still
more recently—in July, 1932—another power, Belgium, smaller but
no less rich than the one cited above, which if it suffers at
the present time from the world-wide depression, is far from
having felt the deep shock which has come to Greece, has been
able to cause the recognition—not this time by the United States
but by Great Britain—of the war debt character of two commercial
debts,—one of nine and a half million Pounds Sterling for
national reconstruction contracted in 1919, and the other of
three and a half million Pounds Sterling for the Congo.
The Hellenic Government can only entertain the firm hope that the
American Government in accepting to reexamine the question of
the second debt of Greece in the light of the observations which
have just been made, will not wish to hold to considerations of
form but, looking at the question in all its aspects, will deem
it equitable to grant to Greece the facilities which are
appropriate to its particular situation.
[Athens,] 8 October,
1932.
