The Secretary of State to the Ambassador in Great Britain (Mellon)
281. Your 320, November 8, noon and 325, November 11, 5 p.m.37
The Secretary of the Treasury requests that you make the following statement to the Foreign Office with respect to the British Government’s proposed instructions to the International Financial Commission. The instructions set forth certain conditions which include the payment and transfer of certain parts of service on loans not under the supervision of the Commission and also of certain sums to the British and French Governments. In view of the Greek Government’s refusal to make any assurances of any payment in gold on the American loan, the Secretary of the Treasury does not feel that the withholding of 100 percent in drachmas to cover the service on the American loan gives the safeguards required by the spirit of the loan agreement or the duties of the International Financial Commission. The Greek Government’s present position that it will not [Page 416] give equality of treatment to the United States Government is entirely untenable and is directly contrary to the express provisions of the contract under which the money was made available to the Greek Government in 1929 and which settle and determine the status of the “new loan”. The War advances have an entirely different status under the agreement.
The Greek Government is now in default with respect to the so-called “new loan” part of the agreement of May 10, 1929, the Treasury having received no payment on November 10th.
Accordingly, the United States Government is under the necessity of invoking all the provisions of Article 2 of Part II of the Agreement of May 10, 1929, including the following paragraph.
“Subject to the obligations resulting from prior charges thereon, the above-mentioned revenues shall be held and applied by the International Financial Commission for the purpose of making up any past defaults should they have occurred as well as for the purpose of meeting the periodical service of this new loan by the United States.”
This Government expects that the International Financial Commission will take steps to see that the United States receives in fact, both with respect to payment and transfer, treatment on the November 10th payment now in default not less favorable in any respect than that which has been or is to be accorded to the holders of the Greek Stabilization and Refugee Loan of 1928.
Quite apart from all other considerations the Treasury does not understand how the suggestion of holding 100 per cent drachmas against the American debt service would be adequate in view of the inability of the United States to convert into gold at present and the uncertainty as to the future rate of conversion. The essential difficulty with the plan proposed by the Greek Government is that it contemplates the release of funds under the control of the International Financial Commission in return for the Greek Government’s making payments in foreign exchange to others and not to the United States which is entitled to corresponding treatment.
The United States Government in making this loan looked to the International Financial Commission to see that the reserved revenues should be distributed in accordance with existing priorities and the terms of the various agreements. It considers the International Financial Commission trustees. It cannot conceive of trustees being parties to a plan the effect of which is to discriminate against one creditor whose interests they undertook to protect. Please send [Page 417] copies of your 320 and 325 and of this telegram immediately by air mail to Embassies at Paris and Rome to which the Department will issue appropriate instructions.
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