Memorandum by the Chief of the Division of Near Eastern Affairs (Murray)

The Greek Minister called this morning to inform me that he had been instructed by his Government to request a postponement for a period of 2 years of the payment in principal amount of $130,000 due this Government from the Greek Government on January 1, 1933, under Part 1 of the Debt Funding Agreement of May 10, 1929, between the United States and Greece. The Minister added that [Page 425] although notice of postponement should, under the Agreement, have been delivered to this Government 90 days before the payment date, his Government had instructed him to request this Government to waive the requirement as to the time of notice.

Mr. Simopoulos left with me the attached copy of a communication dated December 19, 1932,42 addressed to the Secretary of the Treasury, concerning this matter.

The Minister at the same time informed me that after a meeting of the leaders of all the Greek political parties held on December 18 it had been unanimously decided that the second loan under the Agreement of May 10, 1929, is to be considered as a war loan and that no payment thereon could be made pending a solution of this question. However, the Greek Government, with a view to showing its good-will towards the Government of the United States, will retain in exchange on New York in a blocked account 30 per cent of the service of the second loan until a definite solution is reached on the question as to whether or not this loan is a war loan. The Greek Government considers that by the above procedure it is according to the United States treatment as favorable as that accorded to other creditors, in view of the decision of the Greek Government to retain in blocked account the difference between payments in gold and payments in paper currencies to other creditors pending a decision as to whether the Greek Government is in fact obligated to make payments in gold.

I pointed out to the Greek Minister that I was unable to see how the above procedure could be regarded as constituting as favorable treatment in respect of the payment due this Government on November 10, 1932, as was contemplated under the agreement arrived at in London last September in the case of private bondholders, since, as he was aware, this Government was insisting upon transfer as well as payment.

For convenient reference, I quote paragraph 4 of the British Government’s instructions to its member on the International Financial Commission with respect to payment to British bondholders on a gold basis:

[Here follows paragraph 4 of the instructions quoted in telegram No. 320, November 8, noon, from the Ambassador in Great Britain, printed on page 413.]

In a telegram dated November [December?] 2, 1932,42 from Athens Mr. Morris informed us that the Greek Government objected to the retention by the International Financial Commission of the difference between payments in gold and payments in paper pending [Page 426] an arbitration of the matter between the Greek Government and the bondholders as had been suggested by the International Financial Commission.

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