868.5151/154

The Chargé in Greece (Gade) to the Secretary of State

No. 2337

Sir: With reference to the Legation’s despatch No. 2276 of October 29, 1932,49 and to previous correspondence regarding the Enforced Conversion Decree of July 29, 1932, I have the honor to inform the Department that the government, with a view to restoring confidence in Hellenic currency and attracting funds from Greek emigrants, is considering amending the Decree so as to refund to depositors of foreign exchange the amount of their deposits at the rate of 145 drachmas to the dollar (the official rate of exchange on the date the Decree went into effect) instead of at the arbitrary rate of 100 drachmas to the dollar. It is proposed to effect this by requiring all the Greek and foreign banks in Greece to participate in an issue of bonds in proportion to the amount of foreign exchange deposited with each. Since the total of the deposits in all kinds of foreign currency amounts to 36 million dollars, the face value of the proposed bond issue would reach approximately one and one half billion drachmas. This sum, of course, represents the difference between the rates of 100 and 145 drachmas to the dollar. The banks would pay depositors 100 drachmas to the dollar in Hellenic currency and the balance in obligations of this loan. Deposits in other foreign currencies would be reimbursed in the same ratio. The rate of interest of the loan would be 4% with a long period of amortization.

Needless to say, the banks are strongly opposing the proposal, but the government contends that the necessary service of the loan could be paid by economies in the general expenses of the banks and by a reduction in the dividends of their share-holders.

Respectfully yours,

Gerhard Gade
  1. Not printed.