The Minister in Greece (MacVeagh) to the Secretary of State

No. 4062

Sir: In reference to the parts of my despatches No. 3759 of January 27, 1940 and No. 3969 of March 29, 194099 relating to a secret Anglo-Greek commercial accord I have the honor to enclose herewith a copy of an exchange of notes between Mr. Apostolides, the Greek Finance Minister, and Lord Bessborough, representing the League Loans Committee and the Council of Foreign Bondholders, dated respectively January 25th and 26th, 1940.1 This exchange of notes, obtained from the International Financial Commission in Athens, confirms the report that Greece agreed to raise the percentage now being paid on her foreign debt from 40% to 43%.

In his note submitting the Greek proposition, Mr. Apostolides refers to the negotiations with the British Government “on various matters” and to the “strongest hope” expressed by the British Government that “the cordial relations between our two countries should be strengthened by an arrangement for the service of the External Debt”. He then submits

“a definitive offer for the service of the debt, of which the most important point is that Greece is willing to pay 43% of the contractual [Page 613] interest, commencing 1st April 1940. The Greek Government, moreover, undertake to pay the same percentage throughout the duration of the war.”

He requests the Committee to accept his assurance that

“this increase represents the utmost that Greece can pay in the present circumstance, and the undertaking to maintain this percentage throughout the war is, I hope, sufficient proof of the sincerity of our effort to reach an agreement.”

The British reply paraphrases the Greek offer in detail and informs Mr. Apostolides that

“in view of the present exceptional circumstances and in view of the fact that your Government unconditionally undertake to maintain payments at 43% of the interest for the duration of hostilities, the Council and the Committee are prepared to recommend your Government’s present offer to the acceptance of the bondholders. The Council and the Committee are further ready to recommend to His Majesty’s Government that the Governments represented on the International Financial Commission in Athens should instruct the Commission to release to the Greek Treasury such balances in drachmas out of the assigned revenues as would become free under this arrangement.”

The British note closes with the suggestion that the offer be made public as soon as possible, and that this be done, as in November, 1933, by the publication of the correspondence. Publication, however, has not been made in Greece.

The Department will observe that attached to the exchange of notes there is a list of the loans under the control of the International Financial Commission, and that this includes the United States Government’s 4% loan of 1929. In addition the term “for the duration of the war” used in the body of the exchange suggests that the Greek offer was intended to give preferential treatment to loans floated in countries now engaged in hostilities. Under these circumstances, I took the occasion yesterday to inquire of the Under Minister for Foreign Affairs whether Greece regards the agreement reached with the bondholders in London as general or restricted in the manner indicated.

Mr. Mavroudis replied that the agreement between Mr. Apostolides and Lord Bessborough covers only British loans, but can be extended to French loans also if the French Government gives Greece similar concessions to those Great Britain has granted her. He said loans from other countries would, he supposed, continue to be serviced with the 40% hitherto offered. Great Britain merited a special concession, he said, by extending a loan of 2,000,000 pounds Sterling to Greece for the purchase of war materials, and by other helpful actions.

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In view of the conflicting attitudes of the Greek and American Governments regarding the 1929 loan, and in advance of instructions from the Department, I made no comment to the Under Minister on his reply. The Legation’s records fail to show, however, that any interest on the 1929 loan was paid to the United States in 1939, though 40% was paid in 1938. I did mention this to Mr. Mavroudis, and he laughed and remarked, “Well, that’s a precedent”.

Respectfully yours,

Lincoln MacVeagh
  1. Neither printed.
  2. For texts, see the Sixty-Seventh Annual Report of the Council of the Corporation of Foreign Bondholders for the Year Ending 31st December 1940 (London), pp. 38–42.