Memorandum of Conversation, by the Under Secretary of State (Stettinius)

The Greek Ambassador38 called at his request to present Mr. Varvaressos, Ambassador Extraordinary for Economic Affairs and Governor of the Bank of Greece, who had attended the Monetary Conference at Bretton Woods39 and was well satisfied with the results. Mr. Varvaressos feels that the plan adopted is sound, comprehensive, and workable. I recalled my conversations in London in April with the Greek Minister of Finance regarding the Greek Government’s financial situation.40 They left with me the attached memorandum on the Greek financial position and stated that they wished to discuss the matter further with me next week.

Mr. Varvaressos stated that he had applied to the British Government but had received no encouragement. The Greeks feel their financial situation is desperate and they hope aid of some kind can be granted. I assured the gentlemen we would analyze their memorandum promptly with the greatest care and would give it our most sympathetic consideration.


Mr. K. Varvaressos to the Under Secretary of State (Stettinius)

No. 2654

Memorandum Concerning the Financial Situation of the Greek Government

Sir: During your visit to London you were good enough to grant an interview to Mr. Mantzavinos, Mr. Spyros Skouras and myself, in the course of which we gave you a short account of the financial situation of the Greek Government. As you will recall, we then undertook to forward you a brief memorandum embodying exact particulars and figures.

I have therefore the honor to submit to you hereunder these particulars which, I hope, will give a clear picture of the problem. We [Page 217]are confident that you will examine them with the same kind interest that you have devoted to every question concerning our country.

When, on the 28th of October, 1940, Greece took up the struggle against Italian aggression,41 the British Government declared to the Greek Government that it would afford unlimited financial aid to Greece for the conduct of the war. The British Government discharged this promise, undertaking to pay:

the value of all war materials which Greece might obtain within the sterling area,
a sum of £5,000,000 monthly for war expenditure incurred by the Greek Government inside Greece. This sum was to be paid up to April 1941, when the situation would again be reviewed. The Greek Government expended these sums within the country, acquiring the equivalent in drachmae by selling the total monthly amounts of pounds sterling to the Bank of Greece,
a single credit amounting to £5,000,000 towards the cost of supplies purchased outside the sterling area, in view of the fact that such purchases were exhausting the country’s exchange reserves.

On the occupation of Greece by the enemy, the British Government intimated to the Greek Government, then provisionally established in Crete and later in Egypt, that it was not prepared to continue affording financial aid on the basis of the original agreement, even if the latter were amended in regard to the sums involved, but that negotiations should be opened in London for the purpose of arriving at a new basis.

These negotiations took place when the Greek Government was established in London, and ended in an agreement42 the substance of which is the following:

The British Government will not demand from the Greek Government payment of the value of materials and services supplied by Departments or Agents of the British Government, in so far as they may be necessary for the equipment and maintenance of the Greek armed forces.

All other expenditures of the Greek Government, including the remuneration, allowances, pensions, etc., of officers and men of the Greek armed forces, are a charge upon the Greek Government and must be defrayed out of its own resources.

In addition, in every case where expenditure was to be incurred for the despatch of foodstuffs to the population within Greece or for the relief of refugees from Greece, the Greek Government was required to make a declaration, and in fact did so make this declaration, to the effect that it would make itself responsible for the expenditure involved.

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The Greek Government could not, of course, do otherwise than accept this settlement, although it was manifest that the commitments undertaken far exceeded its resources.

Apart, however, from the financial assistance which the British Government had agreed to afford for the equipment and maintenance of the Greek forces, the Greek Government secured further invaluable aid of a financial nature for the discharge of its mission as follows:

The United States Government assisted Greece in very many ways. In particular, a) it decided to despatch to Greece, under Lend-Lease,44 substantial quantities of foodstuffs for the suffering population, specifically pulse, rice, milk, fish and other valuable foods,45 which otherwise would have to be made at the cost of the Greek Government, b) In response to the Greek Government’s appeal, it decided to furnish additional aid in accordance with the terms of the letter addressed on the 5th [4th] of May, 1943, by the Secretary of State, Mr. Cordell Hull, to our Ambassador at Washington.46
This assistance consists of: first, payment from the first of January 1943, of the costs of transporting to Greece the above-mentioned foodstuffs and the Canadian wheat by the Swedish steamers. These charges had previously fallen in part upon the Greek Government and in part upon the Greek War Relief Association. Secondly, it consists of American assent to an arrangement whereby the G.W.R. undertakes the cost of maintaining the Greek refugees as from the first of April 1943. By reason of difficulties which have arisen in Cairo, effect has not yet been given to this latter project.
The Canadian Government decided to make a free gift to the population of Greece of 15,000 tons of wheat and of certain other foodstuffs per month. Recently the amount of wheat has been increased substantially, and provisionally this increase is being covered by a gift of the Argentine Government.
The Greek War Relief Association, an exclusively American institution, continued to provide invaluable assistance to the Greek people, even after the occupation of Greece by the enemy. Thus, it shouldered part of the cost of despatching foodstuffs from Turkey to Greece, and expended in this connection a sum of approximately £1,250,000. Through the Red Cross it despatched medicines, foodstuffs and other articles for the maintenance and relief of the population. As already stated, it paid part of the costs of the Swedish ships, and in addition to its other relief work, undertook to help in connection with the relief of the Greek refugees.

Figures are not available to make it possible to assess the financial value of the extensive assistance thus provided. This much, however, is certain: the extent of the assistance and the nature of the needs which it served have relieved the Greek Government of a heavy financial burden.

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In addition, this assistance has assured the daily bread and other vital needs of more than 3,000,000 inhabitants of our country, who otherwise would be exposed to the greatest privation and even to death from starvation.

Yet, in spite of the generous assistance which the Greek Government received, the remaining items of expenditure which it still had to meet were very substantial and were constantly increasing, while conversely the revenue at its disposal was meagre and progressively declining.

Thus, during the period of three years from April 1941 to March 1944, the Greek Government has incurred public expenditure in the sum of £13,214,600. Of this sum only £5,803,800 are covered by taxation and other forms of revenue created by the Greek Government outside Greece. Almost the sole source of such revenue is the Greek Mercantile Marine. The balance was derived from the assets of the country existing in foreign countries at the date of the enemy invasion.

These assets consisted of the country’s gold, which had been saved from enemy spoliation and safely deposited outside Greece, and of other assets in dollar and sterling deposited in various accounts of the Bank of Greece with American and British Banks.

At the time of the occupation of our Country by the enemy, the aggregate amount of these holdings of gold and foreign exchange totaled £52,455,800 (we include small amounts deposited later, being the proceeds of interest, sale of merchandise, etc.).

On the 31st of March 1944, these assets had been reduced to £45,045,000.

The difference of £7,410,800 had been utilized by the Greek Government, as stated above, to defray public expenditure, by far the greater part of which was incurred for the armed forces.

In addition to the aforementioned £13,214,600, which embraces the sums actually paid by the Greek Government up to the 31st of March 1944, it is today called upon to make urgent payment of the following sums for expenditure relating to the same three year period: approximately £1,000,000, balance of the value of foodstuffs despatched from Turkey to Greece, part of which was, as stated above, defrayed by the G.W.R.; a sum of £756,000 against expenditure in connection with relief of refugees up to the end of last year.

Such is the picture which our country’s finances present during the three-years period from the date when the Greek Government left Greek soil until the 31st of March 1944.

The forecast for the future is even more unfavorable. Our expenditure has increased to a very considerable degree, and is estimated at approximately £7,880,000 for the financial year 1944–1945. Out of this amount, £5,111,400 correspond to expenditure for the armed forces, and a further sum of £1,496,000 is also connected with the [Page 220]conduct of the war. Conversely, our annual revenue has fallen by reason of the tremendous losses sustained by our Mercantile Marine, and cannot be estimated at more than £2,500,000, including certain extraordinary revenues.

This situation compels the Greek Government to address themselves once again to the Government of the United States, and to request that favorable consideration may be given to the possibility of making available a measure of financial assistance whereby the Greek Government may meet their pressing needs.

We consider that a credit of £25,000,00047 would be of the greatest help and would very greatly facilitate the Greek Government by relieving it of the need to make further inroads upon the country’s assets, which constitute almost the sole national capital that has survived the general destruction of our country’s economy.

I avail myself of this opportunity to convey to you, Sir, the assurance of my highest consideration.

K. Varvaressos

Ambassador Extraordinary for Economic Affairs.
Governor of the Bank of Greece
  1. Cimon P. Diamantopoulos.
  2. For correspondence on the United Nations Monetary and Financial Conference, which met at Bretton Woods, New Hampshire, from July 1 to 22, 1944, see vol. ii .
  3. Memorandum of April 18 not printed.
  4. For correspondence on the Greek-Italian war, see Foreign Relations, 1940, vol. iii, pp. 524 ff.
  5. Dated March 9, 1942; for summaries, see telegram 5202, September 17, 1942, 6 p.m., from London, and report of October 15, 1942, by the Greek Minister of Finance, ibid., 1942, vol. ii, pp. 803 and 804, respectively.
  6. For correspondence on the Lend-Lease Agreement between the United States and Greece, signed at Washington on July 10, 1942, see Foreign Relations, 1942, vol. ii, pp. 814 ff.
  7. For correspondence on the sending of relief supplies by the United States to Greece, see ibid., pp. 724 ff.
  8. Ibid., 1943, vol. iv, p. 175.
  9. Hereinafter this amount is referred to as $25,000,000.