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.
[Annex]
Mr. K.
Varvaressos to the Under Secretary of
State (Stettinius)
No. 2654
Washington, July 27,
1944.
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:
-
a)
- the value of all war materials which Greece might
obtain within the sterling area,
-
b)
- 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,
-
c)
- 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.
[Page 218]
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:
- 1)
-
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.
- 2)
-
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.
- 3)
-
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.
[Page 219]
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.
