Office of the Historian

868.00/11–1045

Memorandum by the Director of the Office of Near Eastern and African Affairs (Henderson) to the Secretary of State 13

[Washington,] November 10, 1945.

Subject: Deteriorating Conditions in Greece and Proposed U.S. Action

Present conditions in Greece are so alarming that British military authorities in the theatre have recommended to London that the United States Government be requested to “share British responsibility in Greece.”14 It is not known how the British Foreign Office has reacted to these recommendations, but it is possible that Prime Minister Attlee may bring up the question of Greece with the President during his current visit. Although it is considered undesirable to reverse our policy of undertaking no military responsibility in Greece, the situation seems critical enough to justify active steps on our part to improve conditions. If the economic situation there continues to worsen, it may seriously prejudice the successful holding of the [Page 264] forthcoming elections, which this Government is committed to observe.15 The present situation also jeopardizes the chances of long run economic recovery in Greece which the United States is trying to promote through UNRRA and other assistance. A weak and chaotic Greece is a constant invitation to its already unfriendly neighbors on the north to take aggressive action and constitutes a menace to international peace and security.

Since the failure in August of economic stabilization measures undertaken by Vice Premier Varvaressos, the value of the drachma has continued to drop, prices have risen rapidly, government expenditures have continued at a high level and receipts to cover these expenditures have been entirely inadequate. The recovery of industrial production has been extremely slow, the export and import trade and the flow of remittances are practically at a standstill, and there is wide-spread unemployment. The UNRRA program is feeding, clothing and helping to provide shelter to the people of Greece, but under the conditions outlined above, it cannot start them on the road to the self-sufficiency which they must have achieved when UNRRA operations will cease, as scheduled, approximately one year hence. Loans and other assistance would probably also have only a temporary palliative effect, and without ultimate recovery in sight, the prospects of repayment are obviously poor.

It is the Department’s conviction that the following measures must be vigorously undertaken in Greece if the present economic deterioration is to be halted and the country started on the road to recovery:

(1)
Rigid price and wage control, the latter after adjustment has been made to the increased cost of living.
(2)
Monetary controls, following a realistic revaluation of the drachma.
(3)
More effective and carefully supervised distribution of UNRRA supplies in close cooperation with UNRRA officials, including rationing where required. Reexamination of the present price policy for relief goods.
(4)
Stringent taxation to increase government revenue.
(5)
Review of government activities to eliminate all but essential expenditures, especially in the civil services.
(6)
Revamping of the civil service to handle wisely and efficiently present Greek economic problems with a minimum of personnel.
(7)
Positive action by the Greek Government to restore agricultural and industrial production by insuring the provision of necessary raw materials and the cooperation of management and labor.
(8)
A clear definition by the Greek Government of commodity fields in which the private importing trade may again begin to operate.
(9)
Direct encouragement to export trade after a revaluation of the drachma again makes the revival of exports possible.

It is clear in the present situation that we must determine either to abandon Greece entirely to work out its own economic salvation without the assistance of the United States or that we must insist on internal economic reforms in Greece. This is essential if the assistance which the United States is now providing through UNRRA or may provide through credits is to have any long run benefit and if it is to come to an end in a reasonable period with Greece any better off than it is today. I hope you agree that it should be the policy of the United States to follow the second alternative. Some British officials suggest that such a policy would entail active intervention, including the possible use of United States military forces in Greece, but it is our belief that this is not required. The Department suggests on the other hand that the United States in concert with the United Kingdom and, possibly France make it clear that further assistance to Greece is conditional on the enforcement by the Greek Government of measures along the lines of those suggested above.

It is encouraging that the newly formed Canellopoulos Government has already expressed its intention of putting many of these measures into effect. Since the beginning of 1945, however, no Greek Government, whether for reasons of its political representation or other causes, has been able to enforce the rigid kind of economic measures which are essential to Greek recovery. While it is hoped that the present government will be more successful, fear of repercussions in the coming elections and resistance of powerful groups which brought earlier programs to ruin make the outcome doubtful. It appears, therefore, that some measure of responsibility and firmness must come from outside Greece and it is thought that making known the existence of this source of pressure might provide the present government with an added bulwark in embarking on the essential economic program which will inevitably be unpalatable to influential groups in Greece.

I suggest, therefore, that a note covering the four points outlined in the attached memorandum for the President16 be presented to the Greek Government by the United States and at the same time be released to the press. It is desirable, I believe, that such a note be presented in concert with some similar communication from the United Kingdom, and perhaps other governments. If you approve, the attached memorandum will be transmitted to the President.

Loy W. Henderson

  1. Attached to this memorandum and to the memorandum to President Truman, infra, is a memorandum of November 17, 1945, by the Director of the Office of Near Eastern and African Affairs (Henderson) to the Under Secretary of State (Acheson) which stated:

    “You will recall that the Secretary was disturbed by recent telegrams from Athens concerning the deteriorating conditions in Greece and by the indication that General Morgan intended to recommend to the British Foreign Office that this Government be requested to share British responsibilities in Greece—by which he obviously meant military assistance.

    In view of the urgency of the situation and the possibility that Mr. Attlee might bring up the subject of Greece with the President over the weekend, the attached memoranda were prepared and given to the Secretary late Saturday afternoon November 10 without an opportunity of sending them through your office.”

    ↩
  2. See telegrams 4015, November 2, 10 a.m., and 4042, November 4, 1 p.m., from Caserta, pp. 251 and 253, respectively.↩
  3. For documentation on the decision of the United States to participate in the supervision of elections in Greece, see pp. 98 ff.↩
  4. Infra.↩