868.50/12–1545
The Ambassador in Greece (MacVeagh) to the Secretary of State
[Received January 4, 1945.]
Sir: I have the honor to report that certain misapprehensions appear to exist in British, UNRRA and other circles as to the motivating factors behind the economic policies of the several Greek Governments which have held office during 1945. As a result, these governments have been subjected to severe and almost continuous criticism for policies which have been followed quite consistently ever since the Communist revolt was crushed last winter and which, in essentials, are not only logical but inevitable.
Two of the Four Freedoms45 are taken for granted in liberated Greece—the only Balkan country where such is the case—but the remaining two, involving Fear and Want, are in the mind of every Greek. Fear is inspired by the traditional Slav menace from the north, now far more frightening than ever before, with three of Greece’s immediate neighbors almost completely under Soviet domination and a dynamic Communist movement within the country under Moscow-trained and directed leadership. In the meantime [Page 285] the specter of Want, due largely to the country’s catastrophic shortage of foodstuffs, is an ever-present reminder that only UNRRA stands between Greece and starvation.
The remark has been heard on frequent occasions that Greece is failing to make good use of the huge shipments of relief supplies furnished first through military and later through UNRRA channels, and that the country is no better off today after receiving foreign aid to the value of some $300 million in the course of the past year than it was at the time of liberation in October 1944. The speech of Foreign Secretary Bevin in the House of Commons on November 23 indicated that he shared this view. Careful examination of various pertinent facts, however, appears to support a very different evaluation of Greece’s position. All but a small portion of the relief supplies sent to Greece have gone toward filling the gap between available stocks of consumers’ goods within the country and the minimum requirements to sustain life. A combination of war damage, losses caused by the civil strife of December 1944 and the almost unprecedented drought of 1945, reduced Greece’s farm and factory production during the past year to less that 50 percent of prewar levels; of these factors the drought was probably the most serious in immediate effect. Virtually nothing came into the country from abroad for industrial rehabilitation until the middle of 1945, and then only in small quantities, while the effect of military and UNRRA assistance to Greek agriculture will become apparent only after many months.
The preceding paragraph should make clear the unfairness of expecting Greece to show really substantial and visible economic recovery until after the 1946 harvest; also how enormous a quantity of relief supplies is required simply to provide some measure of Freedom from Want under present circumstances. With UNRRA aid Greece may not yet show great improvement, but without such help there would be appalling starvation. Such is the country’s dependence upon a relief program which the public has been told might cease at any time during 1946 and which is unlikely to extend beyond the close of that year in any event. Can so predominantly agricultural a country, with a normal deficit in foodstuffs, carry on unaided within a few short months after the 1946 harvest, even if crop yields are satisfactory?
In the meantime, estimates of the area planted to crops this fall and winter are in the neighborhood of 80 percent of the country’s total arable land, and spring planting should add to this figure. Industry is reviving more slowly, but textile factories in the Athens area—the most important group of manufacturing enterprises in the country—are operating above 50 percent of prewar rates. Other [Page 286] industries are in a somewhat less satisfactory position, but factory production as a whole is said to compare more than favorably with that in most parts of Europe. Does this indicate that the Greeks are failing entirely to do their part? It is only natural, however, that they should be deeply concerned over the country’s food supply for 1947 and subsequent years, notably the large quantity of wheat which must be imported even when domestic crops are good. With the best will in the world Greece cannot expect to bring total agricultural and industrial production back to prewar levels in less than three or four years, not to mention the difficulties of replacing the country’s merchant marine and reviving its tourist traffic and export trade, all of which are essential to restoring the balance of payments. How are imports of food and other absolute necessities to be paid for during the interim period after UNRRA leaves. To the Greek mind there is only one answer: foreign financial assistance.
Most Greeks are not interested in Communism as an economic theory, and all of them have found it associated, in their recent experience, with looting and murder. Fear of what the future may hold for them in this regard is with them an obsession; for what assurance have they that British Labor Party preoccupation with Socialist dogma, or an American lapse of interest in Balkan affairs, may not deliver Greece to Communism in much the same way as Yugoslavia? Therefore, it is scarcely to be wondered at if they are hesitant to take a long-term view in utilizing what liquid capital remains to them in efforts to expand production. A small bag of gold, jewelry or foreign currency, held in readiness for sudden flight, would be worth far more than a large factory under conditions which many Greeks and others regard as by no means unlikely.
The Greek also realizes that the traditional safeguards of military alliances or pacts of mutual assistance are of doubtful value, even in the improbable event that the United States and Britain would extend such guaranties under present circumstances. The country’s northern frontiers could no more be held against a Russian-supported invasion than was the case against the Germans in 1941. Freedom from Fear can not be looked for until the United Nations Organization has become an effective reality. In the meantime Greece must strive to retain the interest and support of her Western Allies during a period of uncertain duration and manifold difficulties. Fear will not be allayed during that period, but hope will remain until it becomes clear whether Greece is to be a sovereign member of a full-fledged United Nations Organization or simply a Soviet puppet.
During the past year Greece has learned that foreign sympathy may be unreasonably fickle. As a reward for maintaining freedom of its press, at the same time permitting foreign correspondents to circulate about the country and report as they see fit, Greece has been [Page 287] misrepresented and maligned in the American and British press in a most undeserved fashion. This flood of abuse from supposed friends, all having the effect of supporting the Communist thesis, has made it even more evident that some tangible guaranties must be sought from America and Britain. Direct financial support is again the most obvious answer.
It may be pointed out that the Allies are already extending help to Greece of unprecedented scope in the current UNRRA program, under which this country is expected to receive supplies valued at $462 million, including ocean freight. The Greeks are aware of the benefits they are gaining in this connection, as well as of the fact that this help is financed chiefly by the United States. But they are also conscious that the indirect, United Nations character of this assistance, which is being extended as well to Greece’s Communist neighbors, does not imply political support. Its contribution toward Freedom from Fear is in no way comparable to that of direct loans, investments or the extension of commercial credits by the United States and Britain, which would be taken as the best evidence of intention to support the Government in power and to preserve Greece as a sovereign state based upon a free society.
Against this background it is not difficult to understand Deputy Prime Minister Varvaressos’ emphasis on his application for a $250 million credit from the Export-Import Bank in a radio broadcast on August 17 reviewing his economic program (my telegram no. 866 of August 18). The fact that he overreached himself in seeking a much larger sum than Greece had any immediate need for, at the same time indulging in wishful thinking by expressing publicly his confidence that this sum would be approved by the United States, is evidence of Varvaressos’ far greater interest in psychological than in purely economic factors.
When the Kanellopoulos Government took office on November 1 Finance Minister Kassimatis placed very particular emphasis upon psychological considerations (my telegrams no. 1248 of November 5 and no. 1255 of November 6). He tried a slightly different tack from that of Varvaressos by not asking for a larger loan but simply for credits sufficient to supplement UNRRA procurement together with a comparatively small shipment of gold. When it became clear that nothing would be immediately forthcoming beyond an unwanted British Economic Mission, the Kanellopoulos Government resigned (my telegram no. 1331 of November 2046).
The advent of the Sofoulis Government on November 22 was welcomed in various quarters as bringing into power Greece’s nearest political equivalent to Britain’s Labor Party. Its economic program was awaited anxiously in British and UNRRA circles with some [Page 288] expectation of an orthodox approach to budget balancing through government economy and increased taxation. But the first step again was a request for foreign credits and gold, this time disguised as an advance on Greece’s expected share in German reparations (my telegram no. 1383 of December 1). Disillusionment followed quickly among the British, with their orderly ideas of finance, rationing and price control, as well as among Anglo-American UNRRA officials, whose somewhat Leftist sympathies tend to favor dictatorial methods of government abhorrent to the Greeks.
All of the foregoing is not to say that the Greeks have put forth their best efforts to reestablish the country’s financial structure, or that they should not have done more in the way of rationing and price control. But to the quick Greek mind, impatient of detail often to the point of being superficial, there is little purpose in undertaking drastic and locally unpopular measures, as advocated by the British and UNRRA, against a background of fear which is more than likely to render such measures stillborn. With unassailable logic the Greeks persist in their desire for Freedom from Fear and Want. Financial aid from the United States and Britain appears to them as the only practicable road.
Through Lend-Lease, UNRRA and private American channels Greece will have cost the United States in the neighborhood of $400 million between 1941 and 1947. Most of this money has been or will be used for relief or for war purposes; none of it to date has been invested in the reconstruction of Greek economy under direct American guidance which would take into account not only the interests of Greece but also of the United States. A comparatively few millions applied in this manner might easily have more far-reaching effects than much larger contributions through UNRRA. The proposed Export-Import Bank credit of $25 million is a step in the right direction; there remains to be found a longer term approach which, while not dissipating American money or neglecting American business interests, would advance Greece toward the attainment of all four Freedoms.
Respectfully yours,