CFM Files

Memorandum of Conversation, by the Director of the Office of European Affairs (Matthews)

Participants: Mr. Dragoumis, Acting Head of Greek Delegation
Mr. Diamantopoulos, Greek Ambassador to Washington
Secretary Byrnes
Mr. Matthews
[Page 615]

[Here follows a discussion of Greek purchases of United States surplus property.37]

The Secretary then said that he also wanted to talk to them with regard to the matter of Greek reparations from Italy which Mr. Tsaldaris had raised on a previous occasion. He explained that under the arrangements agreed upon by the Council of Foreign Ministers for Soviet reparations from Italy, the Soviet Union would be required to furnish Italy the raw materials which would be needed by Italy for the production of goods to be delivered as reparations out of current industrial production. It was likewise provided that payment for these raw materials should be made by deducting their value from the value of the goods delivered to the Soviet Union. He said that he understood that the difficulty in the case of Greece is that Greece has no raw materials to furnish Italy nor has it available funds wherewith to purchase such raw materials. The Secretary said that, by way of example, if Greece should receive a total of $100,000,000 reparations from Italy according to his understanding—though he was not sure of the figures—some $40,000,000 would probably be required to be advanced in the form of raw materials. Of course, he added, that as in the case of the Soviet Union, the value of these raw materials would be deducted from the amount credited to Italy as reparations deliveries. Mr. Diamantopoulos said that he understood the arrangement but would like to know how Greece was going to be able to get the raw materials to supply Italy. The Secretary said that he was coming to that as it was his purpose in raising the matter. He said that while the Export-Import Bank is an independent institution, he would be glad to use his influence to obtain from it the necessary credits to enable Greece to purchase those raw materials. In other words, if the Greeks were anxious as to how they could implement any award of reparations out of Italian current industrial production, they could inform their Government that financial assistance would be forthcoming from the United States in the form of a credit to purchase and advance the necessary raw materials. Both Mr. Dragoumis and Mr. Diamantopoulos expressed their appreciation of the Secretary’s offer. They said that Greece was also interested in obtaining some reparations from Italy in the form of sulfur.

Mr. Dragoumis said that he had been on the point of asking for an interview with the Secretary to discuss Greece’s frontier problem with Albania. They had felt it wise to withdraw their resolution at the Plenary Session rather than create further difficulties and had written to the Council of Foreign Ministers directly, requesting that the matter [Page 616] be given the Council’s consideration. Greece realized however, he continued, that at the present time the atmosphere was very unfavorable and Mr. Molotov would certainly never agree to any solution of the problem which would be satisfactory to the Greeks. On the other hand, Greece did not want any decision taken by the Council which would reject any future consideration of the question. He was therefore asking the Secretary—and would take similar action with the British—merely to leave the matter open on the Council of Foreign Ministers’ agenda and neither raise it in the future nor agree to its definite exclusion. The Secretary stated that this would be easy to do, he thought, and he would comply with the Greeks’ request.

Mr. Dragoumis then raised the questiion of the demilitarization of the Dodecanese. He said that there was a Yugoslav request of the Military Commission to define demilitarization and the Greeks were anxious that the definition should not contain any prohibition against the drilling or training of draftees in the islands. He said that the Turkish islands of Mytilene and Chios were demilitarized under the Lausanne Treaty and that a satisfactory definition of demilitarization was contained in that Treaty. He hoped that the Dodecanese could be assimilated to the Lausanne definition of demilitarization. The Secretary said he was not familiar with the question but would make inquiry of General Balmer. (This he subsequently did and was informed by General Balmer that a definition of demilitarization had been agreed upon by the Big Four Military Advisers just that morning. The definition would permit the arming and training only of internal security forces for the islands. General Balmer was instructed to inform the Greeks that we could not very well support their claim.)

In conclusion the Greeks discussed the seriousness from the economic point of view of the situation in Greece as set forth in the recent message from Prime Minister Tsaldaris which had been sent to the Secretary.38 They said that the rural population in the north is so convinced that Greece is about to be invaded by Albania and Yugoslavia that the farmers are leaving their fields when they should be preparing for the next crop and there is a great rush of population to the cities. This is being accompanied by a flight from the drachma and a great demand for gold pounds. The Greek Government is very seriously concerned lest all the economic progress made in recent months will be lost. The Secretary said he was aware of the seriousness of the situation and expressed his deep regret over these developments.

H. Freeman Matthews
  1. Concerning this question, see memorandum of July 5 by Leonard linger, and note of October 8 to the Greek Chargé, vol. vii, pp. 175 and 232, respectively.
  2. Reference is presumably to the note of September 16 from Tsaldaris to Byrnes, vol. iv, p. 862.