CFM Files

The Greek Prime Minister (Tsaldaris) to the Secretary of State

My Dear Secretary: I had occasion, during our conversation on Friday last,63 to set forth the reasons compelling us to insist that ex-enemy States shall contribute to restoring the destruction which they have caused to our country.

The demand that we formulate is not in any way related to, or [Page 863] prompted by, motives of vindictiveness, a sentiment which is, believe me, entirely alien to the Greek character. Proof of this is to be found in the fact that the Greek Government did not hesitate, even before the signing of the peace, to resume diplomatic relations with Italy, and that, in addition, it has recently signified its assent to the latter country’s participation in the International Fund and International Bank.

Our demand is prompted solely by the exceptional weakness of Greece’s economy. It is utterly beyond her power either to provide the necessary means for restoring the destruction or to meet the service of the sinking fund which those means, if available, would entail. Consequently, we are compelled to seek a realistic solution based upon the principle of reparations, so that we may be enabled to meet our obligations, at any rate for a certain number of years.

I should be reluctant to add to the volume of your work by submitting to you detailed or exhaustive reports. I have therefore thought to attach hereto two brief Memoranda, drafted in as concise a form as possible, the one of which deals with the problem of Greece’s rehabilitation, the other with the comparative powers of economic resistance of Italy and Greece.

I should be most grateful if, subject to your approval, these Memoranda might be handed to Mr. Thorp, and if this gentleman might be requested to take up the matters raised therein with Monsieur Jean Politis, Greek Delegate to both Commissions for Italy.

Believe me [etc.]

C. Tsaldaris
[Annex 1]

Greek Memorandum Presented to the Secretary of State

The Problem of Greece’s Rehabilitation

I. The balance of Greece’s payments shows the following exceptional position:—

imports of prime necessity (foodstuffs, fuel), raw materials, clothing etc. annually $250,000,000
exchange resources: exports (tobacco, dried fruit, etc), emigrants’ remittances, etc., maximum estimate 80,000,000
Annual deficit (68%) $170,000,000

II. This immense deficit is due:

to the destruction and plundering of 2,800 villages (27% of a total of 10,500 inhabited localities) together with livestock and agricultural equipment;
to the destruction of communications, and all railways and means of transport;
to the sinking of 73% of the merchant fleet;
to the extinction of all savings and the elimination of credit through the collapse of the currency;
to the curtailment of tobacco exports, which before the war were absorbed in large part by Germany.

III. All these developments occurred in a country which, having been obliged in 1922 to sustain a sudden increase of her population by 30% (refugees from Asia Minor and Eastern Thrace) had by 1933 been recognised by the League of Nations as the poorest country in Europe, and which was compelled to shoulder internal and external loans to an amount of £40,000,000 in order to absorb the refugee population.

IV. If post-war Greece is to be in a position to maintain her population, it is essential that the destruction caused by war and enemy rule should be made good in the most advantageous manner. In this connection, it may be stated that the people of Greece would be glad if the extent of the problem could be assessed, and a solution proposed, by American and British experts, since the problem is too great a one for Greece’s economic resources.

[Annex 2]

Greek Memorandum Presented to the Secretary of State

Comparative Indications: Economic Resistance of Italy and Greece

(1) War losses

Greece: a) 35 % reduction of productive capital.
b) Replacement of depreciated capital: nil.
c) Expenditure for rehabilitation: 6% of total Budgetary expenditure.
Italy:* a) 15% reduction of productive capital.
b) Replacement of depreciated capital: exceeding 50% (with the assistance of Allied Services).
c) Expenditures for rehabilitation: 20% of total Budgetary expenditure.

(2) National Income

[Page 865]
Greece: a) Pre-war: 55 dollars per head of population;
1946: 35% of pre-war figure, i.e. under 20 dollars.
b) Salaries cover 25% of essential maintenance expenses.
Italy: a) Pre-war: 142 dollars per head of population.
1946: 65% of pre-war figure, i.e. 92 dollars;
b) Salaries cover 40–70% of maintenance expenses.

(3) Currency

Greece: Total extinction of the national currency through inflation (circulation 360,000 times greater).
Introduction of a new drachma on a basis of 1 dollar=150 drachmae,
Present prices of dollar:—
official rate=5,000 drachmae
unofficial rate=6,300  “
Italy: Maintenance of pre-war currency, with circulation barely twenty-times greater than pre-war;
prices of dollar:—
official rate 225 lire (11 times greater than pre-war)
unofficial rate 480 lire (24 times greater than prewar).
  1. No record of the Byrnes–Tsaldaris conversation of September 13 has been found in Department files. For a summary of the meeting based on Greek sources, see Stephen G. Xydis, Greece and the Great Powers, 1944–1947 (Thessaloniki, Institute for Balkan Studies, 1963), p. 332.
  2. Statements made by the Italian Ministers for Reconstruction, Signore Ruini and Gronchi; estimates prepared by an industrial sub-commission of the Allied Commission for Italy. [Footnote in the source text.]
  3. For the income of the year 1945, see Bruno Rossi Ragazzi: Il reddito dell’ Italia negli anni 1944 e 1945; also the economic “Index” of Professor Livio Livi (May 1946). During 1946 production yields have increased. [Footnote in the source text.]