868.51/1–2246: Telegram

The Ambassador in the United Kingdom (Winant) to the Secretary of State

us urgent

793. Urgent for Secretaries of State and Treasury from Hawkins and Taylor. British officials state that detailed report of proposed agreement between British and Greek representatives substantially accurate in all respects appeared in Athens press this morning. Accordingly the British and Greek representatives decided this evening that publication of letters to be exchanged between the British Govt and Greek Govt covering agreement reached during current conversations in London cannot be longer delayed. They propose to release for publication in Athens Wednesday afternoon January 23, on [or?] Thursday, January 24, an exchange of letters following the paraphrase of the draft letter in part II of this cable. Tentative plans are that the British Foreign Secretary will make a statement along these lines either Wednesday or Thursday. It is planned that draft letter will be approved at meeting in British FonOff tomorrow at noon with Greek representatives at which we will be present.

At previous conversation with us the British and Greek representatives inquired as to the procedure whereby the member of US nationality to participate in Currency Committee would be selected. In accordance with urtel No. 309 of January 10 we replied tentatively that member of US nationality was to be appointed by the Greek Govt but that the US Govt, if requested to do so, may be willing to suggest informally to the Greek Govt a list of persons of US nationality who would be qualified for this position. We indicated that we would not be able to give definite reply in absence of definition of functions and responsibilities of the Currency Committee.
From the discussions it would appear that the Greek representatives feel that the functions of the Currency Committee should be limited strictly to the management of the note issue, and that the Bank of Greece and appropriate Greek Ministries would have clear authority over and responsibility for foreign exchange transactions, stabilization measures and administration of Greek economy generally. [Page 101] The British representatives commented to us informally that the functions of the Currency Committee might well be limited officially to the issuance of new currency, but that in practice it would be in a position to issue policy directives on a broad basis to the Bank of Greece and to the Greek Ministries in initiating and carrying through desired program for economic stabilization. British are now reviewing scope of functions and responsibilities to be given to Currency Committee. We have indicated that the US would take an advance opportunity to comment upon the implementation of the Currency Committee and the formulation of its functions.
Greek representatives hope that they will be able to announce rate of exchange in conjunction with publication of agreement. Tentative British views favor rate between 16,000 and 20,000 drachmae to the pound. Greek representatives have mentioned 18,000 drachmae to pound.
The exchange of letters will not refer to any possible support by the British Govt of proposals by the Greek Govt for assistance to the Reconstruction Bank or other international bodies. See paragraph 8 of ourtel 542, January 2 [16]24. It was agreed that such commitment would be ill advised from the viewpoint of the role of the Reconstruction Bank as an independent agency.
British and Greek representatives agree that currency conversion program should be a straight conversion at rate to be agreed upon. Tentative views are that there will be no blocking or tax measures, or any registration which would permit currency program to be used as a measure for discovering and combating black market operations. Greek and British representatives comment that currency is not held by hoarders or dealers in black market and that change in rate of exchange hits holders of currency hard enough. Exchange of letters will also commit Greek Govt to appropriate adjustments in wages and prices.
Settlement of outstanding 1945 financial claims between the two countries will be settled by a separate exchange of letters. We understand that exchange of letters on this matter will not be published.
British representatives are urging Greeks to send purchasing missions to UK immediately. They point out that Greeks should turn Greek foreign exchange assets into supplies and capital equipment which can be used by Greeks in restoring her economy as soon as possible.
Tentative plans are that Tsouderos and Kartalis25 will not return immediately to Greece but will remain here until a definite list of supplies and equipment which can be shipped immediately to Greece [Page 102] is agreed upon. Greek representatives commented to British that unless they can take actual goods and schedule of agreed subsequent deliveries back with them “agreement is so much hot air”.

Part II. Paraphrase of draft letter from Mr. McNeil26 to M. Tsouderos for discussion and signing if possible on Wednesday 23rd January27 is quoted below. Our comments are in parentheses.

“It pleases me to record the agreement which has been reached between the British Govt and the Greek Govt concerning the decision of the Greek Govt to put into force a detailed and comprehensive programme to reestablish confidence, to restore industrial and agricultural production and to make it possible to take progressive steps to reduce the deficit on the Greek budget; and also the financial and economic assistance which the British Govt have, as part of this programme, decided to give to Greece.

It is my honour to confirm that the financial and economic assistance which the British Govt have decided to give to Greece as part of this comprehensive plan will be the following:

The British Govt will ask Parliament to approve a credit of 10 million pounds for the stabilization of the Greek currency which as described below will have a definite and specific cover of 25 million pounds in all. This cover will be held in a special account of the Bank of Greece at the Bank of England and will be invested in agreement with the Bank of England.
The British Govt will waive repayment of the sum of 46 million pounds loaned to Greece in 1940/41. This will enable the reserves of the Bank of Greece to be available free of all charges or encumbrances as additional cover for the Greek currency and for the purchase of essential imports.
(This section is to be drafted. It will refer to release of property held under custodian arrangements.)
The British Govt will make available immediately for sale to the Greek Govt consumer goods at a cost price of 500,000 pounds. These goods which will be provided in spite of the acute shortage in the UK will comprise clothing and certain household utensils.
The British Govt will make available for service in Greek waters additional coastal shipping and dredgers in order to restore the Greek coastal trade and to ensure that both UNRRA supplies and local agricultural and industrial produce are rapidly and efficiently distributed. (Types of shipping are to be further discussed.)
The British Govt will release from British military stocks for sale to the Greek Govt at disposal prices, material for the reconstruction of Greek land communications. The British Govt have particularly in mind the provision of Bailey Bridges for the repair of the road system. (Greeks have asked to pay in drachma for all supplies in (d) (e) and (f) but British have so far given categorical “no”.)
The British Govt will endeavor in consultation with the Govt [Page 103] of the US and UNRRA to make available without delay the necessary spare parts and tires to enable the 4,000 lorries imported into Greece by the military authorities and by UNRRA to be Kept on the roads. In addition, the British Govt will endeavor to provide materials for sale to the Greek Govt to overcome certain other shortages which may be holding up the immediate reconstruction programme. The British Govt have particularly in mind the rebuilding of houses, the repair of industrial plants and the restoration of road, rail and sea communications and of port facilities.
The British Govt will provide to the Greek Govt technical assistance over a wide field. A highly qualified consultative mission on financial, economic and industrial matters has been formed under Lieutenant General Clark, CB, MC. In addition on the invitation of the Greek Govt British advisers will be appointed to work in certain Greek Ministries and be responsible to the Greek Ministers concerned. (Clark Mission may be limited to 2 years.)
The Greek Govt have stressed the need for a longer term reconstruction plan covering a period of say 5 years and it estimates that to carry through such a plan Greece will need foreign financial assistance on a large scale. The Greek [British] Govt do not dispute this need and they suggest that the Greek Govt should submit proposals to the Bretton Woods Reconstruction Bank to cover the period when UNRRA supplies will have ceased. (British say Greek representatives felt that it was desirable to refer to the Reconstruction Bank but agreed to eliminate any statement that British Govt would support any approach Greeks might make to Bank.)
(Greeks have been pressing strongly for food supplies. British have not been able to indicate what will be made available but may agree to make some reference to it.)

The Greek Govt for their part will take the following measures:

The Greek authorities will make an early announcement fixing a new rate of exchange between Greek currency on the one hand and sterling, US dollars and other foreign currencies on the other hand.
The Greek Govt will deposit as cover for the currency in the special account referred to above 15 million pounds from the foreign exchange resources of the Bank of Greece in addition to the 10 million pounds to be contributed by the British Govt.
As a further measure to establish confidence in the currency, the Greek Govt will by Greek law set up a Currency Committee which will have statutory management of the note issue. The Committee will consist of the Greek Minister for Coordination as President, the Greek Minister of Finance, the Governor of the Bank of Greece, a member of UK nationality and a member of US nationality, whom the Greek Govt will invite to act as members of the Committee.28 New issues of currency will only be made with the unanimous approval of the Committee.
There will continue to be offered for sale to the Bank of Greece foreign exchange received from exports and in respect of remittances.
The Bank of Greece will freely convert Greek currency into foreign exchange for imports and for other approved purposes.
A programme will be framed by the Greek Govt for progressively reducing and as soon as possible eliminating the budget deficit by increasing the proceeds of taxation and reducing expenditure. Monthly statements showing the progress made in carrying out this programme will be published by the Greek Govt.
Wages will be readjusted in the light of the new rate of exchange and will be kept stable.
A system of price control over rationed items and allocated materials will be established.
The Greek Govt will work out in agreement with UNRRA plans for increasing the price of UNRRA goods and reducing the number of indigents who receive free rations. So far as possible the Greek Govt will require indigents to work in exchange for their UNRRA rations.
All possible measures will be taken to restore industrial and agricultural production, so that the standard of living may be improved and a basis may be afforded for adaquate taxation.

It is suggested that an agreement between our two Govts is constituted by this letter and Your Excellency’s reply thereto.”29

[Hawkins and Taylor]
  1. Not printed.
  2. George Kartalis, Greek Minister of Supply.
  3. Hector McNeil, British Parliamentary Under-Secretary of State for Foreign Affairs.
  4. The letters were actually exchanged by Messrs. Bevin and Tsouderos on January 24; for texts, see Parliamentary Debates, House of Commons, 5th series, vol. 418, cols. 451–454.
  5. Sir John Nixon, retired official of the Government of India, and Gardner Patterson, formerly with the United States Treasury Department, were designated British and American members of the Currency Committee by the Greek Government in early February and early April, respectively.
  6. In a memorandum of January 26, 1946, to Mr. Acheson, Loy W. Henderson, Director of the Office of Near Eastern and African Affairs, stated that the “British have been more generous than might have been expected in offering financial and economic assistance; the Greek Government, for its part, has agreed to undertake a stringent stabilization program.” He noted also the urgent request of Mr. Tsouderos for the United States to issue a public statement approving the agreement and appended a proposed statement. (868.51/1–2646) The statement was issued by the Secretary of State the following day; for text, see Department of State Bulletin, February 3, 1946, p. 155.