868.00/2–2147

Memorandum by the Under Secretary of State ( Acheson ) to the Secretary of State 1

top secret

Crisis and Imminent Possibility of Collapse in Greece

The Facts:

Reports from MacVeagh, Porter and Ethridge in Athens are unanimous in their alarm over the probability that Greece will be unable to maintain her independence. Determining factors are the probability of an imminent economic and financial collapse and the fact that Greek communists and the Soviet dominated governments of Albania, Yugoslavia and Bulgaria are making every effort to prevent any improvement in Greek internal affairs. These efforts are designed to make untenable the position of any Greek Government not subservient to Soviet aims.

The morale of the ill-equipped Greek army is at low ebb. Areas under the control of guerrilla bands, who receive aid and encouragement from outside Greece, are increasing.

The Greek foreign exchange position is so critical that no one can see at the present time how absolutely essential imports can be financed during the next few months.

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Greece is the only Balkan country remaining oriented toward the Western democracies. Unless urgent and immediate support is given to Greece, it seems probable that the Greek Government will be overthrown and a totalitarian regime of the extreme left will come to power.

The capitulation of Greece to Soviet domination through lack of adequate support from the U.S. and Great Britain might eventually result in the loss of the whole Near and Middle East and northern Africa. It would consolidate the position of Communist minorities in many other countries where their aggressive tactics are seriously hampering the development of middle-of-the-road governments.

Action and Recommendation:

1. Political unity of all loyal Greek parties excluding the reactionary and totalitarian right, as well as the Communists and other extreme left parties which subscribe to Communist aims. Both we and the British have for some time been advising that this type of broad national coalition is the only hope of winning the confidence of the majority of the Greek people in a situation which is as much a national emergency as that which existed during war years. Such advice is much more likely to be heeded if it is accompanied by tangible and substantial aid from the U.S. and Great Britain.

2. Drastic reform in Government administration and tax program. Low pay, inefficiency and demoralization of the Greek civil service have led to unprecedented corruption and ineffectiveness in the working of the Government. Neither outside aid nor Greece’s own limited resources can be effectively utilized for the welfare of the Greek people as a whole when administered by the present impotent Greek Government services.

The U.S. Economic Mission has urgently recommended, and the Greek Government has requested, the immediate dispatch to Greece of three American and three British experts in the field of government administration to reorganize the civil service. We are already in the process of recruiting suitable persons for this task.

3. Economic and Financial Aid. Credits to Greece from U.S. sources include $25,000,000 from the Export-Import Bank, $45,000,000 for the purchase of surplus property abroad, and approximately $45,000,000 from the Maritime Commission for purchase of ships. The bill for relief appropriations soon to be presented to Congress will permit the allocation of an appropriate sum for Greece.

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While all of these credits and the relief grant, if it is approved by Congress, will contribute to the eventual improvement of the Greek economic situation, they are limited to use in specific fields and there seems to be no money available for the most immediate needs during the critical period of the next few months.

Greece’s most immediate financial requirements are for free funds to meet ordinary budgetary needs and essential import obligations. The Export-Import Bank has stated that under its charter it is unable to make loans for such purposes and there appears to be no other source within our Government. The British are similarly unable to make funds available for this purpose. The International Bank is not yet in a position to take action, and it is doubtful whether such assistance falls within its scope.

It was understood when the British loan was made last year that no further requests for direct loans to foreign governments would be asked of Congress.

If we are to act at all, we recommend presenting a special bill to Congress on an urgent basis for a direct loan to Greece, stressing the fact that if inflation and chaos are not prevented within the next few months, the gravest consequences will ensue and the country will be beyond our help.

4. Military Aid. It has been informally agreed that Great Britain should be responsible for equipping the Greek armed forces while U.S. assistance to Greece would be confined to the economic and financial field.2 However, if the Greek Army is to become an effective organization able to deal with guerrilla activities and maintain internal order, it must be increased and better equipped in the very near future. The British are unable to meet scheduled needs.

Under present arrangements Greece will receive neither adequate economic aid from the United States nor adequate military aid from Britain.

We recommend reconsideration of our policy and decision to assist Greece with military equipment.

Attached are four pertinent telegrams from Ambassador MacVeagh, Mr. Ethridge and Mr. Porter. (Athens Top Secret telegrams 196, February 11; 227, February 17; 232, February 19; 243, February 20).

Dean Acheson
  1. Based on a top secret memorandum of February 20 by the Director of the Office of Near Eastern and African Affairs (Henderson) to Mr. Acheson (868.00/2–2047).
  2. The informal agreement had been reached by Secretary Byrnes and Foreign Secretary Bevin while they were participating in the Paris Peace Conference, which met from July 29 to October 15, 1946; see Mr. Acheson’s letter of November 8, 1946, to Ambassador MacVeagh, Foreign Relations, 1946, vol. viii, p. 262.