868.50/3–447: Telegram

The Chief of the American Economic Mission to Greece (Porter) to the Secretary of State


316. For Ness from Porter. Agree reply Deptel 248 March 1 must be made with assumptions such as those under paragraph E and first [Page 93] paragraph as working basis and following prepared, accordingly, out do not wish endorse them as predictions. Caveat necessary because failure assumed conditions to materialize will substantially change costs to US; moreover, possibility of failure is itself important consideration in determining policy of implementation. Comments specific assumptions:

Re 1. Uncertainty some circles here that, lacking government reform and changes in government social and economic policy, Greek Army capable suppressing armed resistance.

Re 2. This assumes success campaign 1947 and effective pressure US or UK in forcing Greeks reduce army they probably will wish maintain regardless success or failure 1947 campaign.

Re 3. No comment.

Re 4 and 5. US personnel and efforts control economic program probably will be ineffective in inducing Greeks take measures for own aid unless performances self-help measures made condition precedent US aid each quarter. Assurance generous unconditional aid over long period may result continued gross misconduct of government, pauperization of people and recurrence present situation at end aid period.

All conversions of drachmas at arriving foreign exchange value reflected this telegram made at rate 8000 to 1. All value figures in millions dollars.

A–1. Summary balance of payments, details of which given last part this telegram follows:

Column one receipts: (1) Exports 99.6; (2) Remittances 32; (3) Shipping 10; (4) Miscellaneous 3; (5) extraordinary receipts including UNRRA, Exim Bank and FLC credits 75.6. Total receipts 219.2.

Column two expenditures: (1) Food imports 89; (2) Non-food items for consumption 146.5; (3) Reconstruction 25; (4) Miscellaneous 10. Total expenditures 270.3.

Deficit post UNRRA relief basis 51.1.

Extraordinary deficit: (1) For extraordinary relief and budget subsidy under new program 85; (2) Reconstruction 10; (3) Foreign exchange cost Greek Army 120. Total foreign aid 266. Combined programs plus use Exim Bank and FLC credits 318.

Believe important differences in balance of payments estimates on basis this program will be: (1) Extraordinary aid consisting of supplies for reconstruction and other government operations and large US subsidy toward meeting immediate government budget difficulties part of which ultimately will be used for import consumption goods to offset inflationary effects drachma expenditures. (2) Grant to meet foreign exchange cost Greek Army exclusive heavy military equipment. Believe inflation eliminated by stated assumption stabilization Greek economy. However, should inflation occur, naturally would have serious effects extent of which unpredictable. Possible reduction exports [Page 94] under new program more likely due diminished incentive for Greeks utilize own resources.

A–2. Mission estimates follow in subsequent cable.

A–3. Total deficit 1948 roughly estimated 180. Value exports and cost imports dependent 1948 prices and other unknowns. However, with recovery and administration under American guidance, assume reduction to 60 in aid toward balancing budget. Foreign exchange costs reconstruction 45. Assume successful 1947 campaign and gradual reduction military expenditure after 1947 would mean reduction to 75 of aid for army in 1948.

[Here follow further details of the Greek financial situation, including an estimate of $460,000,000 for a five-year reconstruction program, which the Greek Government would not be in a position to finance.]1

  1. In telegram 325, March 6, 4 p. m., from Athens, Ambassador MacVeagh stated: “Embassy generally agrees with views and estimates embodied in Embtel 316, March 4 from Porter for Ness. Believe considerable weight should be given, however, to possibility of Greeks themselves financing large measure of national recovery once reasonable confidence in political economic stability of country established through our proposed aid. Estimates of Greek private assets now held abroad available for possible repatriation range from 200 million to 500 million dollars.” (868.50/3–647)