868.515/3–747
The Ambassador in Greece (MacVeagh) to the Secretary of State
No. 3753
Subject: Greek Economic Crisis: Recent Developments
Sir: In sequence to the Embassy’s Despatch No. 3597 of February 4 I have the honor to transmit herewith copies of two communications from the foreign members of the Currency Committee to the Prime Minister, together with a summary statement of Government economic policy, as outlined below:1
Enclosure No. 1.
Letter of February 7, 1947 from the foreign members of the Currency Committee (Gregory and Patterson) to the Prime Minister, in which they refer again to the urgent need for terminating the sale of gold by the Bank of Greece, and add a series of recommendations on economic policy, the adoption of which they strongly urge.
Enclosure No. 2.
Summary statement of Greek economic policy issued by Prime Minister Maximos on February 17, 1947. It will be noted that the Prime Minister’s policy statements, in very generalized terms, are based closely on the recommendations contained in the above mentioned communication of Messrs. Gregory and Patterson.
Enclosure No. 3.
A letter of February 28, 1947 from Gregory and Patterson to the Prime Minister, in which they again refer to the increasingly critical financial and general economic situation in the country and make certain specific recommendations which they feel it essential for the Government to adopt as preliminary measures in an effort to maintain some degree of economic stability in the country. With regard to these specific recommendations, the Embassy is informed (by Patterson) that subsequent discussions with the Prime Minister and his Cabinet associates have produced the following results as of March 6, 1947: [Page 104]
- 1)
- Currency Committee. The Prime Minister has agreed to accept in toto the recommendation of Gregory and Patterson.
- 2)
- Wage Policy. The Prime Minister has reluctantly accepted the recommendation for a general wage “freeze”, including the specific points enumerated under the general heading.
- 3)
- Prices and Hoarding. The Prime Minister and his advisers appear extremely reluctant to accept measures involving severe sanctions such as confiscation of hoarded merchandise, excess inventories, etc.; no final decision has been reached thus far regarding this recommendation.
- 4)
- Control of Exports, Imports, State Supplies. This recommendation appears acceptable to the Prime Minister including the proposal to establish a centralized “Foreign Trade Administration”. Discussions are said to be well advanced looking to the probable appointment of Mr. Maben, present chief of UNRRA Mission,2 as head of this new agency.
- 5)
- Merchant Marine. No progress has been made thus far in convincing the Greek authorities that the amount of foreign exchange derived from the Merchant Marine can be substantially increased beyond the amount presently foreseen for 1947, aggregating approximately eight million dollars.
- 6)
- Olive Oil. The Prime Minister has agreed that edible olive oil must no longer be used for industrial purposes. He has also agreed to authorize the exportation of olive oil, but no determination of exportable quantities has been reached. The Government is fearful that exports of important quantities of oil will jeopardize the domestic price of this product.
- 7)
- Black Market in Foreign Exchange. Thorough discussion of this subject has not yet been undertaken. It appears that the Greek authorities are opposed to the introduction of a financial censorship of the mails, but the question involves the whole aspect of the foreign exchange position of the drachma, including the problem of correlating the official exchange rate, now 5,000 drachmas to the dollar with the “street” rate at present around 8,000.
What effect our recently declared policy of all-out assistance to Greece may have on the Greek Government in its readiness to adopt remedial economic measures remains to be seen. The Embassy believes however that the situation has degenerated to a point where the Government must, and will, adopt measures more in keeping with the seriousness of the situation.
Respectfully yours,
Counselor of Embassy for Economic Affairs