868.515/3–2847
The Chargé in Greece (Keeley) to the Secretary of State
No. 3838
Sir: In continuation of the series of communications from the foreign members (Gregory and Patterson) of the Currency Committee to the Prime Minister, recommending measures to alleviate the present economic crisis in Greece, (see Embassy’s despatches 3597 and 3753 dated February 4 and March 7, 1947, respectively) I have the honor to enclose a copy of a further letter dated March 10, 1947,1 delivering a virtual ultimatum to the Greek Government on the necessity of stopping gold sales by the Bank of Greece, and disavowing further responsibility in case this is not done.
While the Embassy has long shared the view expressed by Gregory and Patterson that Greece cannot now afford the luxury—however desirable it may be in theory—of diverting scarce foreign exchange to the purchase and importation of gold for sale to private buyers; and the Embassy agrees with them, and the Porter Mission, that this practice should be terminated at the earliest practicable moment, nevertheless the Embassy does not believe that this step can safely be undertaken (1) before adequate controls on foreign trade, commodity prices, wages, etc. (as recommended in the Gregory–Patterson letter of February 28 to the Prime Minister—see despatch no. 3753 dated March 7) have been effectively established, and furthermore (2) before sufficient funds in dollar exchange are in sight to cover essential import requirements at least during the critical period of the next few months.
Fulfillment of the latter condition presumably will be basically accomplished by Congressional approval of the President’s program of assistance to Greece. Effective establishment of the necessary economic controls and related measures by the Greek Government may take some time, since considerable governmental machinery for the [Page 134] purpose will have to be created and public acceptance of the controls established. Until these two conditions are realized, particularly as regards availability of foreign exchange, the Embassy believes that an official termination of gold sales cannot be undertaken without risk of seriously impairing the present relatively stable—but very sensitive—currency and commodity price situation.
Since President Truman’s March 12 address to Congress on aid to Greece, the local trend in gold trading has been completely reversed; the private avidity to buy gold, which became increasingly conspicuous in the few days before March 12, suddenly turned into a rush to sell. The Bank of Greece buying price within a few days dropped from about 140,000 to 124,000 drachmas for the sovereign, and proportionately for the napoleon. Trading has now subsided, and daily purchases and sales by the Bank are at present insignificant. The public, and the Government, are anxiously awaiting the decisive action of Congress.
Until the situation in Greece, and in Washington in regard to Greece, “jells” more firmly, the Embassy feels that no radical change should be made by the Greek Government in its present policy of continuing the authority of the Bank of Greece to cautiously buy and sell gold for the purpose of stabilizing the currency.
Incidentally, the undersigned wishes vigorously to disassociate himself from the views of Gregory and Patterson expressed in paragraphs 3 and 4 of the enclosure, anent the “craven and utterly selfish attitude” of the Greek “business classes” regarding the purchase of gold. The private individual normally will protect himself as best he can under threatening circumstances, be he Greek, Russian, Chinese, or American. In this case the fault is in the Government’s policy, not in the individual.
Respectfully yours,
Counselor for Economic Affairs
- Not printed.↩