Foreign Relations of the United States, 1948, Eastern Europe; The Soviet Union, Volume IV

868.00/3–2748: Telegram

The Acting Secretary of State to the American Mission for Aid to Greece

top secret

Washington, April 9, 1948—11 a. m.

Gama 561. Following is general reply subjects raised Amag 536 Mar 26,542 Mar 27,¹ 578 Apr 1.

a. As stated Deptel 411, Apr 3, to Emb we believe recent actions US, UK, and France, together with recent European and Ital developments have strengthened moderate forces Italy and resulted some losses Communists–Socialist “Popular Front”. Outlook is therefore somewhat more favorable than several weeks ago, and it is hoped this trend can be intensified by steps now anticipated during remaining ten days pre-electoral period. On basis present situation, it appears Ital Govt parties will again win small parliamentary majority.

b. Re suggestions Amag 578 as to precautionary measures to be taken in event unfavorable developments Italy:

1. Dept agrees that should adverse situation develop you should have full discretion to make emergency readjustments within existing Grk Aid Program under Public Law 75, but Dept cannot at this time authorize full discretion in use ERP funds since they are under jurisdiction ECA Administrator. There is sufficient latitude within unexpended balance Public Law 75 funds so that need for ERP funds to cope emergency short term situation will in all probability not arise. You may be assured, however, that any emergency recommendations made by you requiring authority beyond that which you now have as administrator Grk Aid Program will be acted upon with greatest despatch.

2. Dept and Treas have authorized immediate conversion and shipment Apr 10 $2 million FRB gold. Dept and Treas also prepared authorize addition conversion $2 million for immediate shipment upon request Bank of Greece if Ital election results should be adverse, or upon ur advice if the situation otherwise should make this desirable.

3. You may be assured that US policy toward Greece and Turkey will not be changed in event Ital elections result in Communist control of Italy, and that Dept will take appropriate steps to make public its determination to continue supporting democratic countries in Europe which are cooperating in ERP and which are resisting totalitarian pressures despite adverse developments; also that US will continue to assure regular arrival in Greece of sufficient food and other supplies. Dept is prepared approve emergency substitution of Govt buying in lieu private imports if in ur opinion circumstances make this essential.

c. Re penultimate para Amag 536. Introduction into military picture of irregular foreign troops or even regular forces from neighboring countries in guerrilla ranks would not necessarily create a situation beyond scope of instructions under which AMAG and JUSMAPG are operating. If Albanian war develops, new situation would be created which would require immediate re-examination and issuance new instructions pending which JUSMAPG would continue to operate in relation to Grk armed forces under its present terms of reference.

d. Regardless outcome Ital election or other international developments Dept agrees it essential every practical measure be taken control inflationary trend in view obvious dangers threatened economic collapse. Recognize that for time being gold sales must be continued and for this purpose balance FRB gold will be converted in installments as recommended by you. Other suggested steps, in addition to continued efforts implement basic economic reforms, are: (1) In view present slowness in taking up import licenses for raw materials for industrial production, and consequent shortage market goods, AMAG should consider feasibility and advisability authorizing as interim measure until more confidence established importation of greater quantities finished consumer goods in lieu some portion raw materials; (2) As means promoting Grk confidence emphasize in public relations work continuity Am assistance to Greece evidenced by new appropriation under Public Law 75 and by passage ERP legislation which envisages four-year program. Objective would be alleviate fear that Am assistance on short-range basis which likely to terminate at any time; and (3) Confidence in Grk armed forces should be enhanced as much as possible by full publicity of successes, and through such statements as made by Van Fleet just after his arrival Athens.

Lovett

1. Amag 542 not printed; it advised that pressure on the gold market resulted in good part from unfavorable international news; and concluded that continued holding of the gold rate during the coming weeks was absolutely essential to prevent disastrous deterioration of confidence and probable collapse of the present and succeeding governments (868.00/3–2748).