Office of the Historian

781.00/9–2451: Telegram

The Ambassador in Greece (Peurifoy) to the Department of State
secret
Athens, September 24, 1951—4 p. m.

1391. Yesterday deputy PriMin handed me a note formally concurred in by three major pol parties appealing against cut in level of aid.

Note outlines as follows effect of any marked reduction in aid:

1.
Because of very strong inflationary forces, announcement of cut [Page 511] might easily create panic in gold market and spread to other sectors of economy.
2.
Investment program already reduced and necessary for food and raw materials. Further cuts wld result in increased unemployment and undermine hope for future and morale of people latter indispensable for social cohesiveness and fighting spirit of armed force.
3.
Reduction of ECA counterpart availabilities wld have shattering effect on govt expenditures, first among civil pensioners, veterans and guerrilla-stricken areas northern Greece. These sectors most vulnerable Commie infiltration. But even drastic economies here cld not prevent substantial reduction mil expenditures and armed forces.

Elaborating last point, note shows 43 percent of budgeted govt expenditures 1951/52 is for natl defense, 14 percent civil pay roll. Even if govt cld resist tremendous pressure for adjustment civil service pay, cut welfare and relief, local governments, a cut in defense expenditure wld be necessary at $250 million level. At lower level, govt revenue wld be reduced by lowered customs revenues and other taxes, and substantial reductions in size of armed forces wld be unavoidable.

Note concludes “it can only assert with all the seriousness at its command that a reduced level of aid will make it impossible to maintain the main lines of its present policy. Retreat wld be rapidly followed by dramatic developments leading to crisis and chaos. For, under those conditions the forces working against peace and social order wld have full opportunity to renew their activities which aim at paralysis of the social structure and the destruction of the defense establishment of Greece.” Text and despatch follow.1

Emb and USA substantially in accord with arguments presented.

Peurifoy
  1. The text of the note was transmitted to the Department in despatch 466 from Athens, September 25, a copy of which is in file 881.10/9–2551.↩