Foreign Relations of the United States, 1952–1954, Eastern Europe; Soviet Union; Eastern Mediterranean, Volume VIII

881.10/3–3152

No. 426
Memorandum by the Acting Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (Berry) to the Secretary of State¹

top secret
special handling

[Washington,] March 31, 1952.

Subject:

• Greek Currency

The following is background upon a problem which I understand Mr. Matthews will discuss with you today,² and concerning which he will propose that you talk with Mr. Harriman:

As you may know, there has been sharp disagreement between Athens and MSA/W concerning the implementation of a counter-inflationary program in Greece. Since the problems involved in determining the proper course of United States policy in this regard are so complex, we have encouraged the dispatch to Greece of a special MSA mission to study the matter and decide what should be done. A group headed by Mr. Sam Welldon, Chairman of the First National Bank of New York, is leaving for Greece on or about April 2. By mutual agreement between MSA/W and the Department, an officer of GTI will be included in the mission.

Although MSA/W, particularly the officers of that agency who will go on the mission to Greece, is known strongly to favor Greek currency reform, our discussions with Mr. Kenney³ have led us to understand that this question will not be prejudged but will be considered in light of the political, economic, psychological and other factors involved and in light of the attitude of the Greek Government. In discussing the terms of reference of the group with Mr. Kenney, Mr. Rountree emphasized the importance in his judgment that no prior decision be made upon this matter since it is impossible at this distance to evaluate the feasibility and implications of such a step. It was understood that draft terms of reference would be amended accordingly.⁴

Last Wednesday it was learned by chance that Mr. Tenenbaum,⁵ a member of the proposed MSA mission, was departing the following day for London where he would place an order for the printing of a new Greek currency to be used if and when it is decided to institute a currency reform. Mr. Rountree therefore contacted Mr. Kenney and discussed the matter with him.

Mr. Kenney confirmed that Mr. Tenenbaum was going to London to place an order for new currency at a cost of approximately $300 thousand, since MSA felt this would be necessary in view of the time which would be required to print the bills.⁶ He pointed out if we should wait until the decision is made there would be a two or three months delay before the currency would be available.

Mr. Rountree told Mr. Kenney that he was considerably disturbed over the implications of the United States placing the order and asked if the Greek Government was aware that this was being done. Mr. Kenney indicated that an official or officials of the Bank of Greece had “signed the requisite plate orders” but that very few people knew about it because of the requirement of absolute secrecy. From this and subsequent conversations with MSA people there appears to be considerable doubt that anyone in the Greek Government itself is aware of the fact that we intend to order the currency. While the Governor of the Bank of Greece undoubtedly has played some role in the matter, it is not clear to us that he knows that the United States is placing an order. In any event the Bank is not the Government itself.

As a second point, Mr. Rountree asked Mr. Kenney if this action would not tend to prejudge the question of whether there should be a re-issue of Greek currency and he said that it would not. Mr. Rountree emphasized again the hope this would not be the case as it was his understanding that this question would be determined in light of all considerations involved after the special mission arrives in Greece.

It is believed this matter poses a very serious problem. If the plan is permitted to proceed, and if our understanding of the facts is correct, the United States would be in a position of placing an order for new Greek currency, even bearing a new name, without the specific knowledge of the Greek Government. Should this become known, the repercussions could be very serious. Since the prerogative of currency issue is very important to any sovereign state, the action might well be interpreted as intervention of a most blatant nature, and the repercussions could extend considerably beyond Greece.

The argument favoring our placing the order is that, should it later be decided to re-issue Greek currency, the time element would be extremely important and our failure to order now might jeopardize the effectiveness of the program; that the advantages are, in fact, worth the gamble that $300 thousand will be lost if it is later decided not to re-issue the currency. While this argument obviously has merit, it would appear most wise that the action be not taken without the knowledge and approval of at least the Greek Prime Minister, or acting Prime Minister, even though he probably should be asked not to disclose the matter to anyone else.

In view of the lack of consultation upon this matter we cannot be certain of the facts. However, because of the serious nature and delicacy of this question it is proposed that you discuss it with Mr. Harriman⁷ as soon as possible so that we know what the situation and its implications are before the United States is committed. In the meantime, Mr. Matthews telephoned Mr. Tyler Wood⁸ on Friday evening and requested that Mr. Tenenbaum be instructed to take no action in London pending further word. It was understood that such instruction would be sent.⁹

1. Drafted by Rountree and transmitted through Matthews and Cowen. It bears the handwritten notation: “Ret’d by Sec. after action taken.”
2. No record of a conversation on this subject by Acheson and Matthews on Mar. 31 has been found in Department of State files.
3. No record of the discussions between Berry and Kenney has been found in Department of State files.
4. The terms of reference for the MSA delegation to Greece, Mar. 3, prepared in the Office of the Assistant Director for Europe (MSA), set a target date of 3 months after the delegation’s arrival in Greece for implementation of currency reform. (Enclosure to the letter, Mar. 20, from Locker (MSA) to Rountree; 881.10/3–2052) The amended terms of reference called on the delegation and the MSA Mission in Athens to prepare and negotiate, if found necessary, currency reform “at the earliest possible time”. (Attachment to copy of a letter, May 12, from Peurifoy to Kenney; Athens Embassy files, lot 59 F 48, 49–57)
5. Possibly Edward A. Tenenbaum, Office of the Assistant Director for Europe, Mutual Security Agency.
6. Kenney told Rountree: “that the action of proceeding with the order is pursuant to authority granted by the NAC two months ago”. (Memorandum of conversation, Mar. 26, by Rountree; 881.10/3–2652)
7. No record of a discussion by Acheson and Harriman on this question has been found in Department of State files.
8. C. Tyler Wood, Associate Deputy Director of the Mutual Security Agency.
9. Attached to the source text is a suggested message from Harriman to Kenney which concluded that the decision to order new Greek currency would await Kenney’s discussions in Athens and approval by Mantzavinos and Peurifoy. It bears the handwritten notation that the Secretary approved, and the message was transmitted in telegram Musto 301, Apr. 2.