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

Athens Embassy files, lot 59 F 48, 49–57

No. 428
The Deputy Director of the Mutual Security Agency (Kenney) to the Ambassador in Greece (Peurifoy)¹

top secret and personal

Washington, May 29, 1952.

Dear Jack: I appreciate very much your letter of May 12, 1952,² and trust that you will forgive my delay in replying, but I wanted first to discuss with Mr. Welldon the matter of his report.³ He has just returned and is working on his report which will be submitted in due course.

Preliminarily I will answer the points raised in your letter although I am sure they will be answered more fully in Welldon’s report and, of course, you will have the opportunity to comment on such recommendations as may be contained in that report. The terms of reference which I showed you in Paris, a copy of which is enclosed for your information,⁴ detailed the following three tasks to be performed by the Delegation:

a. To institute, wherever possible, and negotiate with respect to, measures necessary to achieve a program which has as its primary emphasis the elimination of inflationary pressures in preparation for a currency reform;

b. To prepare and negotiate, if found necessary, the implementation of a currency reform at the earliest possible time. The anti-inflationary program together with the currency reform, shall be designed to restore confidence in the monetary system of Greece, to induce the surrender of hoarded gold and foreign exchange to the monetary authorities, to restore an equitable distribution of income in Greece, to reduce Greece’s balance-of-payments deficit substantially, and to restore conditions favoring the healthy growth of free enterprise in the country; and

c. To make recommendations with respect to the longer-term economic objectives of U.S. aid to Greece and with respect to the nature and level of economic activity in Greece.

I shall not delineate the steps which have been taken in connection with tasks (a) and (b) because I believe you or someone on your staff are aware of all action taken both by the Mission and by the Greek Government in the institution of the stabilization program. Further action in (b) will be developed as the situation itself develops and it is determined that such action is necessary in the light of progress. The fulfillment of task (c) raises a different problem. Following our discussion with Mr. Welldon it was the consensus of opinion that it would be impossible to make any recommendations with respect to the longer-term economic objectives of U.S. aid to Greece and the nature and level of economic activity in Greece until we had a clearer picture of the success of the current stabilization program. The present economic picture of Greece is so uncertain that there are no stable grounds on which to make any such recommendation. This does not mean that this aspect of the problem is to be overlooked but merely to be deferred until we can proceed on sounder ground. Also, as you are aware, the level of economic aid is a matter of continual study by the Mission and the staff in Washington so that there will be data available for Mr. Welldon and his Delegation when the time appears for the long-range evaluation.

During my meeting with Mr. Welldon we had an extended discussion as to the character of report that he should submit, not with any thought of directing the type of report but merely to obtain that which would be most beneficial to all of us. The report will detail action taken and in progress and will enumerate certain bench marks that can serve as guides of progress or warnings of deterioration. We should be on the alert for their appearance because certain of them will call for action and others for study. The group confined itself primarily to the financial aspects of the Greek economic problem because, as I told you when I was in Greece, I felt that it was our function to prepare a study purely economic in character and not diffused with political and military considerations. The political aspects are your responsibility and the military aspects are the responsibility of the Department of Defense. We recognize that political and military considerations may require action not justified on purely economic grounds. However, the basis for any particular action must be clear, and I do not think we add much to the military and political thinking if we have confused these problems with our determination of the economic ones.

In connection with all this I would like to inquire about your cable of May 13, No. 4869,⁵ because I have assumed that it carried no implications that under appropriate circumstances the military program might not be reviewed. As you know, I discussed with General Eisenhower our fears concerning the economic situation in Greece and our desire due to the military connotations to keep him informed of developments. At his suggestion Fred Anderson⁶ and I had an extended discussion with Admiral Carney concerning the impact of the military program on the Greek economy, and he agreed that if our study indicated that the military program was exacting too heavy a toll from the Greek economy he would review it. This would imply two types of review, one, that the maximum military strength is obtained in the most economical manner, and, two, that the magnitude of the forces is in accordance with strategic plans and can be supported. Admiral Carney clearly understood that this was a responsibility of the military and one in which my Agency had no competency to make any determination. I believe General Anderson had some discussion with General Hart along these lines, but unfortunately, I was not present at their conference so do not know the exact tenor of it.

I quite agree with you that it is most desirous to maintain harmonious relations. With this thought in mind I have pulled the Greek communications out of normal channels so that important cables are seen by me and in some instances have been rewritten by me. Therefore, I am afraid that if there is any current condemnation it must be directed at me. Of course, one of our principal problems in Greece was to strengthen Roger’s⁷ hand and provide him with more competent personnel. To this end I have, at Roger’s request, agreed to the transfer of Barrows as Deputy Chief and Tenenbaum as Economic Advisor. The creation of the Economic Policy Committee should be helpful as it will provide a forum for reviewing programs with an emphasis on overall results rather than individual projects.

I do appreciate the interest you have taken in my problems and hope that we are progressing on the way to solution.

With best wishes to Mrs. Peurifoy and with kindest personal regards, I remain,

Very sincerely yours,

John Kenney

1. The source text bears Peurifoy’s handwritten notation that Turkel discussed this letter with Anschuetz and prepared a reply. No reply was found in Department of State files.
2. Not printed. (Athens Embassy files, lot 59 F 48, 49–57)
3. Not found in Department of State files.
4. Not filed with the source text; see footnote 4, Document 426.
5. Telegram 4869 reported the Embassy’s view that Montgomery’s advocacy of retrenchment by Greece would “make resistance to Greek Govt’s inevitable appeals for greater aid either through NATO or MSA infinitely more difficult.” (781.5/5–1351)
6. Frederick L. Anderson, U.S. Deputy Special Representative in Europe.
7. Roger D. Lapham.