277. Draft Memorandum From the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (Allen) to the Secretary of State’s Special Assistant for Mutual Security Affairs (Nolting)1


  • Aid to Greece

Last spring it was decided to increase Greece’s economic aid for FY 1955 from $15 to $25 million in order to maintain Greek ground forces at 105,000. USCINCEUR recommended strongly that the Greek ground forces be kept at a minimum of 100,000 while the Greek Government indicated clearly that, if Greece received only $15 million in economic aid, it would be compelled to reduce the ground forces to 70,000.

It is now proposed to reduce Greek economic aid to $15 million for FY 1956, and if this is done the same problem will recur. As explained below the Greek Government could obtain no popular or political support for an increase in its defense budget to compensate for decreased United States aid. Therefore the almost certain result of decreased economic assistance would be a decrease in the Greek armed forces. If the Greek ground forces are reduced 30,000 below the NATO minimum, other NATO members may be influenced to make corresponding reductions in their own forces.

Greece is one of the countries which has not reduced its defense expenditures. It has continued to devote about 40 percent of its budget to defense despite strong internal pressures. These pressures have their origin in the fact that Greece has a per capita income of only $158 compared to an average of $600–800 for the NATO countries of Western Europe. United States economic assistance has shown the Greeks how to make substantial increases in their standard of living, and they have made economic development a national objective. They understand that expenditure for investment in development projects is necessary for improved levels of living, and no [Page 531] Greek Government could successfully withstand the demand for further progress. The communists have gauged this situation accurately and for some time they have taken the line that America seeks only to increase the Greek defense burden at the expense of any improvement in the civilian standard of living.

For these reasons the Greek Government and our own observers were convinced last spring that it would have been politically impossible to increase the defense budget at the expense of the economic development program. Since then the Greek Government has been weakened by Cabinet changes, the Cyprus question and the municipal elections of November 1954, when communist-supported mayors were elected in five of the country’s six leading towns. Our Embassy believes these election results were largely caused by popular dissatisfaction with the Government’s lack of significant progress in improving the standard of living. Thus the stable and friendly Papagos Government would risk almost certain political suicide if it attempted to increase defense expenditures in FY 1956.

Another factor which cannot be ignored in deciding on our level of economic aid for Greece in FY 1956 is the adverse effect which the Cyprus question has had on Greek-American relations. American prestige has declined in Greek eyes, and if we now decide to cut Greek aid, the friendly and cooperative relations which we have had with Greece may be expected to suffer.

Thus a cut in Greek aid of $10 million, which is a comparatively small share of our over-all aid program, would probably lead to a substantial reduction in Greek armed forces and might well reduce our influence in this strategically placed country at a time when Greece can play an important role in strengthening the Balkan alliance and the connections between that alliance and NATO.

  1. Source: Department of State, Central Files, 781.5–MSP/2–2455. Secret. This memorandum, drafted by Wood, was not sent. A memorandum for the files by Baxter, February 24, attached to the source text, notes that Allen had made the following comments on the proposed memorandum:

    “I believe our role in this is to point out that reduction in aid to Greece will require reduction of the Greek army to 70,000. It is for the military (and particularly NATO) to determine how that will affect the general defense picture. I do not wish to take on the burden in NEA of justifying the size of the Greek army. If those primarily concerned with defense want to keep it at 100,000, let them fight for the money. Otherwise, let the army drop to 70,000.”