Foreign Relations of the United States, 1958–1960, Eastern Europe; Finland; Greece; Turkey, Volume X, Part 2

231. Memorandum of Conversation⁰

Washington, January 16, 1958.

SUBJECT

• Greek Dollar Bonds

PARTICIPANTS

• Messrs. Nicholas Gazis, Representative of Governor, Bank of Greece
• Francis F. Lincoln, Department of State/GTI

Mr. Gazis came to the U.S., as the personal representative of the Governor of the Bank of Greece, to initiate highly confidential discussions with the Foreign Bondholders Protective Council in order to find a possible basis for the settlement of Greek prewar foreign bonds.¹ Mr. Gazis called on January 16 and told me of the failure of the conversations he has had with the Council to reach an agreement. He made a proposal already described to us by Mr. Spang, the President of the Council.² Mr. Spang worked out a counterproposal which began with an interest payment at the level proposed by Mr. Gazis and in the course of 5 years, through gradual increase in percentage, reached a level double that proposed, or 50 percent of the contractual rates for the several issues of bonds. Mr. Gazis is without authority to accept such a proposal as something which the Bank of Greece would submit to the Government and is taking it back to Athens for further consideration.

Mr. Gazis very adroitly implied that it would be well for the Department to urge the Council to change its position. Foreseeing that this situation was likely to arise, I had discussed it with Mr. Hamlin Robinson and we had agreed that Mr. Gazis should be told that the Council is a semi-official body entrusted with handling debt adjustment and that the Department would not take any position with respect to details but would emphasize its confidence in the Council. I maintained this position with Gazis.

I spoke of the fact that there is a tranche of one of the publicly-offered issues held by the U.S. Treasury originally upwards of $12 million reduced to upwards of $10 million. We recognized that the Council was not a spokesman for these bonds. Mr. Gazis said that the Greek Government in this offer was not dealing with inter-governmental debt. I pointed out that this was a somewhat unique situation in which the Government took a portion of a publicly-offered loan and that it would be important that in any settlement it should receive comparable treatment. Gazis parried with the comment that should the Government and the Council work out a settlement, it was expected that it would be the basis for the treatment of other issues.

Mr. Gazis said that he was returning to Athens quite directly.

The proposal as worked out by Mr. Spang and approved by the Council for the treatment of outstanding dollar bonds is attached.³

0. Source: Department of State, Central Files, 881.10/1–1658. Confidential. Drafted by Lincoln on January 17.
1. In a January 9 letter to Rountree, Zolotas, Governor of the Bank of Greece, noted that the lack of a settlement of the bond issue was hindering Greece’s economic development, that he was sending Gazis to the United States to initiate a new round of discussions, and that Greece would welcome U.S. assistance in settling the outstanding issues. A copy of this letter is Ibid., 881.10/1–958.
2. Apparently during a December 3, 1957, meeting at the Department of State. A memorandum of this conversation is Ibid., 881.10/12–357.
3. Not found with the source text.