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

254. Memorandum of Conversation⁰

Washington, January 20, 1959.

SUBJECT

• Greek Bond Negotiations

PARTICIPANTS

• Greek Ambassador Alexis S. Liatis
• Mr. Douglas Dillon, Under Secretary of State
• Mr. Hamlin Robinson, E

The Greek Ambassador opened the conversation by referring to the common market and free trade area discussions, and asked Mr. Dillon whether he had any information about the development fund and other longer term aspects of the European economic integration movement of particular concern to the lesser developed countries of the area. Mr. Dillon said he was not aware of any recent developments in this aspect of the discussions in Paris, and presumed that everyone was so preoccupied with the recent crisis that these matters had been put aside for the moment.

The Greek Ambassador alluded briefly to the current discussions between Mr. Gazis, of the Bank of Greece, and Dr. Dana Munro, President of the Foreign Bondholders Protective Council. Mr. Dillon said he was informed of the general nature of these discussions, and had the feeling that the time was ripe for a compromise which could lead to final agreement. Whereas the Greeks and the Council had been thinking in terms of an ultimate annual service burden of around $7 million and $8.2 million respectively, he suggested that something like $7.5 million might possibly lead to agreement. He noted that the Council felt that a 12-year period for reaching this figure was too long, and wondered whether a lower figure of 9 or 10 years, for example, might be acceptable to both sides. Mr. Dillon added that the U.S. Government was very interested in the successful conclusion of these negotiations, particularly so as to remove this impediment to the possibility of International Bank loans.

The Greek Ambassador said he also felt that an effort should be made to reach agreement on the bonds at this time. He said that he was urging Mr. Gazis to return to Athens to explain the situation and seek further instructions which might enable him to reach agreement with the Council. He said that he would talk further to Mr. Gazis and would convey Mr. Dillon’s views to him. The Ambassador said that he was considering a short visit to Greece in the near future himself, at which time he would use his influence to resolve the present impasse.

In connection with his possible trip, the Ambassador referred to the DLF loan which he expects to sign within a few days, and said that he would welcome Mr. Dillon’s suggestions for any other matters which he might discuss with his government while in Athens.

Mr. Dillon said there was one other matter which concerned him. This related to the dispute with the contractors building the NATO air base in Crete.¹ He could not understand why this problem never seemed to get resolved. The Greek Ambassador said his Government was not prepared to accept the principle involved in recognizing the contractors’ claim as it would affect other contracts in which the Greek Government itself is directly involved. He felt that it should be possible to agree on a lump sum settlement without relating it to the particular issues involved and he would recommend that his Government seek this way out. Mr. Dillon said that he had been unaware of the basic issue as outlined by the Ambassador, and agreed that the latter’s suggestion seemed to offer a practical way of resolving the difficulty.

On January 21 I conveyed the gist of the foregoing discussion of the Greek bond negotiations to Dr. Dana Munro by telephone. He was very appreciative of the push the Department had given to this matter and agreed that a favorable basis had been laid upon which final agreement might well be possible.

He said he would await a further approach from Mr. Gazis whom he expected to see at a social occasion later this week.

0. Source: Department of State, Central Files, 781.10/1–2059. Confidential. Drafted by Robinson and initialed by Dillon.
1. Reference is to claims made for payment against the Greek Government by Joint Venture, an American company, in connection with the construction of an airfield at Souda Bay in Crete. Documentation on these claims is Ibid., 781.5.