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

270. Memorandum of Conversation⁰

US/MC/34

Paris, September 4, 1959, 4 p.m.

PRESIDENT’S TRIP TO EUROPE

AUGUST-SEPTEMBER 1959

PARTICIPANTS

• United States
  • Secretary of State Herter
  • Deputy Under Secretary Merchant
  • Deputy Assistant Secretary White
  • Assistant Secretary of Defense Irwin
  • J. J. Wolf, USRO
  • W. Witman, Embassy
• Greece
  • Foreign Minister Averoff
  • NATO Ambassador Michel Melas
  • Mr. Panayiotis Verykios, Foreign Office

SUBJECT

• Political and Economic Situation in Greece

Foreign Minister Averoff remarked in greeting that this was his first meeting with Mr. Herter since the latter had become Secretary of State.¹

Mr. Herter responded by praising the work of Messrs. Averoff and Zorlu for reaching agreement on Cyprus. M. Averoff said he was “very happy about it”. Relations had been very bad for some years. He now hoped that when the Prime Ministers met,² there would be agreement on practically everything. It would be most helpful to show the masses something real had happened. There were still some difficulties over Cyprus, but on the whole he expected things would go well.

M. Averoff said he did not want to bother the Secretary details. The Turks of Cyprus, he remarked, got too much and now wanted more. He hoped to persuade the Turkish Government to bring pressure on the Cyprus Turks, otherwise there would be trouble. The Turks for instance had demanded division of customs revenues on a 70–30 basis. This had caused an uproar, as the Greeks carried on the economic life of the Island. There was still pending the question of the Vice President.³ The Greeks could not accept that he be a “co-president”. M. Averoff thought Archbishop Makarios had a good understanding of the problem. He hoped it could be arranged, but it was not yet solved. The Republic was still not proclaimed nor functioning–perhaps it might be by February ’60.⁴

The Greek Foreign Minister briefly mentioned the political problem created by the British requirement for two major bases and 16 minor military posts dispersed across the Island. This demand enabled the Grivas opposition to allege that sovereignty was in question and the Island besieged.⁵ The matter had been discussed with Mr. Sandys, and it was hoped a compromise solution would be found.

Reverting to relations with Turkey, M. Averoff remarked that to the Greek people, it seemed that the Greeks had given everything and the Turks nothing. He said he did not regret the agreement, and was confident for the future. Grivas, however, was attacking, and the Government had to act carefully to prevent reactions among the Cyprus population. In Greece, he said, Grivas would be used by the Opposition, but the Government was quite strong and there was no chance of weakening it unless the Cyprus population started shouting. Then things would be quite dangerous.

Internally, the Foreign Minister continued, the Greek Government considered itself stable, with a parliamentary majority assured for three more years. The only element of disturbance might be Cyprus with Grivas.

M. Averoff said that some gains had been achieved in the economic field too, with United States help, some spectacular things. They had a very stable currency, private bank deposits had greatly increased in the past 2 or 3 years, and especially last year, and this was a token of confidence. They intended to continue a very severe policy. But the mercantile marine crisis last year provoked a disturbance in the balance of payments, which had necessitated the use of $48 million from reserves in two years. If this drain continued, it would have very grave consequences, and require still sterner measures. There were grumblings at such austerity, which was not popular. There had been no salary increases for several years.

Consequently, the Foreign Minister stated, he pleaded very strongly for help in Greece’s balance of payments. He found it very annoying to ask this, but was obliged to do so since they had first done their best.

The Secretary inquired whether they had tried the International Monetary Fund. M. Averoff replied that the IMF and the International Bank could not help because Greece had not paid her debt. He added that when you lost $48 million, from reserves, you couldn’t pay. He felt, however, that the Greek Government had proved by its policies that it had good prospects. He therefore felt justified in warmly asking for help from the Development Loan Fund. They had several projects totaling $50 million, which were designed to increase savings and earnings in foreign currencies. He asked that the DLF look with real sympathy on this request. Among the projects, he mentioned a fertilizer plant, 3 highways and 2 ferry-boats between Italy and Corfu. The latter two items were designed to increase tourist potential, he explained.

Accordingly, M. Averoff stated, he was charged by the Prime Minister and the Government personally to look to the DLF. He reiterated that he found it very annoying to be in the position of asking for help, but he must point out that this was not only a political but also a military matter. Greece had many other problems to which she had been unable to give attention. The impoverished million inhabitants of the mountains, whose per capita income was $80 per year, constituted a socially dangerous problem. M. Khrushchev had “come to Albania to threaten us”,⁶ and some dangerous spies had recently been caught.⁷ But if the present Greek economic trend continued, in three years their balance of payments would be equalized.

The Secretary remarked that balance of payments loans were the hardest to come by. M. Averoff replied that he was seeking project loans which would eventually help cover the balance of payments.

Otherwise, as regards general problems, the Foreign Minister said things were going well in NATO. Mr. Herter observed that he understood the Greeks were taking up the question of the IRBM’s with General Norstad. M. Averoff assented but made no further comment.

On the question of Greece’s possible candidacy for the Security Council,⁸ M. Averoff said that the Prime Minister was “lukewarm”, but promised to talk to him about it. The Secretary said we did not urge them to do it if they did not want to. M. Averoff commented that the Prime Minister thought they had too many problems already. However, the decision was not definite, and would be discussed further on Monday.

The Secretary observed that we sometimes worried about Greece’s troubles with her Communists, to which M. Averoff responded, “we don’t worry”, the Greek people had been convinced by fire and knife: a good vaccination. He was however a little bit afraid and disturbed at the economic situation, with 700,000 Greeks under-employed, and the very poor mountain population suffering the most. Little had been done for them until the economy could be stabilized. There were rumblings from the public employees who had no pay increases. But they were not the ones who caused trouble. The last elections had produced a safe parliamentary majority, but showed 24% support for the Communists although real Communists were only 12–13% of the electorate. On the whole, however, the political and economic situation was sound and would keep for 3 years.

The Foreign Minister said of course all these things had been discussed with our Embassy at Athens and were being repeated here only for the Secretary’s general appreciation. The present time was a critical turning point where Greece needed United States help.

Mr. Herter said that in another ten days we would know how much money we would have from Congress. Our plans were very close, and we had been cut seriously, obliging us to set up priorities which we didn’t want to set up. Furthermore, the President’s recent veto of the Public Works bill⁹ had made many Congressmen angry. M. Averoff pleaded that $10 to $15 million would be “decisive for us”.

Mr. Merchant raised the question of debt settlement, and hoped that the Greek Government was giving serious consideration to that element in the climate in which private capital could move in. This could help with the balance of payments problem. M. Averoff replied that he couldn’t see private capital coming in at this dangerous cross roads. Mr. Merchant cited the new hotel in West Berlin. M. Averoff acknowledged how useful it would be, and said they had started on certain specific debts such as that of a Belgian company, where a plan had been worked out for repayment in drachmas to be invested in Greece, with facilities for income and capital to be taken out. He argued that it was essential for Greece to achieve economic stability before taking on the burden of debt service. Declaring his firm desire to settle this issue soonest, he apologized for not being able to say more now and stated that Greece must reach the point where her balance of payments was stabilized, otherwise it could lead to bankruptcy.

In response to the Secretary’s question as to how they planned to finance themselves year-by-year in the face of an adverse balance of payments, the Greek Foreign Minister said tourist revenues had gone up from $38 million in 1957 to $60 million in 1959; they would save $14 million a year with the fertilizer plant, and $8 million with a new fuel plant. These would lead to diversified industries with new savings and new earnings. They were now importing dairy products and meat, which could be made up with irrigation. All this was planned to improve the balance of payments position. Their eventual goal from tourism alone was $150 million per year, but they needed hotels, motels and roads. Meantime however merchant marine revenues had diminished very much. When the Secretary remarked that much of these did not return to Greece, M. Averoff replied that what counted was crews’ remittances.

In conclusion, referring to the Khrushchev visits,¹⁰ the Greek Foreign Minister urged that in any kind of joint communiqué with the Soviets, nothing be said which might be interpreted as recognition of the integrity of the Satellites. He explained that Greece had a claim to the Greek-populated area of Southern Albania, which he was not pressing, but the Greek people felt strongly and the Government could not say that it had given up the claims against Albania [less than 1 line of source text not declassified]. It would be most unfortunate therefore if Greece’s allies were to acknowledge directly or indirectly that these claims didn’t exist. The Secretary observed that we did not expect to do anything of the kind, and did not recognize Albania anyway. M. Averoff said he feared an “astute formula” of Khrushchev’s which might be open to the interpretation that the question of Southern Albania was closed. He therefore wanted to avoid trouble. Mr. Herter remarked that we were “well warned”.

On departing Mr. Berding asked the Greek Minister’s views regarding a press statement, to which M. Averoff replied that he had no suggestions. (Accordingly a very brief general statement was later issued.)¹¹

0. Source: Department of State, PPS Files: Lot 67 D 548, Greece. Secret. Drafted by Witman and approved in S on September 20. The meeting was held at the Embassy Residence.
1. Secretary of State Dulles resigned on April 16. President Eisenhower nominated Herter as Secretary of State on April 18; he was approved by the Senate on April 21 and sworn in on April 22.
2. Menderes was scheduled to visit Greece in the spring of 1960.
3. Under the terms of the February 1959 London accords on Cyprus, the Vice President of the Republic would be a Turkish Cypriot and would possess veto power over a wide range of government actions. A Constitutional Commission of Greek and Turkish Cypriots was trying to define the extent of that veto power. See Part 1, Documents 297 ff.
4. The London accords set February 1960 as the target date for the establishment of a Republic of Cyprus.
5. Grivas favored enosis, or unification, of Cyprus with Greece.
6. Reference is to Khrushchev’s threats to establish missile bases on Greece’s borders if the Greek Government accepted U.S. missiles; see Document 258.
7. Reference is to the arrest of a number of senior officials of EDA on charges of espionage for the Soviet Union.
8. A potential Greek candidacy for one of the nonpermanent seats on the U.N. Security Council.
9. Eisenhower vetoed H.R. 7509 on August 28.
10. Khrushchev visited the United States September 15–27; see Part 1, Documents 108–139.
11. For text of the statement, see Department of State Bulletin, September 21, 1959, p. 413.