272. Telegram From the Embassy in Greece to the Department of State0
997. 1. Having heard rumors for several days that Prime Minister “much upset” by US attitude toward relevance of Greek foreign debt default to consideration pending DLF loans, I was not surprised to receive Foreign Minister’s request this morning to call on him for discussion this matter. Averoff had before him two-page memo which I gather was directive from ForMin [PriMin] Karamanlis to represent in strongest possible terms concern experienced by Greek Government at our joining two issues of default and future credits. Memo (as drawn on by Foreign Minister) defends Greek economic record, asserts genuineness efforts reach agreements with bondholders protective council and cites considerations with which the Department already familiar re alleged inability Greece do better than Yugoslav temporary settlement, albeit Foreign Minister emphasized Greece’s desire permanent rather than provisional settlement, and argued Greece recognizes validity “one hundred percent of capital debt” in contrast alleged Yugoslav recognition of less than 10 percent.
2. Averoff also cited domestic political problems (see previous reports) and urged Washington recognize “impossibility” at time when Government doing best settle Cyprus, at cetera, to go beyond offer recently made by Zolotas BPC and rejected by latter (DLF memo October 7 Robinson-Munro conversation)1 in all of which circumstances Greece “cannot improve recent offer” and bespeaks Department’s sympathy and consideration for small country, staunch ally, struggling with adverse factors. Should US position remain as set forth by Under Secretary Dillon to Ambassador Liatis2 and should bondholders remain obdurate, Prime Minister is considering, according to Averoff, withdrawing pending DLF applications even though political repercussions thereof both with respect Karamanlis government and in broader context Greek-US relations could be formidable.
3. Foreign Minister had obviously been instructed by Karamanlis put matter vigorously as possible. In reply my inquiry he stated that [Page 683] copy Prime Minister’s memo from which Averoff spoke to me was being sent Greek Embassy with instructions for Liatis to reiterate plea. When I asked what was dollar equivalent of Greek offer, Averoff said that based on approximately 210 million dollars capital amount, two percent interest plus one percent amortization would be 6,300,000 dollars per annum which (again in light Yugoslav settlement) represented best Greece could be expected to do.
4. Comment: Faced with US stand as set forth by Under Secretary at September 25 meeting with Liatis, Karamanlis is obviously smarting, frustrated and unhappy, especially since credits for development have high priority in his development program. Difficult estimate how serious he may be in “threat” withdraw DLF application. Zolotas reportedly still in US and although his most recent offer below that rejected by council earlier this year, we in Embassy are inclined doubt whether prospects right (now or in foreseeable future) for materially improved Greek offer.
Further comment: I have carefully refrained in my discussions foregoing matter from implying that if Greece reaches debt settlement, this will guarantee favorable action DLF applications. It seemed clear however from tenor today’s representation that Greeks may assume guarantee implied. Department may desire adjust Washington thinking to this contingency.
- Source: Department of State, Central Files, 881.10/10–1559. Confidential; Limit Distribution.↩
- Not found.↩
- In his discussion with Liatis, Dillon told him that neither IBRD nor DLF financing would be available to the Greek Government until it effected a settlement with the bondholders. A memorandum of Dillon’s conversation with Liatis, September 25, is ibid., 881.10/10–1559.↩