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

274. Telegram From the Embassy in Greece to the Department of State⁰

Athens, November 21, 1959, 9 p.m.

1412. Reference: Embtels 1337 and 1338, November 16.¹

1. At Prime Minister’s request I spent nearly two hours with him this morning, net of which was that his government approaching critical situation and will fall at very early date unless assistance forthcoming. By assistance, as developed during conversation, it appears that he means aid from US and action by Western European Governments to absorb agricultural surpluses. “A little assistance now, before it is too late, can tide us over, whereas if assistance not forthcoming, we are undone.”

2. Karamanlis began by referring to his satisfaction at arrangements for President’s visit, including his call on President on December 15.² He said would much prefer not to expose his troubles at time when he and entire Greek nation would be wishing to express affection and esteem for Chief Executive of nation which has already done so much for Greece. He hoped therefore by my conveying his estimate of situation in advance, he would be spared need to speak at length about Greece’s troubles. His outline followed lines already forecast in Embassy reports as a result conversations with Foreign Minister Averoff and others, and our own assessment of deteriorating situation.

3. Karamanlis spoke of his government’s difficulties in arranging Cyprus settlement, adding with bitterness that NATO allies had done little to show sympathy or understanding. Cyprus settlement was unpalatable to large segments Greek public and government correspondingly vulnerable. On top of this has come decline of the economy, particularly production and employment, accompanied by falling national and government revenues, and now problem of agricultural surpluses. Although government has heretofore maintained brave public posture, extent of economic difficulty can no longer be obscured since government increasingly hard pressed to meet its commitments (FYI Prime Minister has ordered ten percent expenditures cut in all ministries), farm surpluses are real, and thousands of individual farm families are affected.

4. In these circumstances Greece’s allies have not been helpful. He spoke of discouraging report from Greek common market negotiators in Brussels, which indicates little prospect of early relief from that quarter.³ It seemed incomprehensible to him that allies of Western Europe, whose imports from Greece almost microscopic in terms their total imports, would not be willing to come to rescue at this critical time.

5. Turning to US and conceding its economic difficulties, nevertheless, he said, annually decreased US aid has marked his tenure of office, and proposals for current year, insofar as known to his government, meant that Greece now can not count on aid from that source in amounts Greece considers necessary.

6. Prime Minister concluded with description of Greece’s vulnerability to Soviet pressures, along line statements of Foreign Minister of November 16 (Embtel 1337). While he himself will never deal with USSR on their terms, he said, Soviet offers can not but appear attractive when country so deeply in trouble. Soviet aim, as he sees it, is detach Greece from NATO, and Greece at present time is wide open target.

7. There was more along same line but net of his representation, as stated paragraph 1, is that Greece must have help from her allies, and have it soon, or economy will collapse and political stability with it, with incalculable effects on Greece’s alliance with West.

8. I told Prime Minister I would of course immediately report substance grave picture he had described. On my departure Karamanlissaid he hoped we could have further conversation between now and Presidential visit which I interpret as hope there may be some response from Washington to this appeal, prior to December 14.

9. Comment: Prime Minister account reaffirms and emphasizes picture recently drawn by Averoff (reference telegrams). Even partially discounting some of Karamanlis pessimism, his picture of Greece’s politico-economic fragility and vulnerability corresponds by and large with our own and, in our opinion, calls for action along lines commented on in Embattle 1338. Primary stress laid by Prime Minister was on need for quick assistance to buy time (which would involve less effort and money than that required to collect and reassemble the pieces after a collapse). So far as we can see, only practical source of such emergency assistance is US grant aid. What Greeks would do with time thus gained and what long-term assistance allies could muster are questions which would later follow.

(A) Immediate step we recommend is earliest possible Washington decision on pending aid items–i.e., additional $5 million for defense support; and DLF loan applications, if bond negotiations have cleared way. While this may not meet Karamanlis time-buying objective, it will be helpful not only financially but also in clearing air and enabling useful public announcement of an aid level comparing favorably with last year’s.

(B) Next step would be to provide Greece with some additional grant aid. Karamanlis mentioned ten million dollars, which he associated with need for increased investment spending on top of heavy defense load.

(C) As follow-up attention should be directed at basic underlying problems–especially problem of Greece’s agricultural policies and its expanding unmarketable surpluses. Dealing effectively with that problem may well require several steps, including corrective Greek action as far as possible, common market action on Greece’s association, and possibly even modifications US policies on aid in the agricultural sector (if Greek situation accepted as being of demanding importance).

10. While impossible to predict with exactitude political and economic consequences of economic collapse, it can certainly be said they Would bode little good for US and Western cause. Karamanlis would be repudiated and his party break up, and Grivas (a dubious Messiah) enabled to emerge as important political force. No party would have safe or stable majority, and we might be confronted with succession of weak governments pillow fighting with economic problems, not least of which would be feather weight drachma, with all its collapse would entail. [6-1/2 lines of source text not declassified]⁴

Briggs

0. Source: Department of State, Central Files, 781.00/11–2159. Secret; Limited Distribution. Transmitted in two sections.
1. In telegram 1337 from Athens, Briggs reported on a conversation with Averoff in which Averoff outlined a “three front” Soviet effort to undercut the pro-Western stance of the Karamanlis government. (Ibid., 661.81/11–1659) In telegram 1338 from Athens, Briggs outlined courses of action available to the United States to support Karamanlis against external and internal Communist challenges. (Ibid., 781.00/11–1659)
2. On November 4, the White House announced that Eisenhower would visit 11 nations, including Greece, in a December tour. See Document 276.
3. Greece applied for associate membership in the EEC on June 8.
4. In telegram 1683, December 12, the Department of State instructed Briggs to inform Karamanlis that, in view of Greek cooperation on bond issues, the United States would extend up to $31 million in DLF funds. No defense support funds were, however, available for Greece. (Department of State, Central Files, 781.5–MSP/12–1159)