283. Telegram From the Department of State to the Embassy in Greece0
2434. Re Athens 2213 and 2318.1 Since Prime Minister asked that his views be conveyed promptly to Department, we assume he expects our considered comments. You may in your discretion convey following message directly to Prime Minister.
We are deeply concerned over apparent impasse in negotiations at time when parties appear so close to agreement. With some degree flexibility on part both negotiators, settlement should be possible. We regret [Page 699] to learn that in recent negotiations Gazis apparently had no such flexibility and apparently had no authority to modify latest Greek proposals. He thus reportedly unable respond certain concessions Council apparently prepared to make with view arriving at negotiated settlement. We understand escalation clause now appears be single most important issue and willingness on part both sides to compromise might be decisive in reaching agreement. We believe Council will continue to show flexibility it has already shown on this point.
We are aware of possible comparison such settlement with temporary Yugoslav settlement. We understand that a negotiated settlement between present GOG and Council position would compare favorably with temporary Yugoslav settlement. Moreover it our understanding present temporary Yugoslav settlement will have to be renegotiated on less favorable permanent terms at end 5 years.
We continue to feel strongly that negotiated settlement is essential step in Greek efforts to establish broad and adequate basis for meeting external financing requirements of economic development. Measure of Greek efforts to arrive at such settlement will continue to have important bearing on way we able to respond to pending and future Greek requests for assistance from US.
At time when parties appear so close to agreement, it would be regrettable if unilateral offer were made to bondholders without further efforts to bridge gap. For reasons already given we continue to feel such unilateral offer likely to be counterproductive.
FYI: Council feels that in recent negotiations it reaching outer limits what it can concede and at same time keep faith with other foreign bondholders with which it has made settlements.
Our calculations indicate that even without recent modifications, Council’s original position when applied to all issues would be more favorable to Greeks than temporary Yugoslav settlement. When applied to all US issues only, terms appear to work out about same.
History of these negotiations clearly indicates Prime Minister fears domestic criticism on any settlement within present range negotiations. If negotiated settlement is to be achieved, we will have to continue to set record straight and urge upon Prime Minister advantages of negotiated settlement. End FYI.
- Source: Department of State, Central Files, 881.10/2–1960. Confidential; Limit Distribution. Drafted by Owen Jones and approved by Dillon.↩
- Telegram 2213 is printed as Document 282. In telegram 2318 from Athens, February 19, Briggs reported that, in a conversation with Berger, Karamanlis indicated that the settlement of the debt question raised serious political problems and that the Embassy felt Karamanlis would not make further concessions. Briggs suggested that a new proposal from the bondholders might put Karamanlis in a conciliatory mood. (Department of State, Central Files, 881.10/2–1960)↩