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

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

Athens, April 9, 1960, 7 p.m.

2790. Reference: Embassy telegram 2786, April 9, I960.¹

1. We had one hour meeting with Prime Minister this morning during which I gave him report on my Washington and Paris consultations,² including and emphasizing debt matter. Began by congratulating Caramanlis on Parliament victory last night following five day debate on Communist no-confidence motion on foreign affairs (Prime Minister and Averoff in fact on whole handled debate very well and Embassy assessment is that government improved its position).³ I then remarked I had last seen Caramanlis exactly four weeks ago on eve Washington departure (Embassy telegram 2506, March 12)⁴ and that during busy intervening period I had canvassed Greek-American relationship as thoroughly as I could.

2. I said I returned with their [these?] principal impressions:

A. Depth and sincerity of US interest in well-being of Greece and extent of good will that exists in US Government toward Caramanlis personally as indicated by greetings I charged to transmit—from President, Secretary, Under Secretary, Assistant Secretary for NEA, Ambassador Riddleberger, and from General Norstad and Ambassador Burgess in Paris. Those greetings testify to esteem in which Prime Minister held as well as to importance we attach to Greece as free world ally and NATO partner. They testify also to desire of American Government march forward in continuing collaboration with Greece and to participate in further development Greek economy.

B. My consultations underlined satisfactory state of our relations generally, in political, military, economic, cultural and related fields, recognition of which source of special satisfaction to me as US representative accredited to his government.

C. Finally, my talks emphasized importance, in light foregoing broad considerations, of his removing, as most urgent matter, one remaining obstacle to future progress—namely defaulted foreign debt. Said used word “obstacle” advisedly. What formerly “an irritant” because of long delay may if not settled very soon become formidable deterrent. Explaining that I of course unauthorized negotiate with respect foreign debt, nevertheless useful to recapitulate situation as seen by Council and as explaining its inability accept Gazis proposal. Furthermore, I said State Department officials directly concerned are in general sympathy with Council position which, leaving aside details, is that principle amount of approximately $230 million should be repaid with interest reaching 50 percent of contractual rate within reasonable period and that 10 percent of interest accrued since default should also be paid, the 90 percent balance to be forgiven. Ten-year escalation proposed by Greece altogether unacceptable and, whereas Council probably prepared relax its five–year demand, nothing in neighborhood ten years would be acceptable to bond holders.

3. I pointed out difference between what Greece has offered (approximately $7 million per annum at end of escalation period) and solution acceptable bond holders would probably not exceed $1 million (more or less), which is a fractional amount in terms US-Greek collaboration and US contributions annually to Greece through proposed credits, military aid, et cetera. I urged therefore that Prime Minister review situation and present improved new offer.

4. I also referred to possibility Greek unilateral offer along lines Gazis proposal, indicating that should this be done, it would lead to rejection by Council with public statement of reasons therefor which in turn would mean Greek international credit unrestored and no Greek access further US Government credit. In addition, policy set forth Under Secretary’s letter to Rodopolous⁵ become known among various agencies in Washington, commented upon to the detriment of Greek-American relations, and protracted Greek default now subject US Congressional interest (Celler bill).⁶ Conversely, should debt settlement be reached, we shall be in best possible position move ahead.

5. Prime Minister listened attentively, without interruption, throughout all of foregoing, stating quietly at end that in context my talks with highest officials our government and their known friendship for Greece exposition could not fail to impress him. Although he could not give immediate answer, he would let me know what he could do at early date. Meeting Council’s views would, he said, be difficult for him in light his local political problem and might even result his overthrow. Averoff remarked somberly “if we have to do this, we may all regret it later”.

6. Following discussion of common market problems, separately reported,⁷ meeting ended on cordial note with invitation from Prime Minister for Assistant Secretary Jones and DLF Director Brand, who are due Athens April 21,⁸ to accompany Prime Minister and me to ceremonies incident inauguration Ptolemais plant.

7. Embassy comment: My estimate of foregoing is that, having in mind Prime Minister’s previous attitude toward debt settlement and his not infrequent low boiling point, discussion went off well, with Caramanlis impressed both by sincerity of our government’s desire to help him and by conviction prevailing in Washington that it may become increasingly difficult for us to aid Greece unless foreign debt settled. Recalling my last talk with Munro, I believe that if bond holders can obtain effective January 1 last seven step escalation period with maximum annual payment between $7.5 million and $8 million, that is about all present Greek position can sustain, politically if not economically. If Department has any instructions or comments on foregoing it would be helpful receive them by end next week when Caramanlis will return from vacation.⁹

Briggs

0. Source: Department of State, Central files, 881.10/4–960. Secret; Limited Distribution. Transmitted in two sections.
1. Telegram 2786 reported on discussions with Karamanlis on the debt issue and Briggs’ feeling of cautious optimism that a settlement could be reached. (Ibid.)
2. The nature and duration of Briggs’ Paris visit are unknown.
3. The motion of no confidence, which EDA introduced on April 1, attacked the government’s foreign policy. Briggs summarized the debate and its impact in telegram 2791 from Athens, April 10. (Department of State, Central Files, 781.00/4–1060)
4. Document 286.
5. See footnote 3, Document 287.
6. Representative Emanuel Celler had introduced legislation prohibiting the United States from making loans to any nation in default on a bond issue.
7. Not found.
8. Brand and Jones visited Athens 21–24 for the dedication of the Ptolemais fertilizer plant, which was built with DLF loans, and for discussions with Greek officials on economic matters.
9. In telegram 2895 to Athens, Dillon praised Briggs’ presentation and suggested that a visit to Athens by Munro might settle the debt issue. (Department of State, Central Files, 881.10/4–960)