311. Memorandum of Conversation0
SUBJECT
- Bond Problem
PARTICIPANTS
- Constantine Caramanlis, Prime Minister of Greece
- Evanghelos Averoff-Tosizza, Greek Minister of Foreign Affairs
- Christian K. Palamas, Director General of the Ministry of Foreign Affairs
- Alexis S. Liatis, Ambassador of Greece
- Gorge W. Ball, Under Secretary of State
- G. Lewis Jones, Assistant Secretary, NEA
- Howard R. Cottam, Deputy Assistant Secretary for Economic and Regional Affairs, NEA
- Ellis O. Briggs, Ambassador to Greece
- Robert G. Miner, GTI
- Oliver M. Marcy, GTI
Following a discussion of the Greek 5-year program and related problems,1 Mr. Ball said there was one further question which he [Page 606] wished to raise. This had occasioned us and the Congress some concern. It was, of course, the question of the pre-war bonds. We were very sympathetic towards the Greek position, and did not wish to be rigid in our own. We recognized that the issue caused the Prime Minister some political problems, but Mr. Ball felt that he should say that it also occasioned political difficulties for us as well. He hoped that there would be some way to give assurances to the bondholders that the problem would be solved. At this point Ambassador Liatis asked whether Mr. Ball meant assurances to the bondholders: would such assurances be made public? This could be very dangerous. Mr. Ball responded that there was no necessity that such assurances be made public. It would suffice were they to be made to Mr. Munro.
Mr. Caramanlis then commented that, since the question had been brought up, he would like to make it clear that there was no question of the Greeks having refused to settle. Up to 1950, Mr. Ball should understand, Greece had experienced ten years of devastating war and emerged almost totally prostrate, and now found themselves in the position of being pushed to ask the Germans and Italians—the very nations which had visited such devastation on Greece—for assistance.
The Prime Minister then proceeded to explain the Greek position. In 1950 Greece had just emerged from the guerrilla war. There followed four years of political and economic instability: only in the last five to six years had the Greek Government been able to devote its energy to bringing order to the situation. In other words, during the period when European countries were able to use American assistance to rebuild their economies, the Greeks were forced to spend all they received on the war with the Communists; when it came their turn to rebuild, American assistance, and specifically the Marshall Plan, was fading away. Notwithstanding, since 1953 and 1954, they had taken four or five initiatives to try to come to agreement. All the Greeks asked were conditions which were politically acceptable. In a country which had suffered such devastation in the common Western interest, this was extremely difficult. No Greek had received a penny in indemnity for loss or damage to his private property, or indeed for loss of life. It is not easy first to settle foreign indebtedness, before investing in development projects designed to raise the country from prostration. There was no lack of will on the part of the Greek Government to do so. We must, however, remember that not only had Greek lives and property been destroyed without compensation during the war, but the entire economy was shattered with all savings, bonds completely lost with no prospect of reimbursement.
Against such a situation, any settlement must be very carefully presented from the psychological point of view. Notwithstanding, two years ago the Greeks made another effort. They had started out to offer $4 million per year to service the bonds, and had ultimately agreed to $7 [Page 607] million; but then the bondholders had interjected a proviso to the effect that they should receive the benefit of any more favorable settlement reached with any other creditor by the Greeks. The Prime Minister had, quite rightfully he believed, asked that this cause be reciprocal. He had in mind the Communist countries, for example Rumania. It would put his government in a completely untenable position to have such countries receive more favorable treatment at the hands of the United States. The Prime Minister made the point that he was operating within a democracy, albeit a poor democracy. If the Bulgarians or the Yugoslavs received more favorable treatment, he was required to explain it. He noted, for example, the temporary settlement reached between the bondholders and the Yugoslavs, asserting that they had received better terms than those offered the Greeks. At this point Mr. Averoff interjected the Yugoslav-French agreement, where the Yugoslavs received “far better” treatment. Virtually 95% of the Yugoslav capital indebtedness had been written off. Mr. Caramanlis continued that, to the simple-minded Greek, it was impossible for him to explain why the United States was treating non-allies, neutrals, and even enemy countries such as Rumania, better than its ally, Greece. The political side was of much greater importance to the Prime Minister than the economic; he couldn’t care less if it cost him $1 million more or less per year. The problem was how to present it. Greece might be poor, but it was democratic and politically-minded.
Ambassador Liatis then translated very carefully: “the Prime Minister states that it is in his intention to settle”, and “indeed he might have been able already to settle it if you had not connected it with loans, DLF in this case. It would have been disastrous to the Greek Government, as to any Greek government—to appear to settle under the pressure of a threat of no loans unless there was a settlement. It would have been a similar disaster to the United States, from the point of view of its position in Greece.” The Prime Minister could not follow what he viewed as a political mistake in Washington. The United States might be correct from its point of view, but the Prime Minister was, so far as Greece was concerned. In any event, the Greek Government “is determined to find at a proper time a proper solution, without connection to aid from the United States.” This was the duty of the Greek Government, and the Greek Government would settle with or without United States aid to Greece. This was one of the basic measures which the Greek Government must take in order to re-establish Greece’s credit and good name. The Prime Minister wished to stress that, when the time came in his view to approach the bondholders, he would ask the United States to assist in achieving this, through admonitions and suggestions to the bondholders.
[Page 608]In response, Mr. Ball stated that he appreciated the Greek position and wanted to make it clear that we did not wish to be categorical. At the same time, he should say to the Prime Minister that the situation created for us some political problems, not only to the extent that it might condition the amount of help we can give Greece by Congressional control of funds, but also because the Congress exercises great scrutiny over our policies and programs thus limiting our own freedom of action. He did not put this forward as a categoric condition, but rather to reveal that these are political facts for us, as well as the Prime Minister. The Prime Minister interjected at this point that he saw quite well that the United States also had difficulties, and agreed entirely. The United States difficulties, however, were different. His were more fundamental.
After reverting momentarily to the prior discussion of the Greek 5-year program, the Prime Minister concluded his presentation by pointing out that when problems failed of resolution, occasionally it was because the means to resolve them were not available. At other times, it was because the problems were not understood. If now the problems between the United States and Greece were not resolved, it would not be because he had failed to do what he regarded his duty in endeavoring to explain them. For his part, Mr. Ball concluded by extending assurances that the United States had every intention of doing everything it could to help. The United States wished to see the Greek economy grow as rapidly as possible, and the standard of living raised for its people.