868.51/12–1047: Telegram
The Acting Secretary of State to the American Mission for Aid to Greece
Gama No. 637. Dept fully cognizant difficult task facing Mission in preventing runaway inflation in light of extreme pressures in [Page 455] Greece, and has carefully considered all aspects of problem. (Further reference Amag 6431).
It is hoped conversion of napoleons already authorized will provide sufficient sovereigns for stop-gap sales program pending arrival in substantial quantities of program goods already in pipeline. Dept is convinced that solution to inflationary pressures lies in implementation of effective economic reforms accompanied by adequate supply of goods on market. In order facilitate anti-inflation program, you are therefore authorized until further notice to accelerate expenditure AMAG funds which are now being held for necessary civilian expenses after March 1, 1948. Dept will endeavor meet Greek requirements after that date from other sources including European Recovery Program and will do everything possible assist obtaining essential supplies to be purchased under accelerated program. However, this course involves risks which AMAG must weigh; first that no further funds may be available, second that provision further funds might be delayed, and third that further funds appropriated may prove inadequate.
Obviously Aid program cannot succeed unless Greek Government faces economic reality and is willing to adopt controls and measures deemed essential to recovery program. It is recognized that implementation of these measures will often bring about extreme pressures which must be realistically faced. Among these are attempts of small business groups to dominate markets at expense of equitable distribution and fair prices, attempts to maintain for political reasons unnecessary government subsidies such as wheat and milk subsidies; and pressure from some Greek quarters for continuation government gold sales as outlet for their profits. In your efforts to assure implementation of realistic program you may be assured of Dept’s full support irrespective of possible political repercussions or cabinet crises in Greece.
Re para 8 Amag 643, Dept view on gold sales still as in Gama 540,2 however, it is of course possible that exceptional circumstances may force Dept for reasons of expediency to concur in extension of gold sales. Difficulties inherent in extension of this policy, however, must be recognized. Over and above economic considerations, use of foreign exchange to purchase gold instead of urgently needed supplies, would be practically impossible explain Congress and the public and would make it extremely difficult obtain additional aid for Greece. Moreover, it is felt knowledge that American funds, either directly or indirectly, were being used for this purpose would have extremely adverse effect upon enactment entire ERP.
[Page 456]Clay fully informed of situation here, Dept would appreciate if after his return you would review entire program of Mission in light of what is considered essential to insure successful accomplishment of U.S. objectives in Greece and submit your recommendations as to policies and requirements for additional aid, in the light of both needs and availabilities, with justification. It would be extremely helpful if after your recommendations have been completed you and Clay could return to Washington for a few days at an appropriate time to be determined here to fit legislative schedule.