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

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

Athens, June 29, 1960, noon.

3700. Reference: Embtel 3647.¹

1. Optimism re foreign debt matter has, I regret to report, proved premature. Caramanlis has gone into tailspin over political developments and now proposes further delay. Foreign Minister told Berger yesterday Prime Minister has reluctantly decided he cannot send Gazis now to US as it would be “politically dangerous” for him to announce bond settlement at this time, but that Caramanlis is hopeful atmosphere will clear up enough to wind up negotiations “2 or 3 months hence”.

2. Averoff elaborated as follows:

A. Recent strikes of institutional doctors and law court officials and general unrest among civil servants and industrial workers (all seeking higher wages) and dissatisfaction among farmers (lower prices and incomes combined with crop damage in some areas) make government conclude this bad time to announce bond settlement, particularly since government can do very little to meet these domestic demands.

B. Korean, Turkish and Japanese events² have created hope among opposition and communist elements that perhaps something can be pulled off here, if they can latch on to some popular issue. Government determined not to give them any opportunity and everything in Greece now being looked at from this point of view. Indeed government has gone so far as to advise King not to go to Italy to watch Crown Prince in sailing competition³ lest this open him to criticism he is playing while Greece suffers.

C. Government unable provide much in way of amelioration of worker and farmer demands without either adding to inflationary pressures or reducing their investment budget. However some improvements will be made in next few weeks at least for such groups and this together with further increase in public works program and signs Greek economy improving slightly will they hope make for better atmosphere few months hence. By that time, too, Korean, Turkish and Japanese “contagion” may have evaporated.

3. Berger told Averoff that effect of above decision in US might be little less that disastrous and that it would almost certainly adversely affect Washington view of pending Greek request for assistance. Indeed there might well be public denunciation by irate bondholders in US, and with justification, which would complicate Greek Government’s ability to settle few months hence as it might enable opposition to level charges government capitulated under pressure from US.

4. Berger suggested as alternative that Gazis go to US at once to complete negotiations and initial agreement, if necessary with understanding that settlement would not be announced until agreed upon moment. He suggested time for announcement might perhaps be in September when IBRD and IMF meet and which would offer an opportunity for Greeks to seek kind of IBRD statement they anxious to have.

5. I phoned Averoff thereafter and ratified what Berger had said emphasizing my disappointment and my view that Washington would view Prime Minister’s eleventh hour withdrawal as worse step Greece could take, in own interest and in terms American ability to collaborate in immediate future. I told Foreign Minister he could quote me to that effect, adding that I was prepared say same thing to Caramanlis.

6. Averoff said he would see Prime Minister and communicate with me again, which he did today, on eve their departure for Tito visit (Embtel 3631).⁴ Foreign Minister said Caramanlis somewhat shaken by our representations and had decided postpone decision until their return to Athens on July 3.

7. I still hope we can pull it off but Caramanlis, troubled by international developments plus his domestic problems, has apparently become [1 line of source text not declassified] reluctant take any step that might complicate his local situation. It would be helpful for me be able say Department endorses views already conveyed to him, and likewise for Department make similar representations, urgently, to Ambassador Liatis.⁵

Briggs

0. Source: Department of State, Central Files, 881.10/6–2960. Secret; Limited Distribution.
1. Telegram 3647, June 26, reported that Averoff had stated he would send Gazis to New York to conclude a settlement of the bond issue. (Ibid., 881.10/6–2660)
2. In Korea student-led riots had forced the resignation of President Rhee on April 27. A military coup on May 27 overthrew the Menderes government. Riots in Japan in June against the conclusion of a U.S.-Japan security pact forced the cancellation of a good will visit by President Eisenhower.
3. Crown Prince Constantine was participating in the 1960 Olympic games in Rome.
4. Telegram 3631, June 24, reported on Karamanlis’ projected visit to Yugoslavia. (Department of State, Central Files, 781.13/6–2460)
5. In telegram 15 to Athens, July 2, the Department of State replied that it “fully agreed” with Briggs’ views and the actions he had taken. The Department added that Liatis had been informed of U.S. concern with the lack of settlement of the bond issue. (Ibid., 881.10/6–2960)