§ 3.39 p.m.
§ Sir Henry d'Avigdor-Goldsmid (Walsall, South)
It is only right that I should begin by thanking my hon. Friend the Member for Isle of Thanet (Mr. Rees-Davies) and the Parliamentary Secretary to the Ministry of Public Building and Works for their courtesy in shortening the previous debate to allow time for the later subjects.
I should also like to say how pleased I am to see on the Treasury Bench the Economic Secretary to the Treasury, because he has come from the hurly-burly of the market place where he has greatly distinguished himself as an innovator. I hope that he will bring to his new honourable post the same qualities of innovation and determination which made his life in the City so successful.
In speaking of the plight of the holders of Greek bonds in this country, I make it clear that I am not one of them and that, as far as I have information, no company in which I have investments is a bond holder. I have made no exhaustive inquiries about this, however, for the very good reason that if anything I have to say is to be discounted or brushed aside as coming from an interested party then no statement of disinterestedness on my part, however elaborate, will carry conviction to those who are determined in advance not to accept it.
I prefer to rely on the standing practice of the House, which recognises that hon. Members with specialised knowledge of particular matters can be of value and use to the House in bringing these things to its notice, provided that they make frank disclosures of any interests they hold. I am a director of the subsidiary company of the bank which acts as the paying agency for the Greek Government, but these matters could by no means fall within the purview of the bank in which I work.
1701 I believe that my interest in this matter is shared by all members of the British public. It is to try to ensure that, as far as it is in our power to do so, the Greek Government come to an equitable settlement with the bondholders, with consequent benefit to our balance of payments.
In raising the matter of the Greek Government's failure to come to terms with the bondholders, I do not want it to be thought that I am antagonistic in any way to Greece. One of my heroes has always been Lord Byron—I was at the same school—and I remember with appreciation the Greek Government's part in the commemoration in this country of his heroic death in the struggle for Greek independence in 1824.
Nor do I forget that the Greeks were the most heroic of allies in Hitler's war, nor the great and successful efforts of my right hon. Friend the Member for Woodford (Sir W. Churchill), who saved Greece after the liberation from the thrall of Communism, an operation in which my hon. Friend the Joint Under-Secretary of State for the Home Department played so distinguished a part.
We have recently had the dispute over Cyprus, but now that that is happily settled there is no valid reason to postpone talks between Greece and her creditors, as is proved by the visit to these shores of Mr. Nikolas Gaziz, of the National Bank of Greece, who came to discuss the Greek Government's external sterling debt. These talks were abortive, as was evidenced by the curt communique at their conclusion.
If there was no political reason for the failure of the talks, can the blame be laid on the present economic position of Greece? I doubt it—and here I pray in aid a four page advertising supplement to the New York Times international edition of the 1st November. This was headed "Today, Green for Greece." It went on to say that this special advertisement had been paid for by the Commercial Bank of Greece and the Ionian and Popular Bank. It added:The implementation of the Treaty of Athens "—which brought Greece into association with the Six—will stimulate the Greek economy in a number of ways. Specifically, the inflow of capital, technological know-how and business-minded- 1702 ness will provide a welcome injection to Greek industry.A further article was called, "Greece attracts foreign tourists." From this we learn that the Greek income from tourism in 1962 may be in the neighbourhood of 70 million dollars. It mentions the inflow of foreign capital, which, between 1953 and 1961, was over 53 million dollars.
There is also a long article about the ample incentives for foreign investors, with the sub-heading "Greece protects foreign capital." There are a number of provisions with which I do not need to weary the House as time is short, but it can be seen that Greece is determined to make herself as attractive as possible to foreign investment.
It may be summed up in words which are used in the supplement—that between 1959 and 1961 the net national income of Greece rose by 10 billion drachmae, an annual increase of 7½ per cent. The article says:The production and investment performance of the economy in the first two years of the plan, the remarkable stability of the currency, the expansion of bank deposits, the satisfactory level of foreign exchange reserves and the slight improvement in the current account of the balance of payments indicate that the prospects for the Greek economy are very bright.Many of us would be pleased if we could truthfully say the same of this country.
From another source I take the information that a very large number of ships which formerly sailed under flags of convenience have returned to the Greek fold. The Greek merchant fleet now represents 4.2 per cent. of the world total and Greek revenue from shipping remittances in 1960 was £28½ million. This is adequate proof, all from Greek sources, of the prosperous state of the Greek economy.
What is the debt in question? There is still outstanding an amount of about £60 million expressed in sterling, of £13 million expressed in dollars and of just over £2 million expressed in French francs. The annual interest on the former will amount to just over £3 million, on the dollars £750,000 and on the French franc loan much less. There are arrears of interest in each case amounting to about the total of the nominal debt outstanding.
1703 In addition, the Greeks have a responsibility for a share of the Ottoman debt; for under the Treaty of Lausanne of 1923, the successor States of the Ottoman Empire undertook to take their share. With the exception of Greece, all the others, Turkey, Syria, Palestine and Jordan, have, come to satisfactory and far from exigent terms with the Ottoman Debt Council, but negotiations with Greece have never been finalised. After being partially in default on some of their loans, the Greeks went into complete default in 1932. In the years between then and 1939 there was a series of negotiated temporary agreements. Under these temporary agreements, current interest gradually rose to about 43½ per cent. of the contractual interest, but sinking fund provisions remained in suspense.
The Council was not prepared to make a permanent agreement until the annual interest reached a higher percentage. The Greeks were not prepared to increase their annual remittances to do this, and the Council was not prepared to see a sinking fund established at the expense of their interest remittances.
The Greeks went on paying during the early part of the war, but, not unnaturally, defaulted after the German invasion of Greece. After the war creditor representatives fully recognised the effects of the war and of the subsequent civil war and were extremely patient in not pressing for a debt settlement, but in the early 1950s it was felt that Greece ought to be able to do something for her bond holders and the Council began pressing hard for negotiations. The Greeks finally agreed to multilateral negotiations with the Americans, the French and ourselves in Paris in September. 1954, but their representatives had no power to negotiate and the offers they put forward were so ludicrously inadequate that the talks broke down at once.
Since then, the Council has made continual efforts to get them to resume discussions. The long delay in their coming to meet the Council can only partially be excusable by their political difficulty in negotiating with us during the time of the Cyprus troubles. When the Greek representative came to London during the week of 26th November the Council had three sessions with him and, as a result, published a brief notice, 1704 with his agreement, to the effect that the discussions had not resulted in agreement. He was not prepared to authorise us to say anything about the possibility of a resumption of talks.
The World Bank has steadily refused to consider any loan applications from Greece until a satisfactory settlement of the pre-war debt has been made, but the European Investment Bank, on the other hand, one of the instruments of the E.E.C., has been less unyielding and has made loans to Greece for political reasons without receiving any undertaking whatever from the Greek Government. The Foreign Bondholders Protective Council, in New York, has negotiated a settlement with the Greek Government which provides for a virtual write-off of the arrears of interest, payment of one-third of the coupon rate of interest in 1963, rising to one-half in 1957, with a tiny sinking fund which might theoretically take 200 years to complete its task. These terms have met much criticism and whether the Foreign Bondholders Protective Council, which, incidentally, receives a handsome commission for its services, will succeed in persuading the American bondholders to accept must be open to question.
The most concise summing up of the recent London negotiations comes from The Times, of 4th December. In a leading article headed, "Unacceptable Greek Terms", The Times says:The Greek attitude at last week's London debt talks is not easy to excuse. The least that Greece should have offered was the miserable terms that the United States Foreign Bondholders Protective Council recently accepted on behalf of American bondholders. In fact at the time of the American settlement authoritative sources in Athens stated that an offer based on the American settlement' would be made to United Kingdom holders of Greek bonds. The American terms, inadequate though they were, would probably have been considered a basis on which to start discussions. But apparently the Greeks did not offer even those terms to all holders of their sterling loans (except in the case of some of the latest loans). As it is a cardinal principle that all bona fide bondholders must be treated alike, this offer offended all sense of justice. Moreover, the Greeks were not prepared to recognise any currency option in spite of the fact that the 6 per cent. Public Works loan, 1931, has a clause which specifically states that both the principal and interest of this bond will be paid in sterling or at the option of the holder in Dutch florins, Swedish kronor, or Swiss francs.Long-suffering British holders of Greek bonds must, therefore, exercise still more patience. Anything less than the American 1705 terms for all bondholders and the recognition of the currency clause should not be considered. The American terms themselves are meeting criticism not only in this country but also across the Atlantic. To persuade the Protective Council the Greeks had to plead poverty—and they did so just at a time when Greece was proclaiming that her economic prospects were bright.It seems to me that the time has come for Her Majesty's Government to interest themselves directly in these negotiations, or rather lack of negotiations. We ought not to forget that in addition to the factors I have detailed Greece has received from the United States of America alone since 1945 grants amounting to 1,400 million dollars and loans of 138 million dollars. Though I understand that these sums were not available for debt repayment, their effect on the rebuilding of the Greek economy must have been of crucial importance.
Moreover, due to the depressed state of the Greek bond market I believe it is correct that more than half of the Greek sterling debt still outstanding has been purchased by Greek nationals and repatriated and the Council of Foreign Bondholders has, in my opinion perfectly rightly, refused the invitation of the Greek authorities to discriminate between classes of bondholders by nationality. Nevertheless, it is perfectly clear from what I have said that to service its foreign debt in full would have only a negligible effect on the presently buoyant Greek balance of payments and Greece ought to take this decision if she wants to keep her good name.
Meanwhile, the United Kingdom, whose intimate and special relationship with Greece goes back over so many years and which is now making such valiant and successful efforts to expand her foreign trade, ought not to be too proud to try and collect her previous loans made to Greece to help tide her over some of the most difficult periods in her history, and I do ask my hon. Friend to give this most important matter his earnest consideration.
§ 3.53 p.m.
§ Dr. Alan Glyn (Clapham)
Would not my hon. Friend agree that the whole servicing of the loan would cost roughly £160 million and that Greece has adequate resources to pay it? Secondly, now that she is a member of the European Community she ought to treat 1706 her debts in a slightly more honourable way. Thirdly, though they are private debts affecting private citizens in this country, nevertheless Her Majesty's Government should take an interest because it affects not only our balance but it also should affect any money advanced to Greece at a future time. The Government should at least put pressure on our allies to make sure that no money is advanced until these outstanding debts are clear.
I should like to declare that I have a very small personal interest and thus, probably like my hon. Friend, know a certain amount of the background of these long drawn out negotiations.
§ Sir H. d'Avigdor-Goldsmid
The servicing of the loan will in fact cost only about £3 million a year, but the total capital outstanding and the arrears of interest are as my hon. Friend said.
§ 3.55 p.m.
§ The Economic Secretary to the Treasury (Mr. Edward du Cann)
May I, first, thank my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) for his very courteous and generous references to myself, which I very greatly appreciated. He has raised an important and complex matter. I will reply as rapidly as I can under three headings: first, the fact and history about the Greek external debt; secondly, the recent negotiations with the bondholders; and, thirdly, Her Majesty's Government's position. I will, of course, endeavour to answer as many as I can of the specific questions which my hon. Friend raised. Indeed I will try to comment also on the point, put, deliberately very shortly, as I know, by my hon. Friend the Member for Clapham (Dr. Alan Glyn).
There are 14 sterling loans issued between 1881 and 1931. There are three dollar loans issued between 1924 and 1928. There are various other smaller loans issued in other currencies, and in addition there is a Greek liability in respect of the former Ottoman debt. The capital is the equivalent of about £75 million, of which about £60 million. in other words, 80 per cent., is denominated in sterling. Arrears of contractual interest are more than tile outstanding capital amount.
1707 Service on the debt was suspended as from April, 1941, when the Germans invaded Greece. The Greek Government assured the bondholders representatives, however, that it would negotiate with them as soon as possible after the liberation of Greece and the establishment of a measure of recovery in her economic life, in order to reach a just and equitable settlement.
In 1954 the Greek Government invited representatives of all its external bonded creditors to negotiations in Paris. The proposals made for a settlement of the external debt were, however, unacceptable to the creditors, and discussions were suspended to enable the Greek Government to reconsider the position.
The Greek Government did not find themselves able to enter into negotiations with the Council of Foreign Bondholders and the League Loans Committee on the sterling debt between 1954 and 28th November of this year, despite requests both from the Council and from Her Majesty's Government.
From time to time, however, the Greeks negotiated informally with representatives of the American Bondholders: the dollar bonds, of course, represent less than a fifth of the outstanding bonds by value. In October this year it was announced that the Greek Government had reached agreement with the Foreign Bondholders Protective Council. Inc., New York. This is initially a temporary arrangement for the years 1963–67. I understand that the main provisions of the offer which is to be made to holders of the dollar bonds are that interest will be resumed in 1963 at one-third of contractual rates, and will rise generally to one-half in 1967. A portion of interest arrears is to be funded, and sinking funds—of ½ per cent., and in one case 1 per cent—will operate during the five year period.
The sterling loans were issued at different times from the dollar loans, and the contractual terms differ fundamentally in some cases. My hon. Friend quoted from The Times to the effect that the American terms should not necessarily be a precedent for that 80 per cent. of the external debt which is denominated in sterling.
Following the U.S. settlement, the Greek Government opened negotiations 1708 on 28th November with the Council of Foreign Bondholders on the sterling debts. I am sorry to say that these were not successful.
It is not for me to give details of the negotiations, which were carried out by the Bondholders representatives. I will, however, make one comment. There have been reports that the negotiations broke down largely because our bondholders representatives asked tor substantially better terms than the Greeks are offering the Americans. My understanding however is that they were not offered such good terms.
I would like to comment on the more general aspects of the question. Firstly, I would say that we have great sympathy with the holders of Greek sterling loans, who have waited long and patiently for the resumption of service on their bonds. Secondly, we naturally attach importance to a successful settlement of this issue. These 14 loans were issued on the London market as a result of loan agreements which were freely entered into by the Greek Government. It is of importance for the proper functioning of international lending and borrowing institutions that contracts freely entered into should be honoured, or amended only by mutual agreement. This is in the interest not only of the reputation of London as a financial centre but especially of those who wish to have access to the market.
Her Majesty's Government, therefore, share the concern of the Council of Foreign Bondholders that a satisfactory settlement should be reached. Like all such settlements this must take account of all the circumstances, including the debtor's capacity to pay. We have confidence in the Council who we believe will negotiate well and fairly on behalf of the bondholders.
We also have the greatest sympathy for Greece's sufferings during and after the war. The German occupation caused not only distress and privation for the people of Greece but also widespread damage to her economy. We must not forget that while we and our other allies were setting about the task of post-war reconstruction our Greek allies were faced with one of the bitterest struggles in their long and proud history, the struggle against a blatant Communist take-over bid. No one who remembers 1709 our cultural debt to Greece, no one who remembers the close ties between our two countries from the War of Independence down over the years to N.A.T.O., can fail to be moved by what Greece has suffered. The links which we have forged are strong and lasting ones.
§ It being Four o'clock, the Motion for the Adjournment lapsed, without Question put.
§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. F. Pearson.]
§ Mr. du Cann
The product of them is not merely sympathy but a determination to continue in a spirit of cooperation in every regard, now and in the future.
It has been urged in some quarters that Her Majesty's Government should give more practical expression to our sympathy towards the bondholders by bringing pressure to bear on the Greek Government in support of particular claims by the C.F.B. As I have already said, the substance of the negotiations is not our affair but that of the C.F.B. We are concerned that there should be genuine negotiations between the Greek Government and the bondholders' representatives, and the Greek Government are fully aware that this is our view. We have repeatedly made this clear to them.
The question has been asked why Her Majesty's Government do not give practical expression to their sympathy towards Greece by bringing pressure to bear on the C.F.B. to abate their claims. What is at question here is private money. As I have said, Her Majesty's Government's concern is that there should be genuine negotiations.
At this point I should perhaps say a few words on our attitude towards economic aid for Greece. We are always ready to give such economic aid to our friends as we can afford, judged in the context of the many urgent calls on our economic resources, which, alas, are all too slender —as my hon. Friend also pointed out—to fulfil the many urgent claims made upon us. We must take all—and I repeat "all"—the relevant factors into account.
It may well be—although there is no means of knowing—that a proportion of the bonds are held by Greeks. This is a complicating factor, but so far as we are concerned it cannot and does not affect 1710 the principle that foreign holders of the bonds should be equitably treated.
To sum up, our role has been to try to get the two parties together. I believe that a just and honourable settlement is possible. Greece cannot be blamed for her original default. But now that Greece, though still faced with economic difficulties, is on the economic upgrade, I very much hope that a settlement can be reached.
I want to say one thing more. In these days when there is a tendency all over the world to forget about obligations when they become inconvenient, it is well to remember that recognition of contractual rights and obligations is essential for the rule of law, whether it be in international political or financial affairs. I repeat the words, "recognition of rights and obligations". Given that, there is often room for modification of contraotual rights and obligations during the course of genuine negotiations between the parties concerned. On that basis I am confident that a settlement is possible. We very much hope to see such a settlement.