Created: 11/17/1948

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Thc Greek Army's much-publicized Gruinmos campaign of last summer did not fundamentally change thc situation in Greece. Thc Grammos guerrillas withdrew to satellite territory, repaired their losses in men and materiel, and reappeared in the Vitsl area, where they are again stubbornly resisting army attacks. At the same time, other guerrilla bands are carrying out terrorist and sabotage raids throughout thoIt is now more apparent than ever that unless the guerrillas are eliminated, there can be no real recovery in Greece.

A year ago. AMAG (American Mission for Aid lo Greece) launched an imposing program of development and reconstruction. Significant progress has been made: communications have been repaired; agriculture has been revitalized with modem machinery, irrigation projects, and fertilizer and seeds; industrial production has increased. Nevertheless, total recovery and real economic stability cannot be expected so long as highways and rail lines are subject to guerrilla sabotage, crops and farm machinery are confiscated or destroyed, peasants are forced to flee their farms,lack the confidence to invest their money locally, and fear and insecurity

pervade the country.

The Kremlin has given no indication of abandoning its ultimate objective ofOrecce under Communist control, and satellite aid to the guerrillas Isuerrilla combat strength within Greece nowperating against the guerrillas is an armyen, of whom less than half are combat effectives. US funds and tactical advice have corrected many deficiencies in the army, but the armystill unable to eliminate the guerrillas. Morale has dropped considerably since the early days of the summer offensive; present delays in thc vital operation point to lack of leadership in Uie Greek Army as one of the most important factors. Of morehowever. Is the guerrillas" ability, after every army drive against guerrilla concentrations In thc fronUcr zone, to reassemble on satellite territory Into strike elsewhere. So long as the guerrillas receive such unneutral satellite aid, which can be expected to continue until the northern border is scaledhange in Soviet policy effected, lt is unlikely thai Uie guerrillas can be totally eradicated.

Meanwhile, both the people and the rank-and-file members of thc government itself are dissatisfied with prolongation of the war. there isidespread feeling Ihat

SeeContinuing Satellite Aid to the GreekctoberTlic information In this report Is as ofctober

The intelligence organizations ot the Departments ol State. Army. Navy, and Lhe Air Force

have concurred In this report.


Greece is caught In the struggle between the West and the East, and that the Greeks arc not merely fighting their own battle. In the absence of conspicuous army successes, these feelings may lead to the downfall of the present coulition government, which might possibly be replaced by an auUioritarian regime of the Right.egime mightemporary improvement in the military situation, but it could not long survive without aid from abroad. Without such aid the regime could hardly prevent the strengthening of the Communists; the eventual outcome would probablyommunist Greece.



I. Military Situation.

The effective reconstruction of Greece depends on the ability of the army tothe guerrilla forces. Yet after two years of army action. Including seven months of the recent intensive summer campaign, the guerrillas are numerically stronger and better equipped than theyear ago.

Ineriod of quiescence following the abortive revolution at the end ot the occupation, the resurgent guerrillasampaign of raiding and sabotage paralyzing to national recovery. B'armcrs were forced to flee their land, villages were destroyed, communications were cut. An undertralned army was forced to begin operations against the bands, which by this time were receiving concrete aid from the Satellites to the north.

The first campaign in the summer7ailure. Some of the failure lay with the armydefensive rather than an offensive spirit, lack of initiative in thc field, bad timing, inadequate training for anti-guerrilla operations and mountainand political interference preventing the proper concentration of forces. But the cliicf causes of thc failure were Inadequate troops, terrain which favored highly mobile bands not committed to defend given points, and, in the border areas, the guerrillas' tactical advantage arising from their ability to slip safely into satellite countries. Having tested the army's offensive ability, the guerrillas, once content with evasive action, began to stand and defend certain areas, probably with the idea ofa safe areafreeor the same reason they Initiated offensive operations to capture large towns.

During the fall and winter certain changes in the national forces were made which promised more successful operations In the future. The high command wasa National Defense Corps0 men was approved for the purpose of providing static defense for villages, thereby releasing army units for offensive action; USbegan to arrive in significant amounts; and US tactical advisers were appointed to army units.

Inew series of operations was begun- These operations at first appeared successful, the timetable lagged, however, and the guerrillas, in spile of losses of men and materiel, for the most part escaped encirclement and annlhlltation. New arms, hospitalization, and tactical refuge were continually provided by theThe summer campaign culminated In thc battle for the Grammas area in northwest Greece. There, supplied with artillery and anti-aircraft guns, their flanks well anchored on thc Albanian border and protected by strong defenses and mine fields, anuerrillas (including combat replacements)defended themselves for two and one-half months against the attack ofombat effectives of thc Greek Army. The guerrillas were eventually foiccd into Albania, but they quickly reappeared, strengthened by replacements, in the Vita area to the north Attacks against this concentration have so far failed Mean-


guerrilla units have generally maintained their position in other mountainous sectors along the northern border, except for one or two areas where the Greek Army is now in control; over Greecehole the destructive activities of guerrilla units have actually been Increasing since the early summer

Gucrrdla combat strength in Greece Li now estimated at0 men, not including reserves or thc persons both inside and outside Greece who are providing varying degrees of logistical support. Many guerrillas are forced recruits effectively held by threats of death or reprisals against their families. The hard core of theis determined; the officers are thoroughly familiar with local terrain; and the whole organization is encouraged, advised, and aided by the Satellites. Although, as pointed out. static defensive action is sometimes taken, the guerrilla principle ofis in general to produce as much social and economic chaos as possible through terror and sabotage raids

Operating against thc guerrillas Is an armyemporary over-strength. US funds and tactical advice have corrected many deficiencies in the army, but It appears still unable to eliminate the guerrillas, who havetheir ability to hold successive positions along the northern border. Morale has dropped considerably since the early days of the summer offensive; present delays in the Vital operation point to lack of leadership in the Greek Army as one of the most important factors. Of more importance, however, is the ability of thewith the aid of the Satellites, to reassemble after every drive to strike again wherever opportunity offers. More determined leadership and slronger action than has heretofore been employed, as wellossible increase in strength, may enable the Greek Army to contain the guerrillas near the frontier and to reduce the peril in the interior of the country. Yet It seems unlikely that the guerrillas can be totally eliminated until thc northern border is scaled orhange In Soviet policy is effected.

2. Political Situation.

When the Oreek Government-ln-Exile relumed to Greecets existence was Immediately threatened by Communist subversion and armed revolt. Although British intervention prevented the revolt from succeeding, lhe threat Lo thcstill remained, as thc non-Communist politicians, placing short-sighted party Interests ahead of the national good, prevented the formationtrong united front and the implementation of measures designed to revive thc stricken country. Only slowly did thc politicians admit to thc military and economic danger confronting the country, and It was not until7 that they agreed toon-political figure. No working cooperation was achieved, however, untiloalition more representative of popular feeling was formed by the two major parties, the Liberals and the Populists. This governmentutarliamentary seats, pledged mutual cooperation, and enjoyed the blessing and financial backing of the US

The two chief tasks of the government were to eliminate the militant Communist


opposition and to hold tho line against inflation until the effects of the rehabilitation plans financed by AMAG (American Mission for Aid to Greece) could be felt. Thc government has only partially succeeded in accomplishing these tasks It outlawed thc Communist Party and rendered ineffective thc Communist underground'sin the cities and towns On the other hand. It has not been able tooliUcal surrender of the guerrillas, and its efforts to bringessation ofaid to the guerrillas (either by direct negotiation or through the UN) have been frustrated by the intransigence of Moscow and the Satellites. The army has generally wrested the military initiative from Uie guerrillas, but it has not brought about any reducUon In their strength or re-established security in any significant areas. On Uie economic front, Uie government has held Uie line against runaway inflation, but various factors have Interfered with rehabilitation, wages have laggedising cost of living, and high production costs have increased the difficulty of selling Greek products on the world markets.

The Greek Government has maintained asharacter as possible under the circumstances. Excesses have taken place, but these have been the resulteaction against Communist terrorism rather Uian any real tendency toward fascism as Uie Soviet satellite presses would like to prove. Fair judicial procedure has obtained; parliamentary debate has been limited only by self-imposed securityand trade unions have functioned within thc necessarily severe recovery laws. Thc present government Is dominated by the Right, which traditionally serves ultra-conservative and private Interests but also represents the anti-Communist proclivities of the people. The poliUcal temper of the people and Uie composition of Uiewill move toward the center only as Uie Communist threat recedes.

There has been and la now discontent with government Inefficiency, nepotism, and over-cenlrallzaUon of power. US missions have attempted to Improve certainto reduce tbe swollen ranks of the civil service, and to place more authority In the hands of the local governments; litUe has been accomplished to date, and while much can be done at present to improve the political sittiulton and strengthen the government's positionis the Communists, many of the basic political reforms that are needed must await more setUcd conditions.

At present the continuation of the coalition government is endangered by arevolt within Uie ranks of both the Populist and Liberal Parties. This quarrel may resulteshuffling ol Uie cabinet but will not substantially change Uie character of the government. Much more threatening is the increasing dissatisfaction among both the people and Uie rank-and-file members of the government over prolongation of the war against the guerrillas. Unless the army soon achieves more conspicuous successes, this dissatisfaction will crystallize, and the government may fall, wiUi Uie strong possibility of being replaced by an authoritarian regime of the Right.egime mightemporary improvement In the military situation, but it could not long survive without aid from abroad. Without such aid thc regime could hardly prevent Uie strengthening of the Communists; Uie eventual outcome would probablyommunist Greece.


The large majority of Greek people are nationalistic, democratic,they fear the USSR and hate the Greek Communists, who have conducted acampaign of terror in the counLrysidc. Given assurance of hope and stability through continuing US aid, the people should eventually be able to reaffirm their democratic principles; given continued fear and hopelessness, they will succumb,unwillingly, to the persistent pressure of thc determined, militant Communists,

3. Economic Situation,


Modern Greece has always been over-populated and poor, with an export deficiturden of foreign debt. Onlyercent of the land is arable; yet agriculture is the principal occupation and provides almost three-fourths of all exports. The small, diversified industry produces for local consumption but is dependent on imports for machinery, fuel, and many raw materials. Government programs which promised to modernize and develop agriculture ande interrupted by the war, and without help could not be resumed upon liberation. Since the war,5 billion of foreign aid, supplied by the UK, US, UNRRA, and various private relief agencies, have provided immediate consumer needs and helped restore essential economic dislocations, internal political instability, and guerrillahave prevented thc effective revival of economic activity even to prewar levels.

The Greek transportation system is as yet able to perform scarcely more than minimum economic and military functions. The barely adequate prewar system of roads and railways, augmentedarge extent by coastal shipping, was paralyzed by the war. Prior to inauguration of the AMAGear ago, patchwork repairs had restored minimum road and railway service and opened ports to foreign shipments, but no major reconstruction had been undertaken. The program has made steady progress throughout the year. The Corinth Canal has been restored; three main ports have been partially rebuilt; six major military airfields have been improved; workilometers of road has gone forward, and the bridges and tunnels of the Athens-Salonika railway are under reconstruction. Recent and increasingly widespreadattacks on transportation, deliberate terrorization of Greek reconstruction works, and destruction of scarce equipment have already slowed or halted certain of the AMAG projects besides limiting the movement of supplies, troops, and passengers. Thc guerrillas give every indication of continuing their concerted effort to hamper reconstruction, and the lack of sufficient government security troops will give them the opportunity to do so. In view of the present guerrilla situation, it is doubtful whether AMAG will be able to maintain its schedule or whether completed projects can be successfully protected from further guerrilla damage.

Greek agriculture has recovered fairly rapidly from the war, with the aid


of UNRRA, AMAG, and favorable weather;roduction hasercent of prewar. In addition to supplying seed, fertilizer, and farm equipment. AMAG hasrogram of Irrigation, modernization, and construction ofand storage facilities which will eventually decrease Greece's dependence on food imports and increase its export surplus. The current picture, however, is not encouraging. For some years Greek agriculture will continue to need foreign old. Furthermore, no satisfactory foreign market for Greek crops has been found since the war. Most seriously, current production is continually threatened by the guerrilla war., livestock numbers have been substantially decreased owing to guerrillaignificant quantity of grain and other crops has been seized or burned; and roughlyercent of the argicultural population has left the farms for refuge in the towns.

and Mines.

UNRRA and AMAG industrial programs have made only fair progress. Mining, which suffered severe damage during the war and lost its German market as well, has slowly climbedevel aroundercent of prewar. The index of industrialroseeak4 percent of its prewar level at the endhen receded8 level ofercent. There are varied reasons for this lag. Worldand lack of foreign exchange have hindered imports of raw materials anddespite extensive UNRRA and AMAG efforts directed toward procurement. Fuel has been limited by lack of foreign exchange and by the loss of oil imported from Haifa; the Creel: Government has required certain Industries to use Greek ligniteubstitute for foreign fuels, but low caloric content and disproportionately high prices limit its usefulness. Postwar political instability has kept business confidence low and discouraged the investment of Greek capital in domestic industries, and inflation has reduced the effective demand of both domestic and foreign buyers. Recovery was further retardederies of early AMAG restrictive measures taken to meet pressing budgetary, foreign exchange, and inflation problems. AMAG has already takensteps, however, to stimulate industry by making investment loans, helping to find foreign markets for products, and encouraging new industries which can makeuse of Greek resources and reduce Greek import requirements. While these measures should ultimatelyore healthful climate for reviving andproduction, no significant progress can be expected until thc problem of internal security has been solved.

Greek labor is restive under the pressure of rising prices. Sinceage agreement, prices have steadily risenoint where wages now have onlyercent of their prewar purchasing power. There have been periodic strikes throughout the past year, none serious, and currently labor is0 percent general wage increase The government, with AMAG support, has resisted anIncrease bul has been forced for political and economic reasons to make some adjust-



merits. The danger ol widespread crippling strikes is remote, in view of the moderate and cooperative altitude of most of labor, the negligible Communist Influence In the unions, and the government's emergency authority to mobilize workers striking against the national interest.

/. Finance

During thc past year of severe economic strain the Qreek Government and AMAG have managed to prevent runaway inflation. Tax increases, budget and creditage freeze, and an improved import procedure, benefiting from Improved internal security and increased import of consumer goods, actually broughtownward trend in the cost of living inather than capitalize on the immediate benefitsuperficially stable financial situation, however. AMAG chose to Initiate other reforms designed to bring about more fundamental stability. These further reforms have allowed thc general upward trend to continue, and the cost of living now standsercent of prewar. Even with Increased taxes and drastic cuts the Oreek budget has not been brought Intoeficit0 million is expectedcomparedillion. and anillionhe deficit reflects thc burdens ofefugeesndigents and contributing to the support of an armed force. While AMAG and the Greek Government have current inflationary pressures under control, the present delicate balance could be quickly destroyed by any adverse political or military development.

Trade and Balance ot Payments.

In the past year Greece has been able toimited quantity of products by reverting to barter agreements, but the basic export problem is unsolved. Nosubstitute has as yet been found for the prewar German and central European markets, In spite of strenuous AMAG and Greek Government efforts. High production costs still make It difficult for Greece to sell Its products profitably abroad at current world prices, and few countries are able to buy the semi-luxury tobacco, olive oil, and fruits which Greece has always exported to help pay for Imports of machinery, fuel, and grain. While exports and other sources of foreign exchange have diminished, Greek import needs for current consumption, military purposes, and reconstruction have actually increased. Consequently, as in the past four years, Greece will depend on5 million of foreign subsidy.

Economic Outlook


0 million of US aid to Greeceas gone far both toward preventing the complete deterioration of an unstable military and economic situation and towardundamentally more self-sufficient economy through reforms developed jointly by AMAG and the Greek Government;0 million worth of goods over one-fourthS aid. will still be needed this year to provide lhewith sufficient drachma income lo balance the Greek budget, and roughly

illion for military aid. thus leaving only5 million lor reconstruction purposes. Until thc guerrillas are substantially eliminated, however, special military and economic burdens and lack of business confidence will continue to prevent real economic revival. Kven If Lhe guerrillas could be defeated byhe Greek Government would still need some assistance, although an increasing proportion of any further US aid could be allocated for reconstruction and development. Theproblem now, as before, Is not primarily economic, but one which dependsuccessful conclusion on eradication of the guerrillas.





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