102.1/1607: Telegram

The Chargé in France ( Bliss ) to the Acting Secretary of State

6721. For Secretary of Treasury from Crosby. Number 927.

Harris reports as follows concerning Italy:

Recommend total credits for foodstuffs be reduced at once by say 24 percent from rate of shipment for last 3 months, but at same time absolute and proportionate amount milk, condensed and fats be increased. Food credits should be further reduced, say in April, and taper off to complete end, say in September. The Italian Government should be informed of our program in this regard. The maintenance of present food shipments merely sustains present very large Italian military establishment; but, in my opinion Italy can soon feed herself and thus relieve Treasury of this burden, provided Italian Army is substantially demobilized.

Port of Genoa now has 500,000 tons of congested merchandise against a low point of 200,000 tons last summer. Five million lire worth of rotted food supplies recently dumped into harbor. Congestion almost entirely caused by lack of rolling stock on the railways. Am of opinion that Italy overestimates railway supplies to enable railways to reach reasonable conditions as soon as possible. See no reason why Treasury should continue to support of or even aid in control of exchange. Italian Government may as a matter of domestic policy, control imports and exports, which would influence [Page 567] fluctuations in exchange. Investigations among private manufacturers disclose no urgent demand for raw material at this time except for coal. Believe this demand urgent and legitimate but British Government or producers are apt to care for this. Italy could probably satisfactorily use considerable amounts of raw material during this year but I do not believe that there would be necessarily dire distress among civil population if our credits except for foodstuffs be entirely and forthwith stopped, which I recommend be done with possible exception of credits for railway materials the manufacturing program of which, both in Italy and America I am not familiar with.

Should the Treasury decide to make advances for purposes other than those above mentioned, I strongly recommend such advances be made only after prior investigation and approval, in each case particular attention afforded by a representative of the Treasury in Italy. There is a demand among cotton goods firms for Italian Government to lift embargo on export of this commodity, of which there appears to be a present surplus. This has just been done to a limited extent. See no immediate prospect of exports to any great extent above recommendations made without reference to statutory restrictions on loans, but only on substantial merits of situation.

Harris ready to return to the United States. Shall await your next cable on Italy before finally determining his plans. He reports that sale of Federal Reserve notes mentioned paragraph 6, my number 912,27 should be sale of gold certificates.

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