The Ambassador in Spain ( Bowers ) to the Secretary of State

No. 1096

Sir: I have the honor to report that I obtained an interview with Prime Minister Azaña on the 11th in order to pay him my compliments and to gather what I could of general information. I found Sr. Azaña in the most tranquil and happy mood, apparently quite unworried by the internal situation which, as a matter of fact, has improved greatly during the last few days.

Our conversation touched upon the subject of deferred exchange, and the Prime Minister was emphatic in stating that he realized the present exchange situation was an untenable one. He said that the clearing agreement with England had been made before he came into power and that he personally desired to develop a broad plan which [Page 793] would solve the deferred exchange problem with all countries rather than to make lasting bilateral agreements. He added, however, that no general plan had yet been developed and that a foreign loan might prove only a palliative. I asked in this connection whether the Government would now be willing to consider the displacement of gold and I gathered from his reply that if other methods failed it might prove necessary to consider such action.

In conclusion, Sr. Azaña said that the Government was working hard on several commercial treaties and that he sincerely hoped the treaty with the United States would be signed soon. He appeared to have a sympathetic understanding of our position with regard to the treaty, both in its political and material aspects, and earnestly to desire that a solution to the present impasse might be found.

Respectfully yours,

Claude G. Bowers