851.5151/1697: Telegram

The Ambassador in France (Bullitt) to the Secretary of State

148. After luncheon today Chautemps2 in a conversation with Sir Eric Phipps, the British Ambassador, and myself said that he regarded the present flight of the franc most seriously. It was all very well for the Americans and the British to talk about the Tripartite Monetary Agreement and the desirability of continuing it; but it was entirely evident that France could not continue to maintain the position of the franc in the face of sales from the United States and Great Britain, especially the latter.

He said to the British Ambassador that he had his agents listening to telephone conversations between Paris and London. He had been shocked by the conversations that had taken place yesterday between distinguished British representatives in Paris and Sir Robert Kindersley.3 It had been predicted in those conversations that a tremendous financial crash in France was inevitable early in March. Furthermore, the articles which had appeared in the British press the last few days had been calculated to produce the greatest possible selling of francs. In the face of this sort of cooperation from Great Britain he felt that while it would be possible for the French Government to continue for a brief period to defend the franc any prolonged defense would be impossible. However much he might be opposed to exchange control he was being compelled to envisage it as the undesirable but single way out of an impossible situation.

I pointed out that there had been very small selling of francs from the United States, and that I felt Bonnet4 must have informed him that he was more than satisfied with the cooperation that he had received [Page 257]consistently from the American Government and especially from the Secretary of the Treasury, Mr. Morgenthau. He said that this was so and that his complaints were indeed directed against activities in London.

Sir Eric Phipps promised to attempt to do what he could at once to influence newspaper articles; but at the same time pointed out that it was practically impossible for the British Government to prevent sales of francs by British banks and British individuals.

Chautemps added that he felt he had the internal situation well in hand at the present moment. Moreover, he believed that no immediate explosion was to be expected in the international situation. The position of the Government, however, might be made impossible within a brief period, even a few days, by continued sales of francs.

I derived the impression during this conversation that Chautemps gradually is becoming convinced that the establishment of exchange control will be forced by the pressure of events.

  1. Camille Chautemps, President of the French Council of Ministers.
  2. London partner of the French banking firm of Lazard Frères.
  3. Georges Bonnet, French Minister of Finance in the Chautemps Cabinet before its reconstitution on January 18.