740.00119 Control (Italy)/6–1845

No. 466
The Acting Secretary of State to the President

Memorandum for the President

Subject: Principal Questions of Policy in the Treatment of Italy

During the twenty months since Italy became a co-belligerent this Government, in acknowledgment of Italy’s very real contributions to the war and in recognition of the importance of a soundly democratic Italy in achieving general European security and stability, has sought by various means to promote Italian political and economic well-being. The purposes of the program have had wide support in American public opinion, but the measures taken have been inadequate to serve those purposes effectively.

The long-range objective, from the point of view of our national interest, is to enable Italy to become a constructive element in a peaceful Europe. To reach this objective both the political and the economic planning need a more vigorous and realistic treatment.

The problem is immediate. In northern Italy, with its large and restless population in industrial areas left idle and more or less free from military controls, the liberation has not been followed by constructive measures. Anarchy may result from the present economic distress and political unrest unless the work is taken in hand without delay.

There follows an outline of the present situation which is submitted for your approval.

In the economic field the main problems are coal and credit. It is important to note that northern Italy was not badly devastated and that with only moderate support from abroad for the supply of coal, certain key raw materials and transportation equipment the Italians can themselves undertake the major effort in restoring industry and agriculture to production and reactivating the transportation system. The need is urgent, since the program of military expenditure will be terminated within the next few months.

It is evident that even in what remains of the present period of joint responsibility the British will not be able to carry an equal share of economic help to Italy; with the termination of joint activity British resources will be still more difficult to obtain for Italian relief.

A proposal is now in consideration for the use of $100,000,000 of FEA funds from its 1946 lend-lease appropriations, which would be transferred to the War Department to carry the Army supply program forward to November or December, if there is military justification [Page 687] for its extension to that time. In any case we must now determine what type of financial assistance should be made available to enable Italy to meet its essential import requirements after the military program is terminated.

If UNRRA funds are to be used, a larger American contribution to UNRRA would be necessary, and the allocation of the funds would have to have the approval of the UNRRA Council as well. Loans through the Export–Import Bank, which would in any event be needed to supplement an UNRRA relief program, a direct grant or credit by Congressional appropriation (perhaps including other liberated areas as well) or some new type of relief scheme seem to be the only alternatives.

For any of these projects it would be necessary to set forth, for Congress and for public opinion, the reasonable expectations for an improvement of conditions in Italy, under the Allied machinery now operative. The political situation is equally disturbing, and this at a time when Allied military forces are preparing to withdraw, though we still have important political and economic responsibilities in the administration. The following reforms or projects are considered essential:

More rapid progress in converting the Allied Commission from a military to a civilian organization, with a more dynamic American participation, in order to make sure that American ideas and plans are given real effectiveness. The proposed change in the position of the Chief Commissioner, discussed in a separate memorandum,1 is an important step in this direction;
Rapid diminution in the control authority, to place greater responsibility and initiative with the Italian Government;
Revision of the Armistice terms. The Department is now working on this matter, the project being to strip down the present document, many clauses of which are no longer applicable, thus providing a more realistic document as a basis for a modus operandi pending the conclusion of a definite settlement. This will require inter-Departmental agreement, negotiation with the British Government, and consultation, at least, with the USSR;
Preparation of a general settlement. This is a longer range project, preliminary work on which has started. The British are agreeable to the idea and are also working on a draft;
A program of guidance for the Italian Government in arranging for local elections, to precede general elections, and the convocation of a constituent assembly. The real “liberation” of Italy and establishment of democratic government can only be achieved when these civic responsibilities are assumed by the people. The earlier idea of physical supervision or control of elections by Allied administrators and indefinite postponement of constitutional and institutional questions (the Crown) seems no longer practicable.

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In the measure that progress can be made with these projects the reintegration of Italy in the family of nations (United Nations status, membership in the ILO, etc.) and the consequent self-reliance and initiative in political and economic rehabilitation can be facilitated.

If you approve of action along the foregoing lines, the Department will submit detailed recommendations for a solution of the principal problems.

Joseph C. Grew