740.00119 Control (Italy)/12–2044: Telegram

The Secretary of State to the Ambassador in Italy (Kirk)25

20. Department’s 639, December 20, 9 p.m.26 We submitted to the British on December 29 the following proposal on financial matters to be incorporated in revised Italian directives: (Begin paraphrase)

There should be terminated promptly all functions carried on by the Allied Financial Agency with respect to territory which has been returned to the Italian Government. Among other things this will mean that AFA will cease to make lire available for the purpose of procuring goods for export and for the payment of remittances from Allied countries, as is its practice at present. In addition, AFA will cease to collect lire proceeds of civilian supplies turned over to the Italians except as such collection may be necessary in territory under AMG.27
There should also be terminated the control which AFA exercises over Italian external financial transactions e.g. payments out of the post-liberation accounts, in the United Kingdom and the United States. In lieu of these controls the Italian Government should be required to inform the Allied Commission of its external financial transactions so that this Commission may, if it regards such action as necessary, recommend to CCS28 that these controls be reimposed under the armistice.
Those functions of AFA which remain would then be concerned only with the financial operations of AMG in forward areas and of [Page 1220] the Allied military forces. AFA should be transferred as promptly as possible to AFHQ29 which would give direct supervision and control to these remaining functions of AFA.
The Italian Government should have access to full information on those activities of AFA which will be the responsibility of the Italian Government hereafter. Except as specifically authorized by CCS, however, books and other records of AFA must not be released by AFA.
The centralization of all currency issues in the Italian Government or agencies designated by it should be the subject of negotiations undertaken through diplomatic channels with the Italian Government. These negotiations should also lead to the explicit assumption by the Italian Government, or such agency as it may designate, of responsibility for AM30 lire in circulation in Italy at present. There should be included in the arrangements made with the Italian Government provision for meeting Italian Government requests for the printing and supplying of sufficient quantities of lire necessary for all Italian needs and provision for the supply of adequate volume of lire currency and credits to meet the operational needs of the Allied forces. AFHQ, of course, would reserve the right to use any other currency it deemed desirable in the event that adequate quantities of lire currency are not available to the military forces at any time. (End paraphrase)

We pointed out to British that foregoing merely involves the specific application to financial matters of the Macmillan proposal.31 British Treasury Delegation in Washington has submitted proposal to London. Proposal represents agreed U.S. viewpoint and was approved by Spofford.32

  1. Alexander C. Kirk was also United States Political Adviser to the Supreme Allied Commander, Mediterranean Theater. In this capacity, his office was located at Caserta.
  2. Not printed.
  3. Allied Military Government.
  4. Combined Chiefs of Staff.
  5. Allied Force Headquarters.
  6. Allied Military.
  7. Harold Macmillan, British Minister Resident at Allied Force Headquarters, Mediterranean Theater, and Acting President of Allied Commission, Italy. His proposal, in general, pertained to the reorientation of the Allied Commission regarding Italy.
  8. Presumably Brig. Gen. Charles M. Spofford, Assistant Chief of Staff, G–5, Allied Force Headquarters.