The Acting Secretary of State to Mr. Alexander C. Kirk, Political Adviser to the Supreme Allied Commander, Mediterranean Theater, at Caserta
180. Reurtel 254, February 28. Financial policy toward Italy has been under review within the Department during the past several weeks, particularly with regard to method of financing imports after military period ends. Thinking on the subject has not crystallized, but there is some feeling on the part of technical personnel who have studied it that transfer of issuing authority for military lire to Italian Government might be possible only as a part of some broader move which would enable Italian Government to justify assumption of liability to Italian people. This feeling stems to a considerable extent from study of Rome’s 388, February 13, 442, February 16, 501, February 22 and Des 858, January 26.71 In discussions with British here we have taken care not to foreclose ourselves from using financial situation as an argument for making more fundamental changes in Italian position vis-à-vis Allies. (see Section 3 Rome’s 388).
Morgenthau statement does not necessarily dispose of point raised by Macmillan. There has been no public acceptance by Italian Government of responsibility for AM lire such as by consolidating it with Bank of Italy note issue and including it in published figures of liabilities of the Bank. In fact the Italian Government in memorandum71a enclosed with Des 858, January 26 questions its liability under the armistice for total AM lire issue. If the Italian Government publicly acknowledges the accuracy of position taken by Secretary Morgenthau, the question is resolved. If it is silent or questions its obligation, the issue remains.
Foregoing is our hasty reaction to your 254 for your background for March 2 meeting and does not reflect considered view of Department.