The Ambassador in Italy ( Kirk ) to the Secretary of State
[Received 6:25 p.m.]
1604. Reference my tel 1505, June 4, 6 p.m.89 The Italian Govt has transmitted to the Allied Commission a copy of a memorandum requesting the support of the Allied Commission in obtaining credit of $300,000,000. In addition a request is also made for a Lend-Lease or reciprocal or mutual aid agreement with the United States Govt. In transmitting the above memorandum to the Embassy the Chief Commissioner of the Allied Commission90 inquired in a covering letter dated June 9th whether the United States Govt would be prepared to grant the credit of $300,000,000 unless such credit were directly related to an import program in view of the heavy demands which will be made on US productive capacity for reconstruction and the [Page 1264] low priority position of Italy. He also refers to the financing by the War Dept of imports of civilian supplies into Italy under the disease and unrest formula which will be cut off when the period of military responsibility is terminated. Such Category A imports the Chief Commissioner continues would have to be financed in other ways if the flow of such supplies (foodstuffs, medical supplies, coal and petroleum products) were to be continued. This would raise in a most serious and immediate form the question of financial assistance to Italy. No information has been obtained to date regarding the date on which such military responsibility may be terminated. The Chief Commissioner desires the views of the United States Govt regarding the requests of the Italian Govt.
It was intended that the original of this memorandum would be transmitted to the Dept via the Italian Embassy in Washington. However the Italian Foreign Office has apparently considered that the form of the memorandum should be modified before transmission to the United States Govt. The following is a paraphrased summary of the important provisions of the memorandum:
- The first aid plan refers primarily to the economic reconstruction of South Italy. With the liberation of the north additional requirements have become urgent in the form of coal, raw materials and specific types of machines and parts to replace those destroyed through aerial bombardment. With a relatively limited amount of assistance in these respects industry in the north could make a very considerable contribution to economic reconstruction in Italy.
- It is of great importance also from a political point of view that the economic and financial assistance required above be granted. Great danger will arise if the armed workers who so valiantly turned their arms against the Germans should now remain unemployed. It is a most delicate situation which could lead to dangerous consequences.
- The financing of the purchases of the basic commodities required, however, raises a financial problem. Emergency purchases for North Italy are estimated to require a credit of $300 million. Provision for repayment within a reasonable period of time appears possible. The imports for the payment of which the credit is necessary would constitute a most important step towards the full rehabilitation of Italian industry. In turn Axis would make possible in the not too distant future full servicing of the debt contracted.
- On similar grounds the US Govt is urged to reexamine the possibility of a Lend Lease or some other form of mutual aid agreement. The US could take into account the counterpart of AM lire in addition to troop pay as well as the contribution of Italy in the form of requisitions, supplies and work on the part of the Allied military authorities in Italy.
- It is desired to emphasize the urgency of the matter as well as the hope that the necessary assistance will be forthcoming.
- End paraphrase.
The Embassy has been informed by the Foreign Office that the request for a credit of $300 million will be made shortly. While it is [Page 1265] not possible here to estimate the dollar requirements to finance the emergency program (see my report No. 86, June 5, 194591) the first aid program, or, alternatively the forthcoming plan 1946 for imports it is believed by the Allied Commission that the amount required will far exceed the dollars to be made available on troop pay account. Therefore it would seem that if Italy is to finance the imports of basic and indispensable commodities required to revive the economic life of the country it is absolutely essential that some form of financial assistance be forthcoming. The inclusion of category A imports would make the position even more serious. AC estimates that the value of such imports alone to date at about $300 million of which $200 million are for AM supplies.
As for the political implications of the necessity for providing such minimum financial aid as is required I can only say that the Ital Govt view is if anything an understatement of the situation. Vast and continued unemployment in Italy, particularly in the north, would certainly jeopardize dangerously the maintenance of order in the country which is essential to post war recuperation. The question therefore is one of the form which financial aid would take and in that connection I would appreciate an indication from the Adept as to whether it would consider preferable to a general loan a series of specific credits against the purchase of categories of commodities so as to ensure that such credits will be administered in such a way as to attain the purposes for which they would be intended.