C.F.M. Files: Lot M–88: Box 2061: CFM Documents
Report to the Council of Foreign Ministers by the Committee on Reparation
C.F.M. (46) 53
Preamble
The Committee of Experts set up by the Decision of the Council of Ministers at their 2nd Meeting on 26th April 1946 to consider the question of Italian Reparation, were guided by the following decision of the Council:
“The Council decided to refer to a Committee of Experts the proposals contained in the Soviet and U.S.A. Memoranda as well as any proposals which might be made in this connexion by the U.K. and French Delegations. The Committee of Experts was instructed to report to the council as soon as possible”.
(C.F.M. (46) 2nd Meeting).71
Section I
In accordance with the above mentioned decisions, the Committee have considered the following proposals on the question of Reparation.
I. Proposals by the Soviet Delegation (C.F.M. (46) 7) of the 26th April 1946
[Here follows the text of C.F.M. (46) 7, April 26, 1946, printed on page 126.]
II. Proposals by the U.S. Delegation contained in C.F.M. (45) 16 of the 14th September 1946 Section IV para. 2 and Section VI
[Here follow Section IV, paragraph 2 and Section VI of C.F.M. (45) 16, September 14, 1945, “Suggested Directive to Deputies from [Page 287] the Council of Foreign Ministers to Govern Them in Drafting of a Treaty of Peace with Italy”, printed in full in Foreign Relations, 1945, Volume II, page 179.]
III. Proposals by the U.S. Delegation of
the 6th May 1946 (Annex to C.F.M.
(46) 9th Meeting):
IV. Proposals by the French Delegation in C.F.M. (46) 20 of the 2nd May 1946.
- “1. Italy is responsible for the damages caused to the Associated Powers, as a result of the part taken by her in the war on the side of Germany, but in view of the fact that she was the first Axis Power to sever connections with Germany, and to side with the Allied [Allies?], the latter agree to Italy’s paying only part reparation for damages caused to the Associated Powers.
- 2. A special agency shall be responsible for the application of
the foregoing principles. To this end, it will be guided by the
following directives:
- A.
- Italy’s commitments in respect of reparations shall be met
from the following categories of assets:
- (i)
- Industrial plant used during the war for the manufacture of arms, and means of production created for military purposes, in so far as these are in excess of the peace-time requirements of [Page 288] Italy, such requirements to be fixed by the special agency memtioned under Article 2.
- (ii)
- Assets located abroad and belonging to Italian nationals living in Italy; it is understood that as regards this second source of reparations, each State entitled to reparations shall utilize the above mentioned assets primarily to cover their own claims for reparations.
- (iii)
- The gold at the disposal of Italy, after deduction has been made of the amounts due by her under the heading of restitution.
- (iv)
- The assets of war criminals, in so far as these do not originate from appropriation of property, to the detriment of nationals of the United Nations.
- (v)
- Certain assets located in the territories ceded by Italy.
- (vi)
- A proportion of the current Italian production, such as will not reach to excess on Italian economy, such payments to extend over a period of eight years, and, if need be, to remain in abeyance for the first two years. The amounts to be paid will be fixed in the course of the last quarter of each year by the special agency under Article 2.
- (vii)
- Payments in lires, on condition these are used, within Italian territory, for all settlements, except purchases of goods and investments in the Italian economy.
- B.
- The Soviet Union, having no property on their territory belonging to Italian nationals, and having no claim upon the advantages accruing from the cession of Italian territories, shall receive from the above mentioned sources of reparations a share amounting to the Soviet claim.
The shares of the other United Nations concerned shall be fixed by the agency mentioned under Article 2, taking into account their rights and claims, the amount allocated to the U.S.S.R., and the utilisation of resources, as provided for under the same Article.”
Section II
General Position of Each Delegation
1. Statement by the Soviet Representative.
Italy is liable for the damage done to the Associated Powers by her participation in the war on the side of Germany. From this follows the necessity for exacting from Italy reparation payments to the countries which had suffered from Italian aggression.
The sum of reparation payments mentioned in the Soviet memorandum of 26 April 1946 to be exacted from Italy in favour of the U.S.S.R., Yugoslavia, Greece and Albania is but a small portion of the damage that had actually been done to those countries as a result of the occupation of their territories by Italy. On the other hand, this total sum of reparations cannot be an unbearable burden on Italian economy especially in view of the six-year period for the payment of reparations.
[Page 289]Italy’s ability to pay reparations in the restricted measure specified cannot cause any doubts. It is generally known that even during the peace time period—in the last years before the war—Italy’s budget expenditures for war purposes amounted on the average to 250–300 millions of dollars annually. Bearing in mind that at the present time these expenditures should be reduced to a minimum; it will become clear that Italy possesses sufficient facilities for the payment of the above-mentioned restricted amount of reparations.
It should also be borne in mind that strategic raw materials made up no less than one third of Italy’s pre-war import and that post-war Italy will not make expenditures for the import of such an amount of strategic raw materials.
2. Statement by U.S. Representative.
There can be no disagreement regarding the liability of Italy to pay reparations. The question which must be decided is the practical one of how reparations shall be paid. It is the view of the United States Delegation that the determination of the assets which may be considered as available as reparations from Italy should be made on the basis of the same principle which was agreed on for Germany in the Potsdam Agreement, that is, that payment of reparations should leave enough resources to enable the Italian people to subsist without external assistance. Certainly, the principles applying to Italy cannot be made harsher than these applicable to Germany. If reparations are not based on this principle, there can be only one of two results: either an impossible burden will be placed on the Italian economy, frustrating the Allied purpose to restore Italy to a useful place in the community of nations; or the burden of Italy’s reparations will in fact be borne by countries other than Italy.
If a decision is to be made on the basis suggested above, it is obvious that the ability of Italy to pay reparations is limited. Substantial financial assistance has already been extended to Italy and there is no immediate prospect that Italy will be able to stand on her own feet. In the view of the United States Delegation, such measure of assistance as may be reasonably expected to be extended to Italy in the future will only be sufficient to permit the gradual rehabilitation and reconstruction of the Italian economy. The Italian people face the prospect for some time to come of a standard of living greatly below that which they had in pre-war years.
The United States Delegation has submitted to the Council detailed information bearing on the question of Italian capacity to pay reparations (CFM (D) (46) 13).72 No other information has been submitted to the Council which, in the opinion of the United States Delegation, [Page 290] demonstrates that Italy is able to sustain a burden of reparations greater than that envisaged in the American proposals.
It is in the light of the foregoing considerations that the United States Delegation has approached the question of the specific sources of reparations and has put forward proposals which in its judgment constitute a reasonable and practical solution of the reparation problem.
3. Statement by the U.K. Representative.
The U.K. Delegation wish to record in the Peace Treaty the principle of Italy’s responsibility for the damage caused by her to the United Nations during the war; they would in no way minimise this responsibility or condone Italy’s actions. None the less, the reparation obligation to be imposed upon her, must take account of her economic and financial situation. Italy has already received assistance to the value of £300 million from the U.S.A., U.K., Canada and UNRRA; her balance of trade has been unfavourable for years past and her earning power has been drastically reduced. Italy is a debtor country which is now being kept alive by external assistance. In these circumstances it appears to the U.K. Delegation to be an unreal appreciation of the economic situation to impose on Italy an obligation to make other than token reparation for the havoc she has caused. To apply Italy’s limited foreign exchange resources, her capital equipment or deliveries from her current production to substantial reparation can only result in an added burden to those countries which have been contributing to her relief in the past. Further it would diminish Italy’s already reduced earning power and aggravate her existing unfavourable balance of payments.
4. Statement by the French Representative.
Italy, being liable for the damage she caused to the Associated Powers as a result of her participation in the war on the side of Germany, should pay reparations.
Since, however, she was the first Axis Power to break with Germany and to join with the Allies, and in view, moreover, of her present economic situation, it is agreed that Italy shall pay reparation only in part, by the delivery of certain assets which in the opinion of the French Delegation, constitute effective sources of reparation.
The French Delegation consider that it is not yet possible to determine the total amount of reparation which Italy would be able to pay; but they are of opinion, however, that it can already be agreed that the Soviet claim, limited to 100 million dollars, can be met.
This measure appears justified by the fact that certain sources of reparation, such as Italian assets on Soviet territory, and economic advantages resulting from the cession of Italian territory, are not available to the U.S.S.R., contrary to the other countries concerned. [Page 291] Reparation deliveries out of current production should extend over a period of eight years, and might remain in abeyance for the first two years.
The application of the above principles should be entrusted to a special agency, whose function would be, not to exercise control over Italian economy, but to estimate the available assets, and plan their distribution amongst the beneficiaries.
Section III
Sources of Separation Accepted for Consideration by the Committee and Conclusion of Each Representative on These Sources
In accordance with the Soviet proposal the following items were considered for inclusion in the nominal list of possible sources from which Reparation might be drawn.
- 1.
- Italian industrial equipment used for military purposes during the war for the manufacture of armaments and also at the expense of other industrial capacities which were created for military purposes and which are surplus to the peace requirements of Italy.
- 2.
- Italian foreign assets.
- 3.
- Gold returned to Italy.
- 4.
- Current output of Italian economy.
- 5.
- Merchant fleet (Discussion not completed).
- 6.
- Property of war criminals.
In addition, the French representative suggested two additional sources which in his opinion might be considered as possible sources of Reparation payments, namely:
- 1.
- Payments in Italian [lire?].
- 2.
- Italian property in ceded territories.
statements by the four delegations
1. Removal of the equipment of the Italian war industry.
Statement by the Soviet Representative.
The Soviet representative considers that Italy must pay reparations by means of the removal of Italian industrial equipment which was used during the war for the manufacture of armaments and also at the expense of other industrial units which were created for military purposes and which are surplus to the peace requirements of Italy.
Italian war industry had reached such a high state of development during the period of Italy’s prolonged preparation for war and during the war itself that despite the damage done to it in the course of the war and after the carrying out of reconversion that every possibility exists for the partial removal of her equipment for reparations without damage to Italy’s peace time economy.
[Page 292]Statement by the U.S. Representative.
The United States Delegation proposes that factory and tool equipment designed for manufacture of war implements which is not required for the permitted military establishments and is not readily susceptible of conversion to civilian purposes should be made available for reparations. The removal of industrial equipment convertible to peace-time use would increase Italian dependence upon foreign countries for subsistence as is made clear by the following factors: (i) severe war damage to existing installations has greatly reduced the industrial capacity of the Italian economy; (ii) reconstruction requirements, particularly in the fields of railway rolling stock, merchant shipping, and electric generating plant, will necessitate full utilisation of existing factory and tool capacity; (iii) during the prewar years Italy annually imported from $30 to $50 million of industrial machinery, and consequently, removals of such plant would result in increasing Italy’s import deficit.
Statement by the U.K. Representative.
Having regard to the war damage suffered by Italian factories and plant, to under-maintenance and to the need for rehabilitation, the United Kingdom Delegation does not consider that there is surplus capacity except in plant exclusively usable for the manufacture of war implements.
Statement by the French Representative.
Industrial equipment used during the war for the production of armaments, and surplus to the peace-time requirements of Italy, is an effective source of reparation, such peace-time requirements being determined by the special agency charged with the carrying into effect of reparation measures.
2. Italian Foreign Assets.
Statement by the Soviet Representative.
The Soviet representative stated that Italian foreign assets should be used for the satisfaction of the reparation claims of those countries which under the peace treaty are entitled to reparations. Reparation claims in regard to the use of Italy’s foreign assets should have priority over all other claims to Italy.
Statement by the U.S. Representative.
The United States Delegation proposes that Italian property in each Allied country should be available as a means of satisfying the claims of that country against Italy, any assets in excess of the claims of the particular country to be returned to Italy. The United States Delegation has stated that the United States Government hopes to be able to return to Italy at least part, perhaps the greater part, of the Italian assets in the United States for use in rehabilitating the Italian economy. The United States Delegation would be prepared to agree [Page 293] to limiting the types of claims against which Italian assets in Allied countries might be retained, on the understanding that any excess over such claims would be returned to Italy.
In view of the fact that there are no Italian assets within the territory of the Soviet Union, the United States Delegation has proposed that Italian assets in Rumania, Bulgaria and Hungary should be transferred to the Soviet Union as reparations. The United States Delegation believes that these assets are substantial.
Statement by the U.K. Representative.
Italy lacks sources from which the supply of many essential raw materials can be drawn, and her balance of payments is unfavourable. In the circumstances foreign exchange assets in neutral countries are not regarded by the U.K. Delegation as a source of reparation. The U.K. Delegation agree in principle with the U.S. proposals in the Annex to C.F.M. (R) 9th Meeting, regarding the treatment of Italy’s foreign assets.
Statement by the French Representative.
Italian assets abroad are an effective source of reparations, such assets to be primarily earmarked for the satisfaction of reparation claims by the countries on whose territory they are located. France agrees to allotting to the U.S.S.R. the Italian assets located in Roumania, Hungary and Bulgaria.
3. Gold returned to Italy.
Statement by the Soviet Representative.
The Soviet representative considers that gold returned to Italy should serve as a source for Italy’s reparation payments. The immediate task is to determine the amount of such gold.
Statement by the U.S. Representative.
The United States Delegation believes that any gold available to Italy should be used in the first instance to satisfy the claims of those countries from which gold was looted by Italy. It is not clear how much gold will be left to Italy after these claims are met, but the amount will probably not be large. Such remaining gold will be needed to support the Italian currency and as a means of buying imported supplies.
Statement by the U.K. Representative.
This is conjectural in amount but at the best (i.e. assuming she shares in the gold captured in Germany) it is not likely to exceed £15 million. Against this there are claims for looted gold by Yugoslavia, Albania and France for about £6½ million. The remaining balance is very small considering Italy’s needs.
Statement by the French Representative.
The gold available to Italy, after deduction of the amounts due by her in respect of restitution, may be utilized in part as reparations.
[Page 294]4. Current output of Italian economy.
Statement by the Soviet Representative.
The Soviet representative considers that annual deliveries of the products of Italian industry over a period of 6 years is a perfectly feasible source of Italy’s reparation payments. Italy’s ability to fulfil production orders in particular fields of industry, as well as orders for shipbuilding, is confirmed by the information in official Italian sources cited by the Soviet representative. In this regard it should be borne in mind that during the period of six years the Italian industry will be rehabilitated and without damage to Italian national economy will in restricted measure be able to make deliveries to meet the reparation orders. These annual deliveries will be determined by agreement between the recipient country and Italy.
Statement by the U.S. Representative.
Utilization of the existing damaged Italian productive capacity is determined largely by the volume of imported raw materials for industry and foodstuffs for the workers. Italian commodity imports customarily greatly exceed commodity exports. The difference before the war was covered by invisible sources of income which have been greatly reduced as a result of the war. Commodity exports will have to be increased at the very time that domestic requirements for rehabilitation of the Italian economy have increased. Every product in excess of minimum domestic requirements will be needed for export in order to reduce the amount of foreign assistance which Italy will require in order to subsist.
Statement by the U.K. Representative.
The U.K. Delegation have already referred to Italy’s adverse balance of trade over a long period of years and to the factors which have caused its further deterioration. They see no reason to expect a favourable balance in the future or an increase in invisible exports to make good the difference.
Statement by the French Representative.
A certain proportion of current output may be utilized as reparations in so far as the Italian economy is not basically affected thereby, payments to extend over a period of eight years, and, if need be, to remain in abeyance for the first two years. These shall be fixed each year by the special agency for Italian reparations.
5. Property of War Criminals.
Statement by the Soviet Representative.
In the opinion of the Soviet representative this source of reparation payments can be accepted with a reservation in regard to looted property.
Statement by the U.S. Representative.
In view of the absence of any means for determining who are war criminals, the United States Delegation has been unable to agree to [Page 295] this property as a source of reparation payments. The United States Delegation doubts, in any event, whether such property would be readily susceptible of transfer to the reparation claimants or would greatly assist in their reconstruction.
Statement by the U.K. Representative.
The United Kingdom Delegation doubt to what extent property falling under this item is capable of transfer outside Italy and is therefore a real source of reparation. In principle they would consider this property as available.
Statement by the French Representative.
The property of war criminals is an effective source of reparations in so far as it does not derive from loot.
6. Payments in Italian Lira.
Statement by the Soviet Representative.
The Soviet representative stated that this question raised by the French Delegation could be studied additionally on the submission of the necessary information concerning, in particular, the approximate total sum of such payments.
Statement by the U.S. Representative.
It is understood that this proposal, which was made by the French Delegation, envisages the use of lire for two types of payments: (1) for repairing of United Nations property in Italy damaged during the war; (2) for making certain payments for which lire would otherwise have to be acquired through ordinary financial means. The first use is not regarded by the United States Delegation as being a part of the reparation question. The use of lire for the second type of payment would reduce Italy’s foreign exchange availabilities and would hence increase her dependence on foreign countries.
Statement by the U.K. Representative.
The United Kingdom Delegation regard lira sums established by the Italian Government for purposes connected with reparation expenditure in Italy (e.g. compensation for personal injury) as an available source of reparation. They do not consider these requirements would be large.
Statement by the French Representative.
Payments in lires are an effective source of reparation; such payments may be used, in particular to recondition United Nations property in Italy and to make certain settlements for the account of United Nations within Italian territory.
7. Italian Property in ceded Territories.
Statement by the Soviet Representative.
According to the statement of the Soviet representative the question of Italian property in ceded territories is in need of further study since [Page 296] its discussion at the joint meeting of the Economic and Reparation Committees has not yet been completed.
Statement by the U.S. Representative.
The United States Delegation believes that commercial enterprises in ceded territories which are owned by the Italian state should be transferred to the successor state as reparations. It is likewise prepared to agree that the Italian interest in certain types of privately owned public utility enterprises within ceded territories may be taken by the successor state as reparations subject to such special economic arrangements as may be necessary in connection with the determination of boundaries.
Statement by the U.K. Representative.
The United Kingdom Delegation agrees in principle with the proposals contained in paragraph 4 of the United States Memorandum of the 6th May in Annex to C.F.M. R (46) 9th Meeting.
Statement by the French Representative.
Certain assets located in the territories ceded by Italy may be an effective source of reparations, on condition they are exclusively the property of certain Italian concessionary companies, State and parastatal assets being transferred to the Successor State without compensation.
Section IV
Conclusion
As seen from the above the Committee has not been able to come to a common decision acceptable to all the four delegations although in regard to certain questions a certain measure of agreement was reached;
i.e. The use as Reparations of Italian foreign assets and part of the equipment of Italian war industry.