740.00119 EW/8–546: Telegram

The Chargé in Italy (Key) to the Acting Secretary of State

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3414. Embassy has received formal memo from Italian Foreign Office, dated August 1,6 stating government has urgently examined economic financial clauses Draft Peace Treaty and must inform Embassy as follows:

1.
Collaboration of Allied Governments and AC helped meet Italian minimum requirements without which Italian situation would have been transformed into economic and social disaster. Assistance has been insufficient, however, for economic reconstruction.
2.
Need of foreign credits is salient aspect of Italian situation. Program for 1947 supplies contemplates need for financing at least 900 million dollars.
3.
In this situation, peace treaty if unchanged, would impose new burdens on Italy so grave as to reduce enormously capacity to meet needs without outside help. Consequently, either Italian need for credits will be “enormously increased sufficiently to enable it to bear new burdens imposed or Italy will be precipitated into economic and monetary chaos.”

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Memo concludes requesting Embassy to inform United States Government “very grave consequences which might derive” from economic financial clauses peace treaty. Identical note apparently sent United Kingdom Embassy.

Accompanying letter from Prunas Foreign Office Secretary General states Government is “proceeding to detailed examination of economic financial clauses” and will supplement its earlier arguments “which do not appear to have been given due consideration.” General impression of Italian experts is that if clauses remain unchanged, “consequences would be fatal for Italy” which would emerge “scarcely alive” from application of treaty. Prunas believes it clear Allies “did not wish pursue that objective” when drafting treaty but fears that “perhaps permanent weakness Italian economy has not been sufficiently made known” and that “apparent and momentary abundance of goods may have been considered indication well being when it is actually sign profound economic weakness due almost total lack purchasing power Italian population.” Similar phenomenon observed in defeated countries after First World War preceding their collapse, he adds.

Prunas questions finally “whether sufficient evaluation has been made of consequences capable of being produced on Italian economy by total effect of individual clauses taken all together”, adding that if economy is pushed toward collapse, it would become “element of permanent disturbance for all Europe with incalculable consequences for all.”

Texts follow airmail.

Sent Department 3414, repeated Paris for United States Delegation 523.

Key
  1. Not printed. The memorandum and an accompanying letter were transmitted to the Department as enclosures to despatch 3915, August 5, from Rome.