The Ambassador in France (Caffery) to the Secretary of State
[Received 9:03 p.m.]
227. Monnet and his principal staff assistants had a talk yesterday with Merchant4 and White5 in which the French placed emphasis on the following 4  considerations vis-à-vis Franco-American credit discussions:
- French adoption of American commercial policy is contingent on large scale US credits. (France will modernize production in the absence of such credits, but more slowly and necessarily within the framework of a closed economy.)
- Lump sum credit should be granted at one time to cover modernization period of 3 years. Piecemeal credits would handicap French [Page 400] planning procedures and would prevent proper synchronization of France’s modernization program with production trends in the US. Monnet said, however, that he recognized that State Dept had to consider political factors in its treatment of this question.
- Although large scale credit to UK was prerequisite to trade liberalization, such a loan will not insure this objective. Western Europe is also important and credit decision vis-à-vis France will be of key importance in determining commercial policy trends in this area.
Embassy representatives suggested that Washington in its consideration of France’s reconstruction needs would be interested in any studies prepared by France on:
- Current and prospective balance on international payments (on world wide as well as dollar area basis) and
- Analysis of France’s national income at different levels of production, with special reference to amounts available for consumption and capital investment respectively.
Embassy is also of the opinion that Dept may want to explore with French the following problems before arriving at any decision on credits: (1) plans regarding any changes in international fiscal and monetary policies which might arrest current inflationary trends and result in re-establishment of international price equilibrium, (2) French economic policies, such as nationalization, taxation and exchange controls, which unduly retard inflow of investment funds and normal commercial credits, thus increasing volume of public credits needed from abroad, (3) concrete plans, if any, under which France might maximize potential “invisible” export receipts from tourist and “protracted sojourner” trade, and (4) plans for revival of export trade in key items which could assist in sustaining international financial position during modernization period.