851.00/1–2646: Telegram

The Ambassador in France (Caffery) to the Secretary of State

secret
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420. When the three major parties reached the agreement (it is described by some cynics as a “non-aggression pact” rather than an [Page 406]agreement) described in my 403, January 25,11 the general public believed that the way had been cleared for the formation of the new government. It soon became apparent that no agreement had been reached on the basic issue of French financial policy and that until this hurdle had been cleared the French Government could not be formed.

In the present critical state of French finances (rising prices and inflation) none of the three main parties was eager to accept the responsibility for the Ministry of Finance. In the belief that drastic measures were necessary to stabilize French finance (heavy reductions in governmental expenditures, capital levies and heavy taxes on illicit profits, freezing of wage increases, drastic price controls, etc.) Gouin offered the portfolio of Finance to Mendès-France, Radical-Socialist who a year ago had advocated stern financial measures. It soon became evident, however, that while the Socialists favored the adoption of Mendès-France’s ideas both the Communists and the MRP had certain reservations. (The Communists apparently because they do not wish to oppose wage increases and the MRP because of the heavy reductions in army expenditures and personnel). However the Radical-Socialist Party reached a decision last evening not to participate in the new government, and Mendès-France therefore refused this post.

In the continued absence of agreement last night by the Communists and MRP to the financial program now advocated by the Socialists, the crisis was brought to a new peak last evening by a message from Gouin to the three parties that if they refused to agree to support loyally and without reservation the necessary financial measures along the lines of the general Mendès-France program it would be impossible for him to form a government. In the meantime the Socialists let it be known that André Philip (President of the Assembly Committee drafting the Constitution), reluctantly would be willing to accept the post of Minister of Finance if his program—said to be similar to but somewhat more moderate than that of Mendès-France—was accepted by the Communists and MRP.

This morning there is feverish political activity and everyone is awaiting anxiously the decision of the Communists and MRP. Despite pessimism it is generally believed that an agreement (probably somewhat watered-down) on financial policy will be reached during the day by the three parties and that Philip will probably be the new Finance Minister.

Sent to Department as 420 repeated London as 83 to Moscow as 37 and Rome as 12.

Caffery
  1. Not printed.