851.51/2–946: Telegram

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

secret

647. Your 573 of February 4, 7 p.m. is most helpful and I concur entirely in the proposed broad approach to the impending negotiations with the French in Washington. I shall continue personally to discuss with French authorities concerned (including Blum) the various points suggested in your message.

I have no knowledge of any present French intention to request the transfer Plan A and North African civilian supplies from cash [Page 413]payment to 3–C basis. My personal view, however, is that such a request is quite likely in the light of their dollar shortage. I suggest that it is an accommodation which might well be extended to them if in the course of the negotiation they substantially meet our desires and satisfactorily document their need for further credits.

I am not clear as to what is comprehended by heading A of agenda in your telegram and would appreciate clarification.

As you are aware, I have always favored a realistic and comprehensive settlement of unfinished business with the French in return for any [apparent garble] dollar credits. If presented skillfully I do not believe there will be serious difficulty in securing satisfaction.

At this time, however, I desire to emphasize my belief that it is in our national interest to grant France a substantial dollar credit even though to a banker’s eye France might not be considered an A–1 risk.

There is little doubt that the political situation in recent weeks has seriously deteriorated. The average man is still cold, hungry, unable to buy what he needs and frustrated by the feeling that not enough progress has been made.

Extremists today are not in control. It is in our interest that public discouragement should not reach the point where extremists appear to offer the only chance of improvement in leadership and in material things.

Today France looks primarily to us for help. If coal is not forthcoming from the Ruhr the US is the only producer that can squeeze out an export surplus. When the French wheat crop fails, it is to the US she turns. Also important, it is only from the US that the industrial machinery and equipment necessary to restore and modernize her plants can be secured.

Without desiring to prejudge a case on which the technical facts have not yet been assembled I am under the impression that the 1946 import program, together with other obligations and commitments, by this year’s end will substantially strip France of her present holdings of gold and dollars. Exports to the US for some months are unlikely to increase sufficiently to earn substantial dollars.

Under these circumstances, I believe that the loan France will request of US should be weighed in terms of its political importance. To refuse it or to chop it down to an unimportant sum, in my considered opinion, will pull out one of the last props of substance and of hope from those in France who want to see France remain an independent and democratic country.

Caffery