811.516 Export Import Bank/6–2046

Memorandum by the Director of the Office of Financial and Development Policy (Luthringer) to the Assistant Secretary of State for Economic Affairs (Clayton)

Mr. Clayton: Following his conversation with you the other day59 the Italian Ambassador requested Mr. Ortona, of his staff to impress the appropriate officers of the Department with the necessity of taking the following immediate steps:

1.
The Ambassador requested that the NAC be asked to recommend to the Eximbank that it set aside the amount considered for the Italian loan ($100 million) so that the funds will be available if the reparations issue is clarified and it becomes possible to proceed with the Italian credit. Although it would be undesirable to tie up for any long period a substantial fraction of the limited funds currently available to the Eximbank, it seems reasonable to suppose that the Italian reparations issue will be disposed of in the relatively near future and that a final decision on the Italian credit can be made before too long. Under these circumstances the Ambassador’s request does not appear unreasonable.
2.
The Ambassador requested that a second approach be made to the House Appropriations Sub-Committee before the July recess of the Congress on the proposal to make available to Italy the non-troop pay dollars. In deciding whether or not to approach the House Sub-Committee again at this time, you may wish to bear in mind the following considerations:
(a)
The Committee may ask you in what respect the situation has changed since May 10 when you discussed this matter with them. The [Page 922]reason for the Ambassador’s concern that the renewed consideration should not be postponed until after the summer recess is undoubtedly the fact that Italy will shortly be running out of money, threatening an interruption in the flow of essential supplies. Such an interruption in the flow of supplies would presumably not be in the US interest.
(b)
Total UNRRA assistance for 1946 will be somewhat less than that planned on the basis of Italy’s needs since approximately $70 million of the UNRRA funds allocated to Italy for the first half of 1946 could not be obligated and had to be returned under UNRRA procedure.
(c)
The Committee may ask why Eximbank funds have not yet been made available which raises the question whether the non-troop pay dollars should likewise be held up pending clarification of the reparations question.
(d)
In view of the fact that your previous appearance before the Committee was jointly with Mr. Vinson you may wish to consider whether you will want to approach Mr. Snyder before reopening this question with the Committee.
(e)
Pursuant to the revision of the armistice the War Department has agreed that it will pay its own way in Italy after June 30. While this bears no necessary relation to the question whether the non-troop pay dollars covering certain previous War Department expenditures should be made available to Italy, you may wish to point out that this Government has urged a revision of the armistice for some months. Had a revision gone through when originally contemplated, the Italian Government would have received the dollar counter value of goods and services supplied during the intervening period.
(f)
By accepting the goods and services made available by Italy without paying the dollar counter value the US has laid itself open, together with Britain, to charges from the USSR at the Paris peace treaty meetings that we were in effect collecting reparations from Italy. Making the non-troop pay dollars available to Italy might assist in furthering the objectives of the US in the discussions at Paris and expected Paris peace conference.
3.
I suggest that any written response to the Ambassador’s memorandum be deferred until decisions are reached respecting points 1. and 2. above.

George Luthringer
  1. No record of this conversation has been found in Department files.