841.51/7–2547: Telegram

The Ambassador in the United Kingdom ( Douglas ) to the Secretary of State

us urgent

4071. For the Secretary and Lovett. Bevin informed me this morning that he was sending you today an urgent cable describing the critical British financial position.1 A copy of this will be delivered to me as soon as it has been prepared.

Convertibility of sterling on the 15th of July has caused a heavy drain on dollars. (The extent to which the British situation has been aggravated by convertibility, I do not at the moment know, but I have feared that it would be more than they or we anticipated.

He says that we are pressing too hard and too fast in the discussions at Geneva2 on the matter of non-discrimination, which, although he agrees to it as a long run policy, is not adapted or suitable to the present emergency conditions. By the year 1951 he thinks that they would be applicable but for the year 1948 he believes they are not applicable.

Before Parliament rises on the 8th of August, there will be a two days debate on the state of the nation. Prior to this debate, the government will have to decide whether:

To cut imports “violently”;
To cut multi-lateral trade;
To “withdraw from Germany”; and
Possibly to declare a state of emergency.

Bevin says he is trying to provide the leadership, so far with considerable success, in the organization of an integrated economic program [Page 44] for Western Europe; and there are other things approaching—such as the General Assembly of the United Nations—in which it is important that Britain play a significant part.

He doubts, in the face of the present British crisis, that their prestige will be such as to provide the leadership and to play a significant role.

If some temporary relief for Britain can be found, the moral position of Britain will be greatly strengthened among other countries. She will be able to provide the direction and leadership, and she will be able to play the role which only Britain can play in integrating the economic program for Europe. Without relief, he doubts that Britain will be able to play this part, and thinks that the consequences on France and Italy and elsewhere may be disastrous.

He suggests personally and informally the possibility that the International Bank might be able to provide this relief to the tune of a billion dollars which, he believes, will be sufficient to carry them over the hump by the middle of next year, and which, he believes, will place Britain in a position where she can provide assistance to France and play her role in Germany.

From my knowledge, I can say that the British position is critical. This has been reported to you by me before.

As to whether Bevin’s personal suggestion is a feasible one or not, I have no judgment, but it is my view that we run the serious risk of losing most of Western Europe if the crisis here develops as it now seems almost certain to develop.

That the British have not come to grips with their coal problem and other issues, I am certain.

I would not suggest temporary relief, if it is feasible, to UK on straight economic grounds, but I think that if we are to be successful in Western Europe, we cannot afford to permit the British position so to deteriorate that her moral stature will be reduced to a low level.

If some relief is feasible, it should not, I think, be of a nature or an amount which will permit Britain to avoid grappling in earnest with some of her problems.

  1. This message presumably was incorporated in the aide-mémoire which Sir John Balfour, the British Chargé, left with Secretary Marshall on July 28, p. 45.
  2. Reference here is to the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment. Documentation concerning this subject is found in volume i .