Memorandum of Conversation, by Mr. George C. McGhee, Special Assistant to the Under Secretary of State for Economic Affairs (Clayton)

Subject: Second Meeting Between Mr. Clayton and the Italian Prime Minister, Alcide de Gasperi

Participants: His Excellency Alcide de Gasperi, Prime Minister of Italy (in part)
Mr. Campilli, Italian Minister of Foreign Commerce
Mr. Donato Menichella, Director General, Bank of Italy
Mr. Carli, Director, Office of Foreign Exchange, Italy
Signor Alberto Tarchiani, Italian Ambassador (in part)
Mr. Egidio Ortona, First Secretary Italian Embassy
Mr. Vincenzo Vogliola
UE – Mr. Clayton
Ambassador Dunn
A–T – Mr. Thorp
OFD – Mr. Ness
UE – Mr. McGhee
SE – Mr. Dowling
IE – Mr. Stillwell
FN – Mr. Reinstein
[Page 855]

The Italian representatives stated that as a result of a suggestion made by the staff of the Export-Import Bank, they wished to offer for discussion a new plan for the proposed $100 million Export-Import Bank loan to Italy. They wished to discuss this loan in terms of its being made to a private Italian banking institution, the Istituto Mobiliare Italiano (IMI), which is an investment banking house supported by the leading banks, insurance companies and investment trusts in Italy. IMI has a total capitalization of one billion lira and outstanding loans of eight billion lira. This institution has been selected as the most suitable of all institutions of its class in Italy, because it is engaged in financing both big, medium, and small sized manufacturing businesses of all types. IMI has a good technical staff, has no political associations, and is not dominated by any one industry or group of industries. The Italian representatives explained that this new proposal was being made in order best to comply with the requirements of the Export-Import Bank. The obligation would be undertaken directly by IMI, with the entire loan including the necessary foreign exchange provisions being guaranteed by the Italian Government. It was explained that loans would be made by IMI from the borrowed funds only to firms engaged in the manufacture of goods for export and only for purchase of raw materials. The foreign exchange derived from these exports will be strictly controlled by IMI, so that funds would be available for repayment of the Export-Import Bank loan as required.

Mr. Clayton replied that this was the first time that he had heard of the Italian proposal, and that he would like to explore it a little more fully before making any final decision. He said that there still remained the question of the Italian balance of payments, and he asked when Italy would be in an exchange balance with the rest of the world. Mr. Clayton also asked what the average length of the loan was expected to be.

Mr. Campilli replied that Italy was now producing at 60% capacity and that she expected to be in balance on foreign exchange within five years. If Italy can pay only the interest on the Export-Import Bank loan for the first three years, she can finance the remainder. Mr. Campilli assured Mr. Clayton that all the funds received from the Export-Import Bank would be allocated to purchase of raw materials by firms manufacturing goods for export. He stated that the firms themselves would make the purchases. Although the loan would include both short and long term commitments, depending on the rapidity of turnover of the product derived from the raw materials purchased, the Italians expected the average length of the loan to be between eight and nine years.

[Page 856]

Mr. Clayton observed that this loan was not a straight raw materials loan pledged by production derived from the raw materials, as it appeared on the surface to be. Particularly in view of the 3-year delay in starting repayment, there was no assurance that the exchange derived from the sale of the products produced would be used to liquidate the loan. The $100 million was small in comparison with the total amount which would be spent by Italy each year for imports. Mr. Clayton asked whether or not it would be possible for the Export-Import Bank to, under the proposed plan, specify the raw materials to be purchased and to obtain a guarantee that they would go to firms engaged in manufacture for export. The Italian representatives replied in the affirmative.

Mr. Campilli explained that the loan in question was not for the purpose of rehabilitating Italian industry, but for facilitating importation of raw materials. The remainder of the help which Italy will require in reconstruction must come from increased world trade resulting from the International Trade Organization, and from loans from the International Bank. The Italian financial position will be much improved when foreign exchange derived from her exports will be freely convertible, particularly the sterling which she earned from her trade with the United Kingdom, who is one of her best customers. The Italians are placing every emphasis on exports at the expense of internal consumption.

Mr. Clayton observed that after July 15, the United Kingdom will be obligated in accordance with her loan agreement with this country to convert into dollars all sterling earned currently. Mr. Campilli replied that the United Kingdom had indicated that this would not in fact be the case, but that they wished to negotiate with Italy a Trade and Payment Agreement effective July 15, which would provide for use of sterling earned by Italy for raw material purchases in the sterling area. Mr. Clayton stated that this arrangement would, in his opinion, be a clear violation of the British loan agreement. In answer to question as to whether or not the recent British-Argentine Trade Agreement did not also constitute a violation, Mr. Clayton replied that it did, but in a different way. The violation in the case of the Argentine is a theoretical one, since it would occur only in the event of the Argentine’s having a favorable balance of trade with the United Kingdom, which is highly improbable. Mr. Clayton promised that he would give consideration to the new Italian proposal before the next meeting of the Directors of the Export-Import Bank. It was pointed out that the Italian representatives planned to discuss this matter further with the staff of the Bank on the day following.

[Page 857]

During the preceding conversation, the Italian Prime Minister and Ambassador withdrew from the meeting.1 Before they withdrew, Mr. Clayton handed to the Ambassador an aide-mémoire dated January 8, with regard to transfer of the former Italian ships Hermitage and the Monticello to the Italian government.2 Mr. Clayton stated that the aide-mémoire did not cover the two questions raised by the Italians in the meeting of the preceding day with regard to this transfer, but that he would take these matters up with the Maritime Commission on Friday.

Mr. Clayton then asked Mr. Thorp to take up any points arising out of his earlier meeting at 2:30 p.m. with certain of the Italian representatives.3 Mr. Thorp reported essential agreement with the Italians on commercial policy matters. He stated that both sides recognized the need for an over-all financial agreement between the two countries, which he hoped could be ratified at the same time as the proposed Treaty of Friendship, Commerce, and Navigation. It had been agreed that both sides would present a complete list of their claims and counterclaims against the other government in preparation for the over-all agreement.

Mr. Thorp explained that the Italian property in this country which had been seized during the war was still held against claims against Italy. The release of this property was complicated administratively since it involved the Alien Property Custodian, the Department of Justice and other agencies of this Government. Mr. Thorp had assured the Italians, however, that the bulk of their property would be returned except for a small amount to be held against certain limited claims. He added that the United States’ claim against Italy for “Plan A” supplies was a substantial one, and that it would be necessary to arrive at some procedure for the settlement of this claim.

Mr. Clayton suggested that this claim be considered along with other claims between the two governments, and that both sides should get together and draft a joint communiqué covering all points under discussion except the Export-Import Bank loan for issue early next week. He suggested that the communiqué constitute a statement of agreements reached so far in the present discussions, and steps to be taken in the future.

[Page 858]

Mr. Dunn reported a conversation between the Prime Minister and the Secretary with regard to an economic survey of Italy. Mr. Campilli added that his government wished the United States to cooperate with the Italians in making such a survey. Mr. Clayton replied that he assumed that the financing for any large-scale reconstruction of Italian industry would come from the International Bank and that the Bank was setting itself up to make the surveys required. He questioned the desirability of the United States and Italy making the survey on a bilateral basis. Mr. Clayton asked the Italians whether or not they had made application to the Bank for a loan. Mr. Campilli replied that the Italians wished to discuss their application with the United States prior to submission to the Bank. Mr. Clayton took the position that this was a matter between the Italian government and the Bank, although we would, of course, be glad to provide such technical assistance as we could. Mr. Clayton stressed the importance of proper documentation of loan applications made to the Bank.

Mr. Menichella expressed appreciation to the United States government for efforts it had made in assisting the Italians in recovering their gold which had been taken over by the Allies during the war. Mr. Thorp summarized the existing situation which he stated was well known to the Italians. First, the gold which was taken by the Germans out of Italy and seized by the Allies in Germany had now become a part of the Gold Pot.4 Although Italy may be allowed to share in the Pot, decision as to the method of sharing remains to be determined, in fact the procedure for making such a decision has not yet been determined. Secondly, the disposition of the gold seized by the US–UK forces in Northern Italy is a matter for decision by the US–UK governments after consideration of claims put forth by other countries, including France, Yugoslavia and Albania. It is hoped that agreement as to disposition of this gold can be reached at the CFM Deputies Meeting to be held shortly in London.5

Mr. Menichella expressed the hope that the 73 tons of gold taken over by the Allies in Germany could be returned directly to Italy, in the same manner that the Hungarian gold had been returned to Hungary. He reported that the Italian government was already in negotiation with the French government in an effort to clear up French claims. Mr. Reinstein commented that there was no possibility of the Italians receiving 100% of the 73 tons of gold taken in Germany, since the most they can expect is to share this with other countries devastated by Germany. Mr. Thorp explained the distinction between the Hungarian [Page 859] gold, which had been seized by the United States forces directly from the Hungarians, and the Italian gold, which had been taken over from the Germans in Germany. The Italian representatives pointed out that they considered the distinction to be in their favor, since the Hungarian gold was taken from the Hungarians while they were still fighting the Allies and was restored to Hungary in an effort to bolster up their currency. The Italians would greatly appreciate the same friendly treatment, since their currency would also be greatly strengthened by an increase in their gold reserve.

Mr. Campilli expressed final appreciation to the American representatives for their consideration. He expressed the hope that the communiqué which would be drafted jointly by the two governments would indicate that positive economic assistance is to be furnished to Italy by the United States government and that the United States will have a continuing interest in the future of Italy. He stated that this was urgently needed in order to give the Italian people hope for the future. Mr. Clayton concluded by assuring the Italians that our heart was in the right place and that we would do all that we could for them under the circumstances.

  1. According to Tarchiani (America-Italia, pp. 63, 65), at 4:00 p.m. De Gasperi and he went to see Secretary of the Treasury Snyder who gave them a check for $50 million for the suspense account.
  2. The substance of the aide-mémoire was embodied in a press release of January 10, Department of State Bulletin, January 19, 1947, p. 136.
  3. See memorandum by the Assistant Chief of the Division of Commercial Policy, January 8, supra.
  4. For an explanation of the “gold pot” principle, see Foreign Relations, The Conference of Berlin (The Potsdam Conference, 1945), vol. ii, p. 938, footnote 4.
  5. Documentation regarding the Council of Foreign Ministers in 1947 is printed in volume ii .