Foreign Relations of the United States, 1947, The British Commonwealth; Europe, Volume III

865.00/5–1647

Memorandum of Conversation, by the Secretary of State

secret

[Washington,] May 16, 1947.

Participants:	Ambassador Tarchiani
	The Secretary
	Mr. Matthews

The Italian Ambassador called this afternoon at his request and gave me his impression of conditions in Italy following his return from a visit there and made some suggestions as to what the United States might do to help. He said that he had seen the President Tuesday, that the President had shown much interest in Italy’s situation, and had asked him to talk further with me.¹

He painted a pessimistic picture of the growth of Communist strength in Italy as evidenced especially by the recent elections in Sicily. He said that in that island, which is essentially conservative, the Communist bloc had polled over a third of the vote. There were two factors in this surprising Communist success: First the general discontent resulting from the poverty of the peasants and second, the extraordinary expenditure of campaign funds by the Communist party. The Communists spent over a billion lire or the equivalent of $2,000,000 which, he said, is an unheard of figure in any Italian election campaign, especially in a small area such as Sicily.² This, he thought, proved the importance that Moscow attaches to obtaining Communist control of Italy and presents a gloomy outlook for the elections next October. He said that for the time being Moscow can do little in France since that country is cut off from Russia by the Anglo-American zones of Germany. On the contrary, through Yugoslavia, Italy is in effect directly linked to Russia which makes Communist infiltration much easier. If Moscow succeeds in establishing a Communist Italy it will have gained a highly strategic position. Italy as a base would serve to flank Greece and Turkey, to extend Communist influence north to Germany and Austria and west to France and Spain. It would also facilitate Communist penetration into North Africa, an area to which Moscow is attaching increasing importance.

It was, therefore, he said highly important that Italy should not fall under a Communist regime. The present government crisis, he thought, would soon be solved whether with Nitti as Prime Minister or with de Gasperi.³ In either case, with the Christian Democrats as the strongest party in the Assembly, de Gasperi would exercise the real power. De Gasperi would do everything possible to prevent the rise of Communism, though whether it would be possible at the present stage to form a government without any Communist participation he could not say. It was important, however, that everything possible be done to assist Italy between now and the elections next October. He did not know when the Italian peace treaty might be ratified, and feels that ratification is a matter between the U.S. Government and the Senate on which he should not comment but if ratification takes place in May or June it will mean the removal of American and British troops from Italy prior to the elections. This, he thought, would be unfortunate. If the Communists do not succeed in coming to power by legal means they may try to take control through insurrection. In the latter case, the Government’s position would be serious. The Italian army is disorganized and incapable of resisting and the police have been largely infiltrated by Communists and Socialists. The Cara-binieri represent the most reliable force, but there are only 60,000 to 70,000 of them and in villages where only 3 or 4 are stationed they would easily be overpowered. I inquired as to the required date of British-American troop withdrawal which is 90 days after the treaty becomes effective. So far, no country has ratified the treaty but if the four powers ratify by the middle of June, it would in fact mean the removal of these troops before that time. I said that I would give thought to the matter.

I asked whether the exact date for the elections has been fixed. Mr. Tarchiani said no. Both the government and the Communists and Socialists wanted the elections in October, but there was a possibility that the members of the Constituent Assembly might desire to prolong their own political life and not approve the constitution in time to permit elections by that date. This would present various legal complications and the present expectation is that the elections will be held in October.

I said I wanted to assure the Ambassador that I was giving serious thought to the situation in his country and would do all that I could to help. I could tell him that when the new government is formed the United States Government will issue a public statement expressing its support and its interest in Italy’s problems.⁴ As to future measures, I will urge that the $100,000,000 Eximbank credit earmarked for Italy be made available.⁵ We hope to get ahead with the negotiation of a treaty of friendship and commerce with Italy. I was encouraged by the passage by the Senate of the post-UNKRA relief bill which would assure Italy substantial relief assistance this year.⁶ I would likewise press for the early return to Italy of Italian assets in the United States. I asked the Ambassador what these amounted to and he replied about $60,000,000, a substantial proportion of which, however, constitute private bank balances, which while valuable assets would not be available to the government since it did not know the owners. Finally, I said the United States would vigorously support Italy’s application for membership in the United Nations. I felt encouraged by the recent trend in Congress which seemed to me a reversal of previous opposition to constructive measures.

The Ambassador expressed his appreciation and said that this brought him to the question of Italy’s financial situation. For the next three or four years Italy’s unfavorable balance of payments, he thought, would amount to $500,000,000 to $600,000,000 per year. This was due to a number of causes. First and foremost, Italy had lost her most important export markets in central Europe—Germany, Austria, and in large part Czechoslovakia. Only Switzerland remained. Similarly, Scandinavia had reduced its purchases of Italy’s principal exports, fruits and vegetables, and Italy had not been able to build up markets in France or England. Fruits and vegetables were now considered as “luxuries” which all those countries could do without and the other important Italian export, textiles, was running into greater competition because of the high cost of Italian production. In order to avoid unemployment Italy’s factories are compelled to employ three men for the job of one. Her steel and shipbuilding industries suffer through lack of coal. Furthermore, the Italian merchant marine had been reduced from some 3,600,000 tons before the war—the minimum necessary—to about 600,000 tons. Thanks to American help it is now back to 1,200,000 tons but this is far too small. Atlantic shipping conditions and other factors mean that tourist trade, another important source of revenue, will continue greatly diminished for the next three or four years. On the other hand, Italy is compelled to spend large sums abroad for her two principal essentials: wheat and coal. I asked whether Italy did not desire more ships and whether she had the crews to man them as this seemed to be one possible source of further American help. He said that in addition to the return of Italian ships utilized by the United States during the war, Italy had purchased through Mr. Byrnes’ efforts on long term credit 50 Liberty ships and an additional 50 had been granted at the time of Mr. de Gasperi’s visit here. I asked why more are not available in view of the large number of Liberty ships which we still have. Mr. Tarchiani and Mr. Matthews replied that they thought the Maritime Commission was reluctant to sell ships to foreign governments owing primarily to the dislike by American shipping interests of foreign competitors who could operate the ships at much cheaper costs. I asked Matthews to explore the possibilities of acquiring further merchant ships for Italy. I asked that tankers be included in such a study since I had this morning considered the sale of tankers to foreign owners and Mr. Tarchiani indicated Italy would like to acquire some on credit.

As to the deficit for the current year Mr. Tarchiani estimated it at $100,000,000 and said that this could be reduced, he thought, to $50,000,000 if the tentative amount of relief ear-marked for Italy could be increased. He said that he thought it was important that if possible steps be taken to step up food shipments between now and the time of the elections so that the Italian people could be given some material as well as psychological lift. There was one final question about which he had spoken to the President and to Matthews, namely, the importance of issuing a statement at the time of ratification of the treaty. He said naturally the treaty was not popular in Italy and it was important to give the Italian people some counteracting assurances at the time of ratification. I said I thought we could issue a statement at that time. He said that he hoped any statement would contain some specific reference to Italy’s “disarmed frontiers” and give some sort of “moral guarantee” by the United States that they would be respected. Opinion in Italy is very sensitive to the fact that Italy has been effectively disarmed by the treaty in the face of an aggressive and well-armed Yugoslavia. For all their talk and oratory the Italians are essentially a realistic people, he said. They think that the United Nations may at some future date become an effective organization for world security but they have little confidence in its ability to defend Italy’s frontiers at the present time. I told the Ambassador that I would look into this aspect of the matter. I said that I recognized the importance of aiding Italy from the psychological point of view. I understood Ambassador Dunn was fortunately in “good voice”, so to speak and he would be authorized to continue addressing the Italian public. Furthermore, I hoped the programs of the Voice of America to Italy could be stepped up. The Ambassador said both were quite helpful.

1. No record of Tarchiani’s conversation with the President has been found.
2. In a memorandum of conversation with H. Freeman Matthews, Director of the Office of European Affairs, on May 8, not printed, Tarchiani explained that one important source of Communist funds was the Mussolini treasure seized by the Communists at the time of Mussolini’s assassination (865.00/5–847).
3. De Gasperi submitted his resignation on May 13.
4. For text of the statement, released to the press by the White House on June 14, see Department of State Bulletin, June 22, 1947, p. 1214.
5. See telegram 1402, June 4, from Rome, p. 917, and memorandum of July 29, p. 951.
6. Reference is presumably to Public Law 271. The Supplemental Appropriation Act, 1948, approved July 30, 1947; 61 Stat. (pt. 1) 612.