FW 865.00/5–2847
Memorandum by the Director of the Office of Financial and Development Policy (Ness) to the Secretary of State
Subject: Urgent request of Ambassador Dunn for assistance to new Italian government.
discussion
Ambassador Dunn’s telegram No. 1322, May 28, attached,1 states that it is of great political importance to give de Gasperi’s new Democratic Christian Government concrete evidence of U.S. support. The Ambassador feels this is essential if the new government is to survive expected attacks from leftists groups. The Ambassador suggests five possible measures of assistance:
- 1.
- Credit Italy with approximately $20 million for prisoner-of-war certificates representing wages and salaries of former Italian POWs.
- 2.
- Return immediately to Italy about $28 million worth of captured Italian gold currently in Anglo-American custody.2
- 3.
- Make an advance transfer to Italy of some part of the share in the German Gold Pool which may ultimately go to Italy.
- 4.
- Modify the terms of the existing $100 million Eximbank loan so as to make it available for basic 1947 requirements.
- 5.
- Make an additional $100 million Eximbank loan, these funds to be taken from the $500 million earmarked for China.
recommendations
- 1.
- The approximately $20 million available in the POW trust fund account should be transferred. This will require concurrence of and possibly pressure on the War Department.
- 2.
- The Department previously attempted to get British agreement to immediate transfer of the gold in custody. The British would agree only to transfer upon the coming into force of the peace treaty. In view of changed circumstances the Department should again seek British concurrence to immediate transfer.
- 3.
- The Department has engaged in discussions with the British and French looking toward the admission of Italy to the German Gold Pool on the same basis as the other participants. The French, however, insisted that Italy should not share in that part of the German Gold Pool contributed by Switzerland under agreement with the Allies. Until this is resolved it will be impossible even to consider an advance distribution to Italy. In the light of the new political situation in Italy and the French interest therein, a high level attempt should be made to obtain French consent to full participation by Italy in the Pool. If, nevertheless, the French continue to maintain their present position, the Department should agree for the sake of getting prompt action.
- 4.
- Since the Eximbank agreed to the $100 million loan to Italy only after vigorous efforts by Mr. Clayton and after the matter had been taken to the White House, it is not believed that Ambassador Dunn’s suggestion to seek liberalization of the terms of the loan is feasible. The Eximbank agreed to make funds available only for approved export projects and only if conditions in Italy were stable and Italy’s other needs could be met from other sources.
- 5.
- It is believed that your decision on May 23 to continue earmarking $500 million of Eximbank funds for China, precludes Ambassador Dunn’s suggestion of giving Italy an additional $100 million from this source. The Bank has currently available only about $300 million outside of the funds earmarked for China. In view of the limited resources available a choice must be made between Italy and China or between Italy and other applicants.
- 6.
- If the above recommendations meet with your approval they will be communicated to Ambassador Dunn in response to his telegram of May 28.
concurrences
This action has been concurred in by A–T—Mr. Thorp and EUR—Mr. Matthews.