Current Economic Developments, Lot 70D467
Current Economic Developments
No. 149
Tentative Recovery Allocations Bring Some Protests; OEEC Programming Gets Under Way
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On April 20 the Executive Branch submitted to the House Appropriations Committee tentative figures on hypothetical and purely illustrative distribution among countries and commodities for the first year of the European Recovery Program.
Although it was made clear that the figures were tentative and subject to revision, the public and the press in a number of the participating countries have been agitated because the estimates were lower than had been hoped for. The provisional figures listed estimates of ECA obligations for the UK and dependencies to receive $1,324,300,000; France and dependencies, $1,130,800,000; Italy $703,600,000; The Netherlands and dependencies $599,600,000; Austria, $185,600,000; Belgium-Luxembourg and dependencies $295,500,000; Denmark $130,800,000; Greece $106,400,000; Iceland $10,900,000; Ireland $113,900,000; Norway $32,800,000; Sweden $28,400,000; Turkey $10,000,000; Bizonal area of Germany $437,400,000; French zone in Germany $96,400,000; Saar Basin $15,600,000; with no allotments for Switzerland or Portugal the first year as Switzerland requires no aid and Portugal is expected to receive assistance from other countries.
[Page 434]Commodities receiving the highest provisional allocations included grain $957,200,000; fats and oils $131,900,000; sugar $117,900,000; dairy products $133,500,000; tobacco products $110,200,000; cotton $511,300,000; coal $245,300,000; petroleum products $379,700,000; timber $142,200,000; and chemicals $166,500,000. Machinery allocations included $81,500,000 for agricultural machinery; $49,100,000 for coal mining machinery and $329,400,000 for machinery not otherwise specified.
Greek reaction to the tentative allocation of $106.4 million has been very unfavorable and the Mission as well, has repeatedly warned that this amount is insufficient. We have advised the Mission that the figure is only illustrative; that tentative estimates of the total Greek deficit for the 12-month period are in the neighborhood of $240 million; and that our previous statement still stands that in the case of Greece the irreducible deficit with all areas must somehow be financed. The ECA Administrator, in view of the special nature of the Greek situation, has designated the present Mission as the authority for administering the Greek Recovery Program for the time being. The Mission will report to ECA on all phases of Recovery Program work and report to the Department with regard to all military and other aspects of the program. The Mission now reports that the Greek Government is complying or has taken reasonable steps toward compliance with the provisions of the Act for aid. A satisfactory budget balance has been maintained during the present fiscal year; agreement has been reached on areas where proposed expenditures can be cut next year and increased revenue obtained; the government has agreed to remove the subsidy on bread not later than June; and the law for locating, identifying and using assets abroad was enacted April 28. The certificate plan will be operated to adjust the exchange rate so as to maintain a valid rate of exchange.
Embassy Ankara reports it is entirely possible the Turkish Government will consider its position stronger domestically if it declines Recovery Program credits than if it accepts an amount judged unsatisfactory in the light of Turkey’s international position and needs. The $10 million estimate for the year is especially disappointing in view of an earlier calculation that $10 million might be available the first quarter. This was told in confidence by Turkish officials to certain members of the parliamentary group and makes it most embarrassing to go before the Assembly with the lower figure. Department officials have made it clear to Turkish representatives here, as has Ambassador Wilson in Ankara, that the estimate is most tentative and subject to decision by the ECA Administrator. Wilson suggested to the Turks that they make plans to utilize the $10 million, try to convince the Administrator of the need for more funds, and at the same time approach the International Bank for additional credits.
[Page 435]Sweden is reluctant to accept aid without complete knowledge of the conditions and it is believed that the Swedes are holding closely to their neutrality tradition and want to be sure the Recovery Program does not become political before they enter wholeheartedly into it.
Greece, Germany, and Austria Present Special Problems
Since the Recovery Program provides for assistance in covering balance of payments deficits solely within the Western Hemisphere, the US is confronted with a special problem in certain areas of primary US responsibility, namely, Austria, Greece and Germany. In the case of Austria and Greece the deficit lies for the most part with other participants. A plan is under study which could be applied by ECA to all deficits recorded by participating countries in trade with other participants. This device would consist essentially of offshore procurement by the US in one participating country for the account of another. There are other problems of Austrian and Greek deficits involved in eastern European trade and with nonparticipating countries outside the Western Hemisphere which will have to be worked out. Happily, however, these amounts are not large.
From a different angle Germany presents an equally complex problem. It was contemplated in the original Recovery Program calculations that the purchase of German coal by participating countries would be paid for by offset purchases by Germany of their export products, especially food. We are now confronted with a situation in Denmark, Norway, Holland and to a lesser extent in Italy, where US authorities in Germany refuse to approve the use of funds for the purchase of certain high cost foods from these countries. This leaves to be settled the method of payment by these countries for German coal imports for which US military authorities in Germany are demanding dollars. If dollar Recovery funds allotted these countries are used for the purchase of German coal, Germany will be receiving more Recovery fund dollars than allotted to her under ECA allocation unless offset by equivalent reductions in the allotments.
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