Foreign Relations of the United States, 1948, Western Europe, Volume III

860S.00/2–1948: Telegram

The United States Political Advise (Joyce), at Trieste, to the Secretary of State

secret

Trieste, February 19, 1948—2 p. m.

80. For Counselor¹ and Director Policy Planning Staff.² Remytel 7 of January 7³ and my letter to Kennan forwarded from Trieste by courier and air pouch from Paris February 16.⁴

1. AMG again faces similar situation to that described mytel 7 and funds advanced by Italian treasury³ will after the most drastic cheeseparing be completely exhausted by about March 10. Rome negotiations still continuing with no assurance AMG will obtain adequate funds from Italian Govt to meet deficit and permit essential continuance public works projects and loans to industry.

2. By putting off creditors and robbing Peter to pay Paul, AMG is setting aside one half billion lire to make modest loans to local industries. These loans are in reality unemployment relief as medium size and small local industries cannot meet their payrolls and are stopped from dismissing workers except by complicated arbitration involving consent labor unions which naturally fight all dismissals. Local jute mill employing 480 workers yesterday received permission lay off only 22 employees but must receive AMG financial assistance to continue operation. This loan will open door to many other industries in financial straits. These loans are palliative and can only be extended by reducing public works projects which absorb unemployed and by refraining from further commitments in public works program.

3. Communist Sindicati Unici constantly threatens general strike and will obtain economic issue it seeks unless AMG can prevent industrial lay off and increasing unemployment. Non-Communist [Camera] del Lavoro Democrats with AMG now but probably could not be held in line if SU called general strike on genuine economic rather than political issue. The issue for military govt appears clearly to be assistance to industries by loans and continuance public works projects to keep down further unemployment which now stands at about 25,000.

4. Sindacati Unici controls Trieste port and general strike would make it virtually impossible to move military supplies for US forces Austria which enter this port and represent a 60% port activity. If general strike made it necessary reroute military supplies for Austria via Bremerhaven Trieste economy would receive staggering blow. Appreciate SU will nevertheless call strike whenever it receives directives from Belgrade and Rome in connection with rule or ruin strategy and fixed policy to undermine Anglo-American administration UK–US zone Trieste.

5. We consider here that lid must be kept on until Italian elections mid-April. Chief Italian economic delegation Guidotti states quite frankly we can expect little or no assistance from Rome for next 2 months as Rome Govt is straining every political and economic resource in preparation for elections. We are exploring every possibility of obtaining emergency economic assistance. Please refer mytels 17 of January 10, 18 of January 12, 21 of January 12, 31 of January 21, 37 of January 26, 46 of January 30, 53 of February 4, 54 of February 5, 60 of February 10, 71 of February 16, 75 of February 18.

6. We believe we can continue to control situation here and maintain security and integrity this zone for critical period of next 2 months but economic assistance from source other than Rome must be forthcoming immediately and before implementation of recommendations to be contained in Stopford-Hawes report⁵ which will be presented to Washington about March 10. I venture urgent recommendation that General Airey’s TAF cable Nr. 73 of 9 February⁶ be considered immediately on policy level in Dept and his recommendations implemented at once.

7. General Airey has read foregoing and concurs.

Repeated Rome 30, Belgrade 21.

Joyce

1. Charles E. Bohlen.
2. George F. Kennan.
3. See footnote 4, p. 551.
4. Not found in Department of State files.
3. See footnote 4, p. 551.
5. A report by Robert Jemmet Stopford of the United Kingdom and Maurice Levy-Hawes of the Division of Financial Affairs, Department of State, who had visited Trieste in late January and early February to investigate the economic situation there (telegrams 46 and 102 from Trieste, January 30 and March 2, not printed, 860S.50/1–3048 and 860S.00/3–248).
6. Not printed; it contained the following recommendations: that the zone be given a margin of financial independence as insulation from outside political pressure; that the United States and the United Kingdom ensure that the Allied Military Government be in a position to carry through the recommendations of the Stopford-Hawes report on a reasonably long-term basis; that a high-grade economic expert be appointed to the permanent staff of the AMG: and that an officer from Airey’s staff act as a liaison in Washington with the Combined Chiefs of Staff. (Department of Defense files)