860S.5017/9–2548: Telegram

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


642. Following for despatch to AMG through Combined Chiefs already approved by Dept and under FonOff consideration: References:

Taf 144, 142, 140, 131, Fat 56.1

“1. As we understand situation, modifications AMG price policy announced Sept 12 have in effect been forced by reversal of attitude Ital FonOff which as recently Sept 20 reaffirmed opposition to continuance of political prices in FTT. (USPolad Despatch 195 Sept 25).2 Financial and economic agreements entered into by zone with Italy basis Annex VII of Treaty subjects administration zone to a considerable extent to Italian policy. However, when such policy marked by vacillation (in this case resulting from divergence of views within Ital Govt) which occasions similar vacillation in AMG policy, effectiveness of AMG administration in the zone and its ability discharge its responsibilities under ERP cannot but be impaired.

We not aware of any development of major significance since July 31 which would warrant Ital Govt reversing itself in matter subsidies. Retreat by Ital FonOff in face pressure from Camera not only permitted Camera to circumvent announced AMG policy this case but also may well prove precedent subsequent attempts by Trieste groups similarly influence policy by appeals Rome when they feel announced AMG policy does not serve their interests.

2. Subject your views, FonOff and State Dept would be prepared instruct UK and US Embs Rome inform Ital FonOff in any manner they might deem appropriate view of US–UK Govts that effectiveness Ital Govt and AMG jointly to deal coordinated manner with economic and political issues arising zone cannot but be reduced when policy marked by indecision and vacillation and UK and US particularly concerned when, as this instance, vacillation results appeals to Rome by groups in Trieste. Itals would also be informed that UK and US Govts would expect that courses action jointly agreed between Italy and AMG in the future will be pursued their intended ends barring unforeseen circumstances sufficiently significant require reappraisal of policy.

3. Prior receipt Taf 144 we were discussing but had not finally agreed on the following views: No useful purpose would be served by [Page 579] refusing Camera demands re Fat subsidy provided Ital Govt furnished necessary funds, although we would not have favored request to the Ital Govt for such funds. If additional funds were not forthcoming we would have wished your position remain as stated para 4 Taf 142.3 If you had viewed seriously shortening of period during which Sept 12 subsidy level could have been maintained as result of your decision for higher subsidy for milk than first contemplated we would have supported your seeking from Ital Govt additional funds up to an amount representing this differential in milk subsidy.

4. Foregoing views were based (with advantage of hindsight) on our opinion no concessions to Camera in addition those implicit in July 31 agreement appeared necessary since Ital Govt had not yet made concrete offer provide sufficient funds meet Camera demands. We do appreciate that at time Camera approached Rome you may have felt probabilities were Itals would support Camera thus placing you most embarrassing position refuse Camera demands. Since Itals did not support Camera with concrete offer we could not understand why the position on the milk subsidy was modified as reported in Taf 142 particularly since impact this modification was apparently to shorten by some months period during which you would be able maintain level of prices announced on Sept 12.

5. However, in light of para 7 Taf 144 question of standing firm against both Camera and Ital FonOff appears no longer to be issue. We understand effect of your decisions on milk and fats is to shorten period during which Sept 12 subsidies can be maintained. If in your view this would warrant approach to Ital Govt designed elicit additional funds to extend modified subsidies through Dec 1949 we will authorize US and UK Embs support you in such approach. We should suppose that Ital Govt might be more likely take action provide necessary funds should such approach be prefaced by representations along lines para 2 above.”

Repeat to AmEmbassy, Rome 2944

  1. None printed.
  2. In this despatch, not printed, Joyce forwarded to the Department a copy of his memorandum of conversation with Guidotti on September 20 (860S.5017/9–2548).
  3. Paragraph 4 reads: “Further reductions in milk and fat prices would only be considered if Italians offered to furnish the extra funds necessary to maintain them until 30 June 1949 without reducing the 15 month period for which they have already undertaken to finance retention of prices announced September 12.”