The Ambassador in France (Caffery) to the Secretary of State
855. For Lovett. Jean Monnet1 has given me the following strictly confidential comments in regard to the French supply situation and its relation to the proposed $150 million Export-Import Bank loan (Department’s telegram 426, February 11)2:
- Monnet summarized two telegrams received from Bonnet reporting his conversations this past week with you and Martin3 regarding the proposed loan. The telegrams indicated that “Bonnet was rather fuzzy about the magnitude of the problem and the importance of the time element”. His telegrams indicated that the prospects for the loan were not good and Bonnet attributed Martin’s reluctance, not only to the Administration’s disinclination to introduce a new factor into the picture at this critical period in the ERP hearings, but also to Martin’s desire to protect the specific position of the Eximbank at a time when its role in the ERP administration was under consideration by Congress.
- Bonnet in a subsequent telephone conversation with Monnet had
indicated, however, that the French Government should continue
to press for the Exim Bank
loan. He made two additional comments which Monnet regarded as
very significant and as providing for the first time a basis on
which the French Government could do specific planning for the
- The action of the Senate Foreign Relations Committee in voting out the $5.3 billion bill on a one year basis had established a ceiling and under no circumstances would France’s availabilities from ERP sources be more than its proportionate share of this total as might be anticipated from the Department’s country studies.
- It appeared likely that final action on the ERP bill would be taken about the middle of April or shortly thereafter.
- The conclusions Monnet reached from the foregoing are (a) that it defines France’s short-term international financial problem [Page 627] as being one of financing March arrivals in France of those essential commodities not covered by interim aid funds plus all April arrivals except wheat and (b) that some additional French dollar resources will be required to supplement ERP funds if the French recovery program is to go ahead on the basis planned by the French (please see section 1 my 813 February 13, and 832 February 14).4
- Re (a) the planning commission is proceeding to schedule an import program for supplementary needs in March and for April arrivals, the latter being uncovered financially except for US wheat shipments under the balance of the interim aid program. The commodity schedule, quantities and costs, should be known to the Embassy shortly after consideration of the program this Thursday by the Interministerial Import Committee. From the projection made by the French, as transmitted my telegram 705 February 7,5 it may be anticipated that the uncovered deficit for April will be neighborhood $120 million. To this must be added the supplementary March imports which include imports crude petroleum beginning March 20, additional cotton imports and purchase of key industrial raw material items whose stock position is approaching exhaustion.
- Monnet, in considering the alternatives, was of the opinion that France simply could not afford a hiatus in its import program. A dip in industrial production is already occurring and economic retrogression will become serious unless new orders are placed abroad in the near future. An import “gap” would not only lead to large-scale unemployment with social unrest, but would defeat that phase of the stabilization program which assures a large flow of essential consumers goods and a stock of goods to be available to farmers for their commodities.
- Monnet, who spent some years in Washington, understands very well the Administration’s reluctance to go ahead with the Exim Bank loan if it would jeopardize the ERP presentation or delay its enactment. Furthermore, he recognizes the danger that announcement of such a loan at this time might lead Congress to reduce the ERP appropriation by the same amount with subsequent reduction in the allocation of ERP funds which otherwise would be available to France.
- The conclusion he reaches, is that the only alternative to an Exim Bank loan would be the hypothecation to the Federal Reserve Bank of New York of a portion of the remaining gold reserve of the Bank of France. He said that Mayer and Monick6 would be very reluctant to take this step because it would increase public apprehension at a time when the stabilization efforts require an increase in public confidence.
I have asked Monnet to submit to us along with the import program a complete analysis of France’s balance of payments position during [Page 628] March and April and upon receipt of these documents it should be possible to measure the magnitude of the problem as well as to consider what steps we could take to assist, as, for example, by expediting US Army payment, and the second distribution of German looted gold.