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

840.50 Recovery/4–848: Telegram

The Ambassador in Italy (Dunn) to the Secretary of State

urgent

Rome, April 8, 1948.

1581. We regret that delay in receipt of Depcirctel, March 25,¹ with reference to the findings to be made in respect to CEEC countries as required by subsection (B) of Section 15, has resulted delay in reply.² In connection with Italy our findings are as follows:

(1). Italian Government is taking all favorable measures to promote industrial and agricultural production with view to rendering economy eventually independent of extraordinary outside assistance. As result of government stimulation and measures aimed at expanding industrial production, the level of Italian industrial production in second half of 1947 rose to 78 percent of 1938 from 62 percent in first half of the year. In recent weeks, notwithstanding the difficulties of programming and planning during period of intense electoral activity, Italian industrial production is reported to be expanding slightly. Special lines of credit have been opened by government for mechanical and electrical industries. With respect to agriculture, and especially cereals, government has taken measures to facilitate the distribution of fertilizer and to provide favorable conditions for crop collections. As a result area planted to wheat this year has increased and the grain harvested may be expected to expand from 5 to 20 percent. To assist agriculture in the south and in Sicily, the government has established credits approximating 60 billion lire for irrigation projects, reclamation, control of erosion and acquisition of seeds.

(2). Present government since it took office in June 1947 has adopted and put into execution numerous anti-inflationary measures which are having the effect of stabilizing the currency, holding prices down, stabilizing wages, increasing tax collections, and narrowing percentagewise the gap between government collection and expenditures. By adroit management of a system of imports known as “Franco-Valuta”, hidden private assets abroad have been applied to purchase of consumer goods. The flight from the lira has been arrested, hoarding has decreased, and the supply of goods has increased in relation to the monetary circulation.

(3). Italian Government has been among most active in promoting inter-European cooperation. It has entered trade agreements designed to stimulate exchanges of merchandise and as time goes on has advanced toward clearing agreements from the primitive barter and reciprocity arrangements of earlier last year. It has important trade agreements with France, Great Britain, the Low Countries and Switzerland, as well as with a number of non-participating countries. It has obtained a large credit in Argentina to acquire foodstuffs. It has entered a commitment with French Government to establish a Customs Union which is to be developed into an economic union, providing eventually free flow of capital, goods and persons between the two countries, increased efficiency of production and a greatly expanded domestic market. Representatives of Italian economic associations, such as the Confederation of Industry, Confederation of Wine Growers, et cetera, have talked with like organizations in France with a view to increasing exchanges and remove obstacles to trade. On Italian initiative a manpower conference was held in Rome in January of CEEC countries to examine the requirements of labor deficient countries and the availabilities of workers in labor surplus countries. Without being a member of UN, Italian representatives have participated in work of sub-committees and study groups of ECE. Without having a vote, the Italian Government sent delegation to Habana ITO Conference.

(4). Italian Government has taken necessary legal action to make available to the Italian economy the private holdings in the US of Italian citizens. Similar arrangements are also being worked out with regard to Italian assets in Great Britain. Italian Government has had to use up its own exchange and gold reserves to an extent much greater than prudence would dictate, and the Italian Government now with the assistance expected, should be encouraged to rebuild its reserves.

Dunn

1. This circular telegram, not printed, was sent to the capitals of the European countries participating in the European Recovery Plan. It explained that both the Senate and the House bill required a bilateral agreement with each participating country, but that for a three-month interval after enactment, the Administrator could perform all functions with the given country provided: (1) that the country adhered to the purposes of the Act and announced intention to conclude a bilateral agreement; (2) that the Administrator found the country to be complying with the relevant provisions of the Act. This included continuous effort of the country to accomplish a joint program through multilateral undertakings for which the CEEC meeting in Paris appeared to establish a basis.

   It also included immediate finding by the Administrator (or until his appointment by the President): (1) that the country was promoting industrial and agricultural production so that it would be independent of emergency outside aid; (2) that it was taking financial measures to stabilize its currency and maintain a valid rate of exchange and balance its budget; (3) that it was cooperating with the other countries in increasing the interchange of goods and reducing trade barriers; and (4) that within the Program it was making efficient use of its own resources.

   A cabled summary statement as documentation for such a finding when the Act had been passed was requested, and reference to earlier reports as supporting data (840.50 Recovery/3–2548).

2. In telegram 219 of January 16, not printed, Dunn had reported that Italy had most enthusiastically embraced the Marshall Plan, and he listed 18 programs and actions undertaken as measures of self-help and cooperation (840.50 Recovery/1–1648).