Office of the Historian

ECA Telegram Files, FRC Acc. No. 53A278,

Paris Repto, Telegram

The Acting United States Special Representative in Europe Under the Economic Assistance Act of 1948 (Katz) to the Administrator for Economic Cooperation (Hoffman)

secret
Paris, March 31, 1949—1 p. m.

Repto 3407. For Hoffman for FACC. OSR report on impact on ERP of proposed military assistance program to Western Union countries finished today and being pouched soonest.1 Important conclusions as follows:

1.
Proposed military assistance program would not jeopardize ERP. On contrary, MAP will be important factor in developing level of confidence in future Western Europe necessary to insure continuing viability beyond end ERP in 1952.
2.
Physical capacity for proposed additional production available. This production probably too small to cause serious diversion manufacturing facilities, labor, fuel and energy from recovery program. Electrical energy tight in continental Western Europe and requires better survey for complete answer, but believe problem manageable.
3.
Since amount dollar aid for 49/50 requested by ECA minimum necessary for satisfactory rate economic recovery Western Europe, any dollars required by Western Union countries for necessary dollar costs of imports raw materials, machinery etc., under MAP should be [Page 258] met through additional amounts of dollar aid. Available data indicate suggested 100 million to 150 million dollars sufficient for fiscal year ’50.
4.
Burden increased military production on Western Union countries national budgets is of manageable proportions, but will call for some additional sacrifice, probably new taxes. See clause (a) of paragraph 5, below.
5.
Following three elements of MAP require careful attention now and in future.
(a)
Financial situation in Western Union countries still critical so imperative increases in military expenditures must be met from noninflationary sources.
(b)
Financial arrangements for transfer European produced military equipment under MAP for first year should be made outside OEEC intra-European payments plan on ad hoc basis.
(c)
After initial allocation of spare parts for American equipment transferred to Europe is expended, there will be continuing requirement for spare parts involving either substantial dollar drain on Western Union countries, or development European production almost from scratch, which will not be easy.

Sent Washington Repto 3407; repeated London Repto 432 for Finletter and Douglas; Brussels Repto 167 for Blaine2 and Kirk; Hague Repto 175 for Valentine3 and Baruch (please show Harriman upon arrival).

Katz
  1. Not found in Department of State files.↩
  2. James G. Blaine, Chief of the ECA Mission in Belgium.↩
  3. Alan Valentine, Chief of the ECA Mission in the Netherlands.↩