Foreign Relations of the United States, 1949, Western Europe, Volume IV

ECA Telegram Files, FRC Acc. No. 53A278, Paris Ecato: Telegram

The Acting Administrator for Economic Cooperation (Foster) to the ECA Mission in France

confidential

Washington, October 27, 1949—8 p. m.

Ecato 930. Reference Toeca 1295.

1. Contents reftel have been discussed with interested Washington agencies and following are agreed views.

2. We understand French proposal to “regularize” at this time 30 billion franc advance made in August means that French have raised 30 billion francs from their own resources with which to cover investment expenditures during month of November which were originally scheduled for ECA counterpart financing. In this respect, it is matter of indifference whether no release is made and French cover their investment expenditures from own resources, as we understand is now proposed, or whether we accept repayment of 30 billion francs from the French and, in turn, release the same amount for the scheduled investment expenditures in November. French proposal to cancel obligation of 30 billion francs is in effect equivalent therefore to release of counterpart funds. If proposal is accepted, ECA would presumably receive list of investment projects totalling 30 billion francs which will be financed during month November and possess breakdown total investment expenditures which corresponds to sum which has actually been released for this purpose.

3. If our understanding of regularization is correct, then we perceive no objection to French proposal contained Toeca 1295, provided that you are satisfied that French have not, in fact, been able to raise the necessary funds only by resort to inflationary financing. We do not have sufficient information on present nature and magnitude of inflationary financing to determine whether or not this is the case. If you feel that the French Government has actually raised the funds by inflationary means then we believe that the Mission should decide whether it wishes to raise the issue of French breach of their anti-inflationary commitments at this time. It may be technically impossible to refuse “regularization” if it is offered; the appropriate procedure would probably have to be to accept the French offer of 30 billion francs as a regularization of the August advance and announce now that we would not concur to an additional release for November investment expenditure. French would probably withdraw their offer, however, rather than face this alternative. Question of appropriateness of unilateral French or concomitant press releases and grounds selected to explain situation to public will depend your final decision on acceptance of regularization. Please advise.

4. We believe that this decision is essentially a political one which can only be made by the Mission on basis your appraisal of the most appropriate time for enforcing anti-inflationary commitments and best means of utilizing our bargaining position. Same considerations apply to question of bringing to bear ECA influence, working through counterpart fund, on present discussions 1950 French budget. We share your concern about the continuing deficit of 1950 French budget and appreciate your extensive reports on this subject. Please pass to OSR.

Foster