Foreign Relations of the United States, 1950, Western Europe, Volume III

740.5/10–550

Memorandum of Conversation, by the Director of the Policy Planning Staff (Nitze)

top secret

[Washington,] October 5, 1950.

Participants: Secretary Acheson, General Marshall, Secretary Snyder,¹ Ambassador Harriman, Messrs. Foster, Martin and Nitze.

[Here follow General Marshall’s brief description of drought conditions in Yugoslavia and comments by Marshall and Secretary of State Acheson on recent efforts to develop a European integrated defense force.]

Mr. Acheson then described his conversations with Bech of Luxembourg and Lange of Norway and others who felt that France was the key to the entire scheme for the defense of Europe. They were worried as to France’s political and economic strength, and had some doubts as to the burden which France could stand. Secretary Acheson said that he felt the French should not be pushed too far. France must be strong to be a strong ally. He said that General Marshall had asked his people to go over the French military program and he thought that Treasury and the other interested agencies should go over the French financial position and that then the two analyses should be combined. Maybe we were contemplating too large a military program. It was for Secretary Marshall to determine what the minimum essential military program should be. He then asked how the others felt we should move on this problem. He said that he imagined the first step was to get further information as to the figures from the French technical people who were arriving on Friday (October 6).

Secretary Snyder said that given the correctness of the figures, the question of what we should do for others would still remain. He said he would be reluctant to take on additional financial commitments at this time. He said that the tax bill was coming up in November, and he thought we were going to have a very difficult time with it. It had been extremely difficult even to get the $5 billion increase in the last session. Pressure from the Congress had really been to get through tax reduction measures rather than tax increases. The Congress had not been serious at all about the excess profits tax bill. He was fearful of the reaction after the reassembling of Congress if the Congress felt that we were undertaking large new commitments with respect to the budgetary deficits of other countries.

Mr. Foster said he agreed that we should go slow lest we make too large a commitment to the French. We do not as yet have a balance of payments analysis, nor have we obtained a full picture of the requirements of other countries. He thought, however, that it was essential that we maintain the momentum of European defense efforts and that, perhaps, the answer could be found by means of a series of partial answers. Mr. Snyder said that it would be just as serious to find that we could not go through with the program as it would be to not start it in the first place. He said that if we should go through with the full program, we would be not in the insurance phase of a military buildup but in the phase of actual preparation for war.

Ambassador Harriman said he thought that there had not yet been any real trimming in the French military expenditures. He thought that they had too much in for their naval military expenditures. He also doubted whether assistance which would merely build up their gold reserves would be effective. Furthermore, he thought it was regrettable that we did not have the time to take up all of the estimates on a multilateral basis. If that work had been done, we could judge what the whole bill might be. He suggested that we might at least put together the total bill for the United Kingdom, France, and Germany. He pointed out, however, that there were 280 million people in Europe; that the national income of Europe was half of that of the United States; that the military program of the size we had all been contemplating simply could not be done without assistance from the United States.

Secretary Snyder asked whether the Europeans to whom Secretary Acheson had talked had indicated how seriously they would take the raising of the French debt limit. Ambassador Harriman pointed out that inflation was latent in France. Secretary Snyder said that the French were not any closer to inflation than we were.

Secretary Acheson said that there were some clear time indications. U.S. High Commissioner McCloy said that the east Germans now have 50,000–60,000 well trained men and that they could easily triple this force in a very short period of time. Secretary Marshall pointed out that an effective force could be developed on the principle of having one thoroughly trained man between two men with relatively little training. He said it would be regrettable therefore if progress cannot be made at the Defense Ministers’ meeting in October.

Secretary Snyder said that a number of labor people talked to him when he was in France and had compared a recent wage increase of 19¢ per hour in the United States with total wages of 22¢ in France. He thought this indicated that someone had gotten at the French labor people with a view to putting us in a position where we would have to finance the entire amount of the increased French military expenditures.

Ambassador Harriman spoke of the need of careful screening of the French military program. He stated that Pleven would welcome pressure on their military to cut out low priority items. He also raised the question of the French railroad deficit and the French war damage indemnity payments.

Secretary Acheson said that our problem was to weave together a sensible program in the light of the various considerations that had been raised. We would be in a pretty hopeless position if Europe should disappear.

Secretary Snyder said that we had equally serious problems with the United Kingdom. Their reserves were rising very rapidly and they were now talking of buying United States bonds in New York. He agreed, however, that most of the improvement in the United Kingdom reserves was balanced by an increase in United Kingdom liabilities in the sterling area.

Mr. Martin cautioned against any type of commitment which would in effect be a blank check. Many people are already conducting speculations against the dollar. Mr. Snyder pointed to the recent action with respect to the Canadian dollar, the possible revaluation of the Australian pound and to the possibility that even the pound sterling might be revalued. He said that all this made it appear that the dollar was weakening, which increased his problems of debt management.

Secretary Acheson said it was clear that we had serious problems. We must be frank in looking at them. Our first approach must be to marshal all our facts and then see whether with these facts before us we could arrive at an intelligent approach. Ambassador Harriman said that we should face up to the reality that if we were to obtain the number of divisions contemplated, we should have to give the Europeans assistance.

Secretary Snyder returned to the difficulties of the tax bill. He foresaw a genuine battle in persuading the Congress that we would have to build up defense forces. Ambassador Harriman said that the defense of Europe was an integral part of the defense of the United States. The whole thing must be sold as one package. Secretary Snyder said that before going to the Congress, the administration must have a unified position with the economic problems tied into the whole defense problem.

Secretary Acheson asked whether it was necessary for the French to put in their entire military budget at once or whether it would be possible for them to put in a supplemental budget later. Mr. Martin said that would be virtually impossible under the French system. Secretary Snyder said that perhaps they would have to develop the type of leadership which could make it possible.

The meeting ended with Secretary Snyder asking whether it would be possible to have another meeting on Monday afternoon. He felt by that time we should have a better knowledge of the French figures.

1. Secretary of the Treasury.