740.5/10–1950
The Secretary of State to the United States Deputy Representative on the North Atlantic Council (Spofford), at London1
priority
Todep 66. 1. Acheson, Snyder, and Foster met with Petsche this morning for discussion Fr proposals contained in Aug 17 memo2 concerning mil integration, common budget, and control of raw materials. Petsche considered mil aspects of memo had been taken care of satisfactorily [Page 392] but that further action required on econ and fin side and outlined main features common budget proposal. He emphasized in particular three aspects common budget: first that it was means of establishing genuine partnership among NAT countries; second it wld be means obtaining finan help from countries other than US which because of small size of mil contribution shld make some finan contribution; and third it wld tend to increase rationalization and harmonization of natl def programs. Petsche also emphasized importance common budget as means of stabilizing currencies and controlling inflation.
2. Petsche indicated Fr willingness to take Nitze paper3 as basis discussion in mtgs of Deps altho he expressed reservations on certain points in document. In particular took exception to concept that payments shld be on bilateral basis. He felt this wld create situation comparable to ERP where there was distinction between givers and receivers and that this concept not appropriate in NATO. Petsche also expressed hope MDAP legis cld be modified to permit use free dols and that free dols might be made available thru EPU mechanism.4
[Here follows a summary of discussion covering the French proposal of August 17 on dollar pooling and several suggestions for further revision of the Nitze paper.]
3. Petsche then referred to Fr view that immed action required on raw materials and emphasized importance Fr attached to immed action on prices and seriousness of prospect of renewed inflation. Petsche handed Secy new Fr proposal which is in broad outline consistent our gen approach. Text new Fr proposal and comments being telegraphed separately.5
4. Fr were informed that we had given prolonged interdepartmental consideration to their econ and fin proposals; that we saw certain practical difficulties in them and felt Nitze memorandum offered practical means of getting forward with common defense program as rapidly as possible and at same time meeting objectives of cooperative action and equitable distribution of burden. Since in accordance Nitze memo assistance between countries wld only flow as national programs were being carried out in conformity with overall agreed program, we felt pressure on national programs which Fr sought would result. We indicated that although seeing practical difficulties at present time with Fr proposals, nothing in procedure we had proposed shut door on developments along lines Fr suggested. Petsche [Page 393] inquired whether if it were later possible to obtain agreement on a Continental common budget US wld be prepared to make a lump sum contribution to such common budget, emphasizing beneficial effect such a contribution wld have on integration of European countries. Secy said we wld have to consider further but that suggestion obviously raised very great difficulties.