The Secretary of State to the Embassy in the United Kingdom
829. Please deliver following personal message from Secretary to Bevin in answer to Bevin’s message contained Deptel 705, February 14:1
- “1. I fully share your view of the importance of Germany to the problem of the development of closer European association. I hope it will be possible to arrange a meeting, together with the French, sometime this spring for a fresh examination of current European problems. In the meantime I feel it is of first importance that Germany be encouraged to participate fully in liberalization measures. The success of our efforts in this direction will, of course, be dependent upon the willingness of other countries to make reciprocal arrangements regarding Germany.
- 2. Progress toward the solution of the specific problems of the establishment of the proposed European Payments Union or, failing that, some more limited scheme, cannot in my view await that review. I am very encouraged by your opinion that progress on the wider European plan should be possible. I realize that the plan presents the United Kingdom with very real difficulties in the light of its responsibilities to the sterling area, but I feel sure that a way can be found for the United Kingdom to join a Payments Union based on the principles discussed in the OEEC without too serious a financial risk. I firmly believe that a Payments Union with the participation of the United Kingdom is so much more desirable than the more limited proposal that every reasonable effort should be made to reach agreement on the broad basis before resorting to the less inclusive arrangement.
- 3. If, however, after further examination it should become clear that agreement on a plan in which the United Kingdom would feel able to participate were not going to be possible, I should feel [Page 633] that we must go ahead with the development of a trade and payments liberalization scheme among the continental countries.
- 4. If, contrary to my hope, it should be necessary to go ahead on this more limited basis, I feel it of great importance that Germany be included from the beginning and that any plan be formulated in such a way that the eventual participation by the United Kingdom is not precluded. By this I mean not only that there should be agreement by the participating countries to extend membership to the United Kingdom, but that the plan should be formulated with that in view.
- 5. I am sure that I do not need to reaffirm to you my strong conviction that the countries of Western Europe, including both Germany and the United Kingdom, must act together if we are to succeed in finding a lasting solution to the German problem.”
We will hand British Embassy a copy of this message today stating that we have instructed you to deliver it to Mr. Bevin in London.2
In handing British Embassy a copy of the Secretary’s reply we propose to refer to Britsh proposal reported in Frankfort’s 1486 of February 17,3 repeated London as 63 to include Germany in sterling transferable account system and to point out that Mr. Bevin’s position against making any decision at this time on the relationship of Germany to Finebel because of effect on EPU negotiations appears to be inconsistent with the British proposal in Frankfort to make immediately such a major change in the position of Germany with respect to her trade and payments arrangements. We propose to refer to Mr. Bevin’s statement that British Government is making every effort to reach agreement on a broad European payments scheme, to reiterate Secretary’s belief that a Payments Union including all OEEC countries is much more desirable than any more limited proposal and to inquire whether in the light of this agreement on our common objective it would not be desirable for British to hold in abeyance their proposal with respect to Germany since, in our view, such a major change in German status would tend to complicate and make more difficult agreement on a European Payments Union. As indicated in ECA telegram Ecato 169 to Frankfort also repeated London,3 we would not object to reasonable modification present payments agreement between UK and Germany. We do not in any sense wish transfer discussions to Washington and shall point out that we consider London, Paris, and Frankfort to be the proper places for negotiations on the various aspects of this matter.
Paris for Ambassador and Katz, Frankfort for McCloy.4
Sent London 829; repeated Paris 757; Frankfort 1180.