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

ECA Telegram File: FRC Acc. No. 53 A 278: Paris ECATO: Telegram¹

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

confidential

[ Washington ,] April 21, 1950—8 p. m.

Ecato 415. Reference Toeca 415.²

1. Appreciate details given reftel on position adopted by Petsche³ in current counterpart discussions.⁴ Since you indicate that French have agreed in principle to proposal of ECA, we assume seriousness of Petsche’s reported objections should be discounted. You may nevertheless be interested in ECA/W reactions to his comments; whether these views should be conveyed to French is matter your discretion. Your comments welcomed.

2. We are certain that your presentation of counterpart proposal did not warrant Petsche’s inference that ECA is now interested in encouraging additional expenditures in France. Nor does proposal to expend 20 billion francs for certain “critical sectors” justify accusations of “demagogy” or raise threat that we are leading France on royal road to bankruptcy. Contention that this proposal involves additional foreign intervention in domestic affairs of French is also without foundation. ECA interest in pattern of investment, and earmarking of counterpart funds for specific investment purposes, is not significantly different in kind or degree from types of US-French relations involved in previous counterpart negotiations on credit controls, sterilization or release of counterpart funds, etc. Further, it is fully consistent with terms of Economic Cooperation Agreement.

3. ECA has obvious and legitimate interest in obtaining most efficient utilization of French investment resources to promote French and European recovery. Present concern over pattern of investment has always existed, and success of Government in achieving overall financial stabilization now permits increased action to be taken in this field. You might indicate to French that in several other participating countries ECA’s interest in counterpart investment projects has gone to extent of approving releases of funds only on basis detailed examination of specific projects involved. Existence of Monnet Plan in France makes such procedure less necessary, but ECA will continue to elicit cooperation of French in specific cases where it feels some change in investment plans is desirable. We recognize fully, of course, that Parliament must give ultimate approval to overall investment patterns.

4. It seems probable that Petsche’s opposition may result in part from lack of sympathy with our support of welfare and other measures identified with other political and social groups, as well as from his predominant concern with financial stability. This may suggest necessity of enlisting additional support for our investment objectives from other interested groups such as Monnet Plan authorities or noncommunist labor unions.

5. As indicated para 6 Ecato 391,⁵ we believe that position of ECA would be strengthened if we can propose specific reductions in other investment categories concurrently. Frequently-voiced argument that French cannot cut investment program even in admittedly over-expanded sectors because all projects are now under way is not persuasive. During course of construction, opportunities must often exist to cut down size and expense of project. Your views requested whether this may necessitate greater familiarity with details of French investment plans on our part.

6. We agree with your position final para reftel that critical sector approach should not degenerate into elaborate shopping list and must be consistent with need for basic adjustments in French economy even though latter are politically unpopular and very difficult to accomplish. We do not believe, however, that tentative list of critical sectors outlined in Toeca 397⁶ is subject to this criticism. ECA support of workers’ housing, cushioning of unemployment, productivity, agricultural investment, etc. is not based on desire for political popularity but on conviction that these measures would encourage social stability and promote economic recovery along lines essential to realization of ERP objectives in France.

7. In summary, your specific counterpart proposal and broader policies, which lie behind it do not appear open to criticisms made by Petsche, nor should they necessarily involve new problems in relations with French. Position which you have taken with French as outlined in reftels has our full support.

Repeated to OSR as Torep 3324.

Foster

1. Federal Records Center accession no. 53 A 278 is a serial master file of incoming and outgoing telegrams of the Economic Cooperation Administration for the years 1948–1951.
2. Not printed.
3. Maurice Petsche, French Minister of Finance and Economic Affairs.
4. For documentation on discussions in December 1949 with French officials regarding counterpart funds, see Foreign Relations, 1949, vol. iv, pp. 682 ff.
5. Not printed; Ecato 391, April 14, recorded ECA’s approval of a proposed shift of emphasis in counterpart discussions from efforts to promote internal financial stability in France to efforts toward closer French-American cooperation in certain critical sectors.
6. Not printed.