The Ambassador in France (Bruce) to the Secretary of State
1397. Eyes only for Secretary and Webb. Distribution as directed by Secretary’s office. I am sending this telegram because I am increasingly concerned over reports that in Washington some of our officials feel the French Government is not seriously intent upon rearmament but is putting forward various schemes designed to have others shoulder the larger part of their military responsibilities for North Atlantic defense.
Personally, I think that the French have presented their case to us in a maladroit and confused manner. In an effort to correct unfortunate impressions, I will try to reduce to simple terms what it is they are apparently prepared to do, and the conditions that they attach to their program.
- The French wish to have additional American and UK ground troops
stationed in Europe, a combined command, a combined production
board, a central approval of expenditures (which they inaccurately
call a common budget), combined operations in the purchase and
allocation of key international commodities, and protection of
European currencies from undue depreciation vis-à-vis the dollar and
vis-à-vis each other.
I shall not comment upon the above since some of it has been already agreed to by us and the rest is under discussion.
- In attempting to judge the French attitude toward rearmament, one must take into consideration the personalities of its chief political leaders. Pleven, Moch, Schuman, Petsche and Mayer are, I am convinced, thoroughly aware of the grave dangers confronting the western world and equally determined that France shall do her utmost to organize to avert these dangers. To that end, the Cabinet has committed itself to the addition of fifteen new combat divisions to their present ground forces, over a three year period, provided that proper financial dispositions can be made to equip and maintain them. Moch would like to have ten divisions (five new and five old) brought up to strength and equipped for western defense by July 1, 1951. The effort in Indochina where armed forces of about 150,000 men are operating would be continued.
- With a commitment of 150,000 troops in Indochina and a readiness, if financing can be arranged, to make available twenty combat divisions to Western European defense, the French Government feels that it has offered in proportion to resources the most significant contribution of any NAT nation since the end product desired is combat troops.
- The French also point out that because of their excessively low troop pay and the absence of supporting services for various amenities, they obtain in proportion to the size of their military budget a larger number of troops than is possible elsewhere, and that it is completely unrealistic to consider their effort in comparative dollar terms. In this connection they point out that the US with a pre-Korea annual budget for the Dept. of the Army alone of about 5.3 billion dollars had only eleven divisions, some of them skeletonized and as the experience in Korea has proved, only a small number trained and equipped for combat. During the same period on an annual budget of the equivalent of about 1.7 billion dollars for all three service branches, Army, Navy and Air, the French had including troops in Indochina at least half again as many divisions as ourselves, many of which had been actively fighting for four years in the Far East. At the same time, their internal security situation menaced by a large Communist element in the population has made necessary the maintenance of sizeable contingents of armed civil guards.
- In regard to the French financing such a program, the background is the following: the French tax system admittedly is in many respects inequitable and inefficient, but it does succeed in raising large amounts of revenue in proportion to national income. During the calendar year 1950, it is estimated that the government will take in taxation (including social security taxes) about 38 percent of the national income or about 31 percent of gross national production. This fiscal burden compares favorably with that of the other NAT nations. Petsche proposes to ask Parliament for substantial new taxes which, if granted, would considerably increase the above percentages for the calendar year 1951, and he hopes to find this new revenue in ways which will contribute further to the elimination of inequity in the fiscal system.
- Out of total French Central Government expenditures in 1950 of approximately 2,450 billion francs, 590 billion francs, according to the agreed London definition, are for defense expenditures, representing about 8.8 percent of the national income.
- Moch has preliminarily estimated that he needs a defense budget for 1951 of 970 billion francs. This figure is not firm and has not been accepted by the Cabinet. If it were accepted, it would represent 14 percent of national income.
- The French are already experiencing a strong renewal of inflationary pressures. It is obvious to them even if they adopt the most vigorous anti-inflation measures that the present situation in France permits a three year program of the magnitude they have in mind cannot be realized without outside aid. If it is attempted without such aid the resulting inflation of their currency would be disastrous [Page 1390] to the political and social equilibrium in France which is the sine qua non of a successful defense of Western Europe.
- In certain cables which have come from Washington on this subject, it seems to be assumed that the French envisage such aid as due to come almost entirely from the US. I think this is a misapprehension of the French concept of the most efficient combined use of NAT resources financial and otherwise.
- Pleven has announced categorically that he can make no definite commitments as to the extent of the financing by his government of large future increases in the French military establishment until he is assured that the other NAT countries will subscribe to financing a reasonable share of the common effort. He believes that the French Government will be in an untenable position with its Parliament and people if, while the French contribute a far larger share in military manpower than their partners, and, therefore at least theoretically expose themselves to greater losses in killed and wounded than their allies, they should at the same time have to finance this effort in a grossly disproportionate manner as compared with their partners. If for example twelve or fourteen percent of the national income of France is devoted to defense, and the UK makes available only 8.3 percent, Belgium 5.7 percent and Norway 4.5 percent, the French believe that they will be embarking upon an enterprise doomed to fail through inflationary pressures which many of the other NAT countries will be able to disregard to the added disadvantage of the French economy.
Consequently the French do not wish to finalize any figures in detail until they know whether their medium and long term efforts will have to be made essentially on a national rather than on a cooperative basis. They also do not wish to indicate whether other NAT countries might contribute to France or vice versa until a common authority under NATO has made definite assignments in troop strength and production to each country. It is likely that such assignments would bring many of the countries up to a level of military expenditures approaching those contemplated by the French for themselves.
Only then could the financial share of the common effort be estimated for each country.
- As to the high priority production program the French are going ahead in letting contracts. Although we have had difficulty to date in extracting from them the information required by Washington, I believe we will obtain it next week. (In connection with this program because of the terms of the Congressional act appropriating MDAP funds, the anomaly seems to appear that a nation contributing both large troop strength and production and therefore taking on a [Page 1391] disproportionate share of non-fabrication expenditures is actually penalized as compared with a nation making the bulk of its effort in the manufacture of military items. The French still hope to obtain our assent to non-fabrication expenditures being taken into account by us in granting MDAP assistance and this has held up the submission of a financial proposition on the high priority production program.) Personally I have doubts as to the wisdom of their manufacturing some of the present priority items, but since decision in regard to them lies in the military field, I have no comment to make on that subject, except to say that as is no doubt the case in our own and other armies this will result in waste, duplication and loss of efficiency in the production of weapons which ought to have been standardized.
- In conclusion, it is my own belief that unless the economic and financial burden of rearmament can be equitably shared either all the gains achieved through the Marshall Plan in France will be cancelled out by an inflation the consequences of which expressed in deep social unrest and even revolt will make the effective rearmament of Europe impossible, or the French Government will be unable to obtain from the Parliament the necessary ratification of its rearmament program.