ECA message files, lot 53 A 278, box 84, Paris Torep: Telegram
The Administrator for Economic Cooperation ( Foster ) to the Office of the United States Special Representative in Europe, at Paris 1
Torep 1438. Reference Repto 915, rptd Frankfort Repto 142.2 Fol are our preliminary views policy proposed reftel:
1. Position appears discard criteria under which aid is and has been allotted without developing adequate substitute. Under these circumstances we wld not wish institute rigid policy withholding further allotments. We cld hardly deny aid on basis lack defense contribution since as pointed out Toeca 208 rptd Paris Torep 2933 this cld be selfdefeating. Further FedRep has in effect been using this year’s ECA aid to help pay EPU deficits indirectly. Possible that imbalances between Ger and OPC’s may persist for some time and that this may not be undesirable trade pattern during early years rearmament effort.
[Page 1623]2. Our projection Ger balance of payments with dollar area and EPU do not provide any hope that Ger can get by with aid figure of $270 million. Even if Gers take all necessary measures to bring payments situation under control, we feel she will require at least full S/M aid and perhaps more.
3. We agree wholeheartedly nr criticism FedRep failure to carry through pledges made to MB and concur view that further allotments shld not be made until Gers take positive steps to minimize EPU deficit. Hope we can accept MB recommendations as condition for further aid. However, if these recommendations appear inadequate we must step in ourselves and lay down our own conditions.
3 [sic]. While our immediate aim is to bring the German payments position more nearly into equilibrium, we must also (a) increase Ger defense production as rapidly as possible, and (b) avoid complete breakdown of trade liberalization. We must therefore avoid such measures as wld increased unemployment and hamper Ger production through lack imported raw materials, or which wld through chain reaction cause complete abandonment liberalization. This will require careful balancing of additional aid and the need for additional production against the urgent necessity of taking drastic measures to reduce the EPU deficit.
4. Bissell, Porter and Prud’homme discussed Ger EPU crisis with Stikker and Marjolin Wed. Stikker stressed special dangers of situation to Neth and expressed fear that any permanent abandonment by Ger of trade liberalization might cause chain reaction throughout Eur which wld not only cause abandonment of liberalization but which wld seriously affect defense efforts of NATO countries.
5. Awaiting Mission’s comments.
- This telegram was cleared by Deputy ECA Administrator Bissell, Assistant Administrator for Program Porter, and Hector Prud’homme, Director of the Office of German Economic Affairs; sent through the Embassy in Paris, and repeated to Frankfurt for McCloy and Cattier.↩
- Dated February 27, p. 1618.↩
- Supra.↩