Editorial Note
In telegram 1402 of September 1, the Embassy in France transmitted to the Department the translation of a note from the French Foreign Ministry concerning the worsening French financial crisis. According to the French note, a number of basic indices, including balance of trade, gold holdings, French position in the EPU, etc., confirmed the fact that, with an inevitable delay, the effects of the Korean crisis and of rearmament policy had begun to make themselves felt upon the French economy in an adverse way. It was most certain that budgetary and fiscal policies would have to be reviewed and credit controls initiated in order to check the mounting threat of rampant inflation. “But measures which might be taken in these different fields would be insufficient if not complemented by action in the field of imports.’ France could not continue to fulfill its many military and political commitments in both Europe and Asia unless it enjoyed sufficient “external assistance” for its purchases in the dollar area. In order that the French Government be able to decide on the pace at which it could and would pursue its defense efforts, the note continued, it was “indispensable” that it be informed by the United States in the very near future of the amount of financial assistance upon which it could [Page 414] count through June 30, 1952, and that “in appropriate form” it be assured that the Truman administration, subject to Congressional approval, was disposed to continue economic assistance “in adequate amount” beyond that date. “It goes without saying that these bilateral assurances would cease to be necessary in event that, in conformity with proposals presented by Fr Govt in Aug 1950, a multilateral system for equitable sharing of defense costs were to be adopted by Atlantic community.” In conclusion, the French note stated that as France was unwilling to jeopardize its current policy of granting authorizations for imports from the dollar area, it would continue to deliver import authorizations on the same basis for the first quarter of fiscal year 1951–1952 despite the fact that no allotment of economic aid from the United States had yet been received for this period. France was basing its action on the spirit of the Franco-American rearmament talks which had taken place during the latter months of 1950. (751.5–MAP/9–151)