No. 189

740.5/11–1351: Telegram

The Ambassador in France (Bruce) to the Acting Secretary of State 1

2827. Pass Defense and Bissell. PriMin asked Acheson, Harriman, Pace, myself to dinner Sunday night with himself, Queuille, Bidault, Mayer, Monnet, Bonnet. Acheson had been ill and unable attend but all others present. Schuman joined us after dinner.

Mayer stated French financial situation had deteriorated to point extreme danger which threatened France’s ability to carry out expected share NATO military commitments, as well as financial solvency country itself. Without definite commitment within few days of sufficient Amer aid or US military expenditures in France to solve dol balance payments position military program wld have to be reduced materially and dol import program immed curtailed from 1 billion to 500 million dollars. Even the 500 million program assumes Amer aid around $200 million and US military expenditures [Page 440] of $130 million. Such a cut wld gravely affect production for military purposes and have industrial, econ and social consequences of far-reaching and harmful significance.

Mayer said that new stringent credit regs were already proving effective, causing bitter opposition from various interests affected. Gasoline and tobacco taxes had lately been raised and were expected to result in 70 billion francs of added revenues, altho the gasoline tax was being contested in Parliament. He anticipated asking for an addit 200 to 300 billion francs in taxes which if granted wld make the tax burden in France even heavier than that in Great Brit.

Together with reduction in imports, Mayer intends to submit a program entailing cuts in reconstruction and investment, NATO contrib and Indochina operations in an effort to attain a budget balance by tax receipts and public borrowing. The latter source of revenue is strictly limited by lack of confidence in the value of the currency and a reduction in econ activity wld make borrowing nearly impossible. Alteration in the terms of trade and other factors render it extremely unlikely that France will reach its predicted dol export goal for 1952. Tourist dols are going largely to black market. Had it not been for rearmament program and tremendous rise price raw materials fol Korean war, France shld have had satis dol balance payments by 1952.

Bidault did not comment at any length. He said he was of course dependent on the FinMin for funds and that those in prospect wld make it impossible for him to carry out any satis rearmament program. For instance, altho France wld have ten divisions for NATO by end this year he cld only maintain seven of them next year.

Schuman, Queuille, Monnet, Bonnet did not advance any views, but agreed with Mayer’s presentation.

Pleven endorsed all Mayer’s observations and frequently responded himself to penetrating inquiries by Pace and Harriman. He also said that on Friday this week gasoline tax will be subj interpellations in Parliament and will lead to debate on whole polit and econ position of France. The govt will propose a vote of confidence on its policies next week and if defeated will of course leave office.

Pleven, like Mayer, particularly stressed the drain resulting from French efforts in Indochina were requiring expenses in French military budget of about 400 billion francs for calendar 1952 cld not possibly be met under present condits if the country was likewise to make its proper contrib to NATO. (Pleven told me privately that Mendes–France, who favors abandonment by France [Page 441] of the Indochina undertaking, was obtaining more and more adherents in Parliament for his point of view.)2

  1. Repeated to London and Frankfurt.
  2. In a preliminary draft of this telegram (Paris Embassy files, lot 58F53, France), Ambassador Bruce had added the following paragraphs which were subsequently deleted from the telegram when it was transmitted to the Department of State:

    “In reference to the foregoing I conceive it to be my duty and that of this Embassy once more to try to call to the attention of the competent authorities in Washington the urgency of making immediate and definite commitments so far as those authorities have authority to meet all or part of the French dollar balance of payments problem. By not authorizing now the grant of credits which we eventually intend and will have to grant we are saving nothing in the long run for and the American taxpayer will have imperilled the whole stability of NATO defense plans.

    “It is no satisfaction to refer to Cassandra like warnings on a subject being borne out by events but on this occasion it seems to me advisable to refer to some of our previous reports so that the gravity of the subject will not be overlooked by those who might think it represented another cry of alarm from the Paris Embassy and represented an undue bias in favor of the French.

    “I should like especially to refer to my telegrams 8170 and 8171 of June 1951 [Documents 171 and 172] recommending the formulation of a consistent U.S. policy regarding the French rearmament situation. They were followed by a top secret memorandum of 80 pages in August 1951 entitled ‘The Role of United States Policy in French Rearmament’. [Not found in Department of State files.] I cannot ascertain that any of these three communications were ever acknowledged although I know they were the cause of considerable discussion and dissension in Washington. They are only three amongst many telegrams and reports along similar lines which have been sent to Washington this year, and during my trip there in September I attempted as adequately as I could to explain toward what a really desperate situation this country was headed and that it would require the concerted action of our interested Government agencies as soon as appropriations were available if a disastrous state of affairs were to be averted.”

    The reasons behind Ambassador Brace’s decision to delete these paragraphs are unknown, but it may well be that he had the opportunity to convey his sentiments directly to the Secretary of State when Acheson visited Paris in November for meetings of the Foreign Ministers of the United States, the United Kingdom, and France. For documentation on these meetings, see vol. iii, Part 1, pp. 1312 ff.