740.5/12–1751: Telegram
The Ambassador in France (Bruce) to the Secretary of State 1
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3606. Immediate attention Secretary; distribution by Secretary’s Office.
1. Last Friday Prime Minister Pleven asked General Eisenhower to come to see him. He explained serious situation in which his government found itself in attempting reconciliation between military tasks called for in report of TCC executive bureau and French financial resources. He told Eisenhower that unless US Government could help him to extent of over 100 billion francs in calendar year in addition to aid promised, he believed his government would fall over this problem. On Friday night Pleven took up same question with Harriman and myself. He said that tentative TCC conclusions regarding France had only been studied by him preceding day but that he did not see how French Government could satisfy [Page 456] its military requirements under NATO as set out in TCC screened French submission plus its commitments in Indochina within budgetary resources available to it. He stated that he had already succeeded on this same day in having legislation passed to raise 70 billion francs in additional taxes and that he had placed his program before Parliament for an additional 200 billion francs in taxation and expected to have to submit votes of confidence in attempt to obtain it. It would be politically impossible to raise more than this 270 billion francs in 1952 by taxation since opposition, which on this point constitutes a majority of National Assembly, had already served notice to him that they would consider no further recommendations in this regard.
Pleven further stated that, after frequent postponements of submission of military budget for 1952 to finance committee of National Assembly, officials of French Government will be forced to appear before it on Tuesday, December 18. This appearance can no longer be delayed and therefore tomorrow government must state its definite position on military budget.
2. Government’s dilemma is that from a military standpoint, Pleven feels that if his 1952 military program does not amount to approximately 1280 billion francs of total expenditures, his government will fall. French mil state they could not meet bare minimum of present commitments and undertakings with a smaller figure and even this figure means serious cancellation of defense production underway. He believes Bidault would leave office rather than accept a smaller figure. (Expenditures at 1280 billion francs are above figure now being considered by TCC executive bureau as appropriate French financial contribution, including counterpart of US assistance.) On other hand, if Pleven attempts to obtain total military budget, including counterpart of presently scheduled US assistance, larger than 1177 billion francs, his government will also fall because of gap between revenues and expenditures. Faced with this situation, Pleven had been pondering whether in interest of all concerned his own resignation might not be preferable to what he believed would be a certain overthrow of government within a matter of days.
3. Pleven said that he appreciated very generous contributions which had been programmed for France by US Government, but that for reasons which had nothing to do with good will universally displayed by US officials in Washington, manner in which our assistance was contemplated did not make it possible for him to solve his present difficulties with National Assembly. (Pleven was alluding to fact that under our present tentative plans $300 million in military expenditures for US use would not generate counterpart.) He mentioned specifically that Paul Reynaud, as chairman of finance [Page 457] committee of National Assembly, was unalterably opposed to a budget which would disclose an uncovered gap.
4. Pleven further said that he realized that US Government was not in a position during fiscal year ending June 30, 1952 to insure that France would receive or earn more than $600 million previously discussed. He had discussed this question with his colleagues and felt that it was his duty to inform General Eisenhower, Mr. Harriman and myself of fact that they saw no solution to their present difficulties and that we should be prepared for the possible fall of French Government and possible consequences thereof including effects on North Atlantic Treaty Organization.
5. We questioned him as to whether investment and reconstruction portions of national budget could not be reduced. He answered that there were very few new projects in 1952 investment program, that in order to obtain their support for ratification of Schuman Plan, govt had been forced to make promises to Socialists for continuance of coal and steel investments and that govt as a whole regarded present investment program as a bare minimum. He said that same situation applied to the reconstruction portion of national budget. Only about 25 billion francs of it represented new commitments, remainder consisting of money to be applied to satisfaction of existing obligations.
6. I saw Pleven again on Saturday after further discussions between Harriman and myself regarding our interview with him on Friday. He said that he found himself in unfortunate position of predicting dire consequences if he could not somehow manage to get assistance to cover gap in his military budget. He was most anxious that in presenting this matter to the American Govt, I make it clear that he was not asking for additional dollars, but only additional flexibility to take care of his franc requirements and some indication of our executive board intentions after June 30, 1952. He thought best means of helping would be for us to take over certain French defense production contracts either let or to be let and which would otherwise have to be cancelled. He repeated what he had said emphatically to Harriman and myself preceding day that Indochina was at the heart of present difficulties. He felt that despite his many efforts and those of other French visitors to US to explain magnitude of problems involved in Indochinese war that they had been unsuccessful in convincing our officials of tragic situation, financially and otherwise, in which France found itself because of this operation. Indeed, the situation was becoming even more serious. In one day last week French Union Forces had lost 1000 men and had expended six weeks’ ammunition in an engagement that had lasted only three days. Very same Viet Minh regiments which had been badly mauled a few months ago had again [Page 458] appeared, brought up to full strength, completely equipped, well-officered, and in good fighting spirit. Undoubtedly this indicated a replenishment of troops, possibly including Chinese, and certainly furnishing by Chinese Communists of full equipment replacements. Current intelligence reports from Indochina indicate that Chinese Commies are preparing for greater and more active participation in that area. Moreover, Monnet had become so convinced in the course of TCC studies that drain imposed on France by carrying on Indochinese war would prevent an adequate defense in Europe that he, Monnet, was threatening to take an active role in presenting this view to French Parliament and French people. (In a conversation which I had with Monnet on Friday afternoon he had made same statement to me.)
7. Harriman made it clear to Pleven that US was not in a position to provide additional assistance at this time out of FY 1952 appropriations, but suggested that our services at least review situation to see whether anything helpful might be done within limits of understanding regarding $600 million.
8. After an informal review with French on Saturday and Sunday, it appeared French would undertake to finance full 1280 billion franc budget and resolve Pleven’s dilemma if US admin would express willingness to recommend to Congress that aid to Indochina at level presently contemplated would continue and would transfer $100 million in form of economic assistance or offshore purchasing of French defense contracts within $600 million figure for six months of 1952. Labouisse and I consider this to be workable solution to get an adequate French military effort in view of fact that these decisions will probably be taken by us in next few months in any case. (For example, there is no likelihood that US military expenditures for infrastructure, etc, will total $300 million in first six months of 1952.)
As it was apparent these decisions could not be taken before Tuesday, we suggested to Harriman that we advise French on fol lines:
- (a)
- That US administration would seek congressional authority in connection with US fiscal year 1953 appropriations to permit aid to Indochina during last half of calendar year 1952 in amount of $130 million.
- (b)
- That, within $600 million figure which forms basis of current bilateral negotiations, it wld increase amount of already scheduled economic assistance (or off-shore purchasing of French defense contracts) by $100 million out of present appropriated funds.
Above, of course, assumes that US and French representatives will reach a mutual understanding on satisfactory arrangements on various matters now under discussion, including progress of infrastructure, [Page 459] LOC, etc; procedures for off-shore procurements; productivity; use of counterpart; tax relief; appropriate economic and financial policies, etc.
9. I talked to Harriman on this subject earlier today. He feels that any action of this sort will have to be considered in Washington. He will take it up with authorities there shortly after he returns, probably on Thursday of this week.
10. Meanwhile, Pleven has sent for me to see him this afternoon. I will confine myself to explaining to him that action of this character cannot be taken without full consideration in Washington but that Labouisse and I will ask Washington to consider it. I will further state that it is not possible to expect a reply on it within a time that would satisfy his necessities in relation to budgetary presentation to financial committee nor, in fact, can I indicate to him when a reply will be forthcoming. I will attempt to prevail upon him to resolve differences within his cabinet and Parl on basis of such possible consideration and to avoid at all costs a failure of French Govt at this time. I do not know whether he can do so.
11. I have an engagement later in the evening to see Reynaud. I propose to tell him my personal hope that his committee will take no precipitous action. I will stress to him that situation will undoubtedly be much clearer and more satisfactory determinations can certainly be reached if satisfactory tentative budget is now settled upon and some way is found to postpone final and definite action on exact amounts to be budgeted until review of whole Western defense problem is completed at time of Lisbon meeting. I shall re-emphasize to him that US administration is without authority to make any promises regarding assistance beyond end of FY 1952, but that French shld know shortly after presentation of next US budget to Congress at least approximate range of amounts administration will suggest for various forms of foreign assistance in next fiscal year.
- Repeated to London eyes only for Spofford and Gifford.↩