Foreign Relations of the United States, 1951, Europe: Political and Economic Developments, Volume IV, Part 1

No. 248

740.5 MAP/2–151: Telegram

The Ambassador in Italy ( Dunn ) to the Secretary of State ¹

secret

Rome , February 1, 1951—10 p.m.

3320. This is joint Embassy–ECA–MAAG message. Following are our views on questions raised paragraphs 6, 7, 17 and 23 Deptel 3143, January 23, repeated London, Paris, Heidelberg unnumbered.²

Paragraphs 5 and 6:

1. We believe present 250 billion lire ($400 million) program for calendar year 1951 is maximum Italians can be persuaded attempt at present time and therefore negotiations should be conducted on that basis. While we realize much more must be done to meet Italian requirements under MTDP (see Embtel 3241, January 27, repeated London 371, Paris 456³), first year program is close to maximum desirable economic burden (see Toeca 59 and ECA despatch D–104⁴) and maximum technical rate of implementation. We also believe it psychologically most important get Italians under way on program to which they have committed themselves and toward implementation of which they now devoting serious effort at highest levels. Once program under way and administrative machinery, theirs and ours, established for handling program, both sides will be in better position arrange necessary increases for future years.

2. Regarding military adequacy (paragraph 5 reftel), in accepting amount proposed Italian defense effort MAAG must and will seek refinements and adjustments within that program, insisting upon greater emphasis and priority of action on items most urgently needed and for which facilities exist for most rapid production as well as some readjustment of program to effect better integration between it and end item program.

Paragraph 7:

3. Know of no public statement made in Rome similar to Tarchiani’s announcement in Washington that Italy had firm intention proceed with program without awaiting conclusion of negotiations. As reported Embtel 2938, January 29 [9], repeated London 326, Paris 395,⁵ Defense Minister Pacciardi and Treasury Minister Pella have both advised us on official level that Italy intends proceed without awaiting conclusion negotiations and Prime Minister reported to have made same statement to Council Ministers. Italians advised Eisenhower to same effect. Believe failure make such public announcement here due desire officials concerned avoid as much as possible opposition to their efforts obtain parliamentary approval 250 billion lire and adequate control measures.

Significant fact to our minds is that while heretofore Italians have always delayed taking concrete steps pending official commitment US aid, this time they have not even awaited official commencement negotiations before introducing enabling legislation in Parliament. Such legislation has already been approved by Chamber Defense Committee.

Paragraph 17:

4. Believe approach on assurances should be to obtain agreement on criteria to be used on determining periodic release US aid. Memorandum on this subject agreed by government preferable to public statement of intention or awaiting further parliamentary action. Bills already before Parliament give government power carry out all measures we would ask. Important question is therefore way in which government intends use powers.

5. Following are criteria we propose suggest to government as basis for receiving aid:

A. Rate of implementation:

(1) Implementation rate measured by (a) military contracts actually let and (b) approved rate of dollar imports.

(2) Satisfactory opportunity for US officials inspect progress being made.

B. Composition of program:

(1) Conformity military items to MTP, as mutually agreed between Mission and Italian military.

(2) Conformity production program to strategic and securing requirements.

(3) Economic efficiency production program in terms use of Italian, European and US resources.

(4) Satisfactory progress in certain urgently needed substantive and infra-structure improvements.

C. Efficient use Italian resources (see ECA despatch D–108⁶).

(1) Increased production and control end uses of materials in short supply.

(2) Making credit available to high priority sectors and restricting credit for non-essential uses.

(3) Reorganization and more efficient use state enterprises vital to defense program.

(4) Agreement on level above which gold and dollar reserves should not rise, such as that of June 1950.

6. Agree necessity obtain early evidence intention incur additional expenditures beyond calendar 1951, particularly for balance fiscal 1952. We assume such evidence would be in terms intention to spend at least at calendar 1951 rate if not higher.

7. We believe negotiations can be centered in Rome leaving question open whether assistance may later be required in Washington or on regional level in London and/or Paris, although additional pressures from these quarters always helpful. Our past experience in dealing with Italians leads us observe that best results can be obtained when they realize negotiations are to be in one place and with one group of officials. If they have any idea they can shop in other markets they will certainly try to take advantage of possibility of appealing for better terms.

Paragraph 23:

8. We feel that (d) plus either (a) or (b) will prove most expeditious and simple method extending aid during current fiscal year, but would prefer more emphasis on (b) rather than (a). Past history strict AMP procedure not such as give Italians any confidence its efficacy. Furthermore, in determination materials requirements and attendant financing necessary look at over-all program rather than multiplicity small unrelated projects. If anything to be accomplished under present AMP project, we feel that, in interest getting something done quickly, there must be (a) prompt handling such projects (in consolidated form—Deptel 3173, January 25 and London’s 263, January 23⁷) and (b) granting of aid on more liberal interpretation existing laws and procedure to get things moving, (c) may also be useful in stimulating production specific items.

9. We hope initiate negotiations to discuss memorandum mentioned paragraph 4 early next week.⁸

Dunn

1. Repeated to London for EDECC and Spofford, Paris for OSR, and Heidelberg for Handy.
2. Document 246.
3. Telegram 3241 provided the Department of State with preliminary costing estimates for Italy’s MTDP requirements. (765.5–MAP/1–2651)
4. Neither printed.
5. Document 242.
6. Not found in Department of State files.
7. Neither printed.
8. For text of the memorandum, see infra.