The Secretary of State to the Embassy in Italy 1
Washington , February 13, 1951—10 p.m.
3553. Tomap. Fol is joint State-ECA message.
- Despite Mission’s belief that 250 billion lire program is maximum Itals can be persuaded attempt at present time (Embtel 33202), we are reluctant to restrict scope negots to this program. Such approach wld leave us without clear commitment or understanding Ital intentions last half fiscal ’52 on which to base our requests for next year’s aid. We are also doubtful, view past experience normal shortfall actual expenditures below obligations, whether “programming” only for 250 billion cld possibly produce actual rate of expenditure of or close to this magnitude. Finally we are concerned lest Ital unreadiness at this time to increase size of def effort and to extend time beyond original Dec 19 memo3 proposals [Page 570] will weaken likelihood of govt’s adopting adequate measures to make possible the implementation of larger programs in succeeding year.
- Therefore determined effort shld be made to persuade Itals increase size present program and make firm commitments for enlargement program after calendar 1951. In order for Itals to achieve expenditure of $840 million during calendar 1951 wld probably have to reach monthly rate about $90 million in Dec 1951 which rate if continued wld give desirable higher 1952 expenditures commensurate Blue Book estimates FY 1953. Without firm Ital agreement to continue program along above lines it wld not be possible use higher end of range of figures suggested para 24, Deptel 3143.4
- Reftel implies that Ital Govt apparently unwilling make clear to public and Parliament magnitude present effort. We do not understand Ital Govt or Mission’s belief (para 3 reftel) that Parliament and/or public more likely accept necessary controls and budget impact if purpose these steps not made clear to them.
- Re memorandum on criteria para 5 reftel, not clear whether Mission regards assurances concerning these points as condition precedent to agreement with Ital Govt on aid and mil program or whether criteria simply constitute basis against which release of aid will in future be determined. Because of great difficulties involved in aid reduction once figure, however tentative, has been agreed and in order to maximize results these negots, believe, as indicated para 9 Deptel 3143, assurances at least certain major measures must be condition precedent to final agreement.
- Re specific points outlined para 4; reftel:
- Believe some treatment fiscal and financial measures shld be included under C, “efficient use Ital resources” D–108 not yet received; but note from d–104(l) that ability to control upper-income consumption and increase rate of saving and/or revenue collection crucial to achievement forecast goals and (2) that greater uncertainty attaches this assumption than other parts projection. (Concerned to read in ECA Daily Press Survey of Feb 2 press report of Pella statement that “Govt will not take advantage of delegation of powers by imposing fiscal measures”. Is this report accurate?).
- Wld also stress particularly importance of reference adequate administrative machinery (re para 16 Deptel 3143).
- Believe measure rate of implementation (para 5–A–1) shld be tot rather than dol imports, to avoid any possibility discouraging maximization non-dol sources. Rate of dol imports wld fol naturally from maintenance agreed reserve level and normal screening techniques. In this connection, what are reasons for adopting June ’50 gold and dol reserve level, rather than June ’49 level agreed at [Page 571] time April review? Latest figures received here indicate reserve rise of about $25 million during FY 50 and further increase of approximately same magnitude during current FY.
- Agree completely para 7 reftel that negots center Rome but suggest care to avoid Ital interpretation of preliminary discussions as finalized US position. We continue receive reports from Rome that US has “answered” Ital memo without reference to broader scope of bilateral approach. Appreciate difficulty Ital press leakages, but trust this does not reflect current Ital Govt thinking.
- Will consider carefully suggestions para 8 and agree with ur evaluation difficulties AMP project procedure but reiterate (re Point (c) ref para) that liberalized AMP procedure cannot be considered as waiving of requirement request must be legitimate dol import requirements under agreed criteria.
- Mission’s views urgently requested general problem outlined paras 1–3 and more specific points paras 4–5.