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

No. 93

ECA message files, FRC 53A278, Paris: Telegram

The United States Special Representative in Europe ( Katz ) to the ECA Mission in Trieste ¹

confidential

Paris, March 6, 1951—4 p.m.

Repto 17. AMG Trieste for Unger.

Reference (a) Galloway-Wood letter January 5.² (b) ECA-AMG joint statement re future aid February 3.³ (c) Dayton memorandum February 7.³ (d) Trieste’s 445 to Department, repeated Paris 22, Rome 93.⁴ (e) Department Torep 879, repeated Trieste Ecato 14, Rome Ecato 134.⁵ (f) Department [Paris] Repto 657, repeated Trieste Repto 14, Rome Repto 125.⁶

After review of reference documents and Daspit’s report discussions Trieste and Rome, OSR has formulated tentative position re continuation ECA program to Trieste in fiscal 1952. Propose send following message to Washington as OSR recommendation, but prior this action invite your comments.

1. Account must be taken initially of virtual economic union with Italy, sharing common pool foreign exchange reserves. ECA aid to Trieste has, therefore, been of benefit to Italy as well, both directly through ECA financed imports on Italian account, and indirectly, in that receipt aid by Trieste and resulting generation counterpart have decreased necessary Italian contribution of dollars from common foreign exchange pool and lire to cover Trieste’s budget deficit, which Italy is committed to supply. Termination ECA aid to Trieste would increase Italian contribution required both dollars and lire. Consequent increase Italy’s own dollar requirements would justify some increase in ECA aid. Properly stated, therefore, issue not whether aid to Trieste should be terminated, but whether should continue be supplied directly to Trieste or indirectly through Italian program.

2. Either method appears satisfactory as regards Trieste’s economic requirements. Issue primarily political: would advantage of effecting nominal elimination of program outweigh disadvantage of adverse psychological effects on Trieste population, and of increasing zone’s economic dependence on Italian Government. AMG and Rome Mission strongly favor continuation direct aid and OSR unaware any countervailing considerations which would justify overruling them. Accordingly, recommend continuation in fiscal 1952.

3. Agree Trieste mission that separate mission not required after present fiscal year. Mission functions have tailed off markedly and no developments in sight which would require ECA’s permanent representation in spot.

Believe responsibilities should be transferred Rome Mission which would be formally designated mission to Trieste. Desirability reinforced by consideration urged by Rome mission: need formulate US economic policy in Trieste with adequate reference US policy in Italy.

4. Believe over-all ECA program should be developed for Italy and Trieste jointly, with Trieste component clearly earmarked and separable. Specific sum would be available Trieste, together with resultant counterpart. Believe this arrangement, while maintaining identifiable program of ECA aid to Trieste in accordance AMG wishes, would permit desirable integration with Italian program.

5. Believe closer harmonization Trieste and Italian investment programs desirable, including consideration former in relation system of priorities which Rome Mission has worked out with Italian Government. Moreover, may be desirable consider Trieste facilities in connection with those of Italy when program of defense production developed and MDAP assistance determined.

6. Do not imply Rome Mission should have veto power or final authority to fix AMG program, since clear that objectives occupation authorities and ECA in Trieste not identical. Believe, however, common line on matters of common concern should be developed by Rome Mission and AMG before either undertakes negotiations with Italians. By providing formal arrangements recommended above, which would involve review by Rome Mission of AMG program prior to negotiations with Italian Government, more effective coordination of policy should be automatically secured. To provide against eventuality that differences may develop which Rome Mission and AMG unable resolve, procedure should be established whereby these can be readily referred to higher authority for decision.

Katz

1. Repeated to Rome as telegram Repto 142 and to ECA as telegram 1017, which is the source text.
2. This is presumably a reference to the Galloway letter, Document 88.
3. Not found in Department of State files.
3. Not found in Department of State files.
4. Telegram 445 reported Unger’s recommendation that ECA aid for Trieste not be terminated since this would result in Trieste’s loss of economic independence from Italy. (850G.00R/2–951)
5. Not printed, but see footnote 1, Document 88.
6. Not printed.