884A.131/10–1351: Telegram
The Ambassador in Israel (Davis) to the Department of State
priority
348. Eyes only McGhee. Embtel 325 Oct 9.1 SecGen MinFin provided Emb officer with fol info on govt’s present fon exch sitn:
- (1)
- Current reserves nil.
- (2)
- Commitments (not requirements) to Dec 31 £17 million.
- (3)
- Estimated receipts to Dec 31, £12 million incl £3 million loans (now under negot) and collections in US from UJA and bond drive.
- (4)
- Apparent deficit to Dec 31 of £5 million they hope to make up thru extension current maturities, sterling and franc credits, and additional dollar credits.
- (5)
- Sitn described as “berydohrn” and still deteriorating. Fon exch now required to clean up present arrearages and get control of sitn said to be $15 million.
While govt had been operating on shoestring basis for many months, present sitn according to SecGen precipitated by mil purchase of approx £1 million, the 29 Sept maturity of which had not thru error been budgeted. Subsequent defaults on fon exch commitments were [Page 906] caused by this upset of an already very tight fon exch budget. SecGen did not think govt’s credit had as yet been seriously impaired nor has there been significant shutting down of short-term commercial credits (floating debt of such credits said to be in upper 7 figures’ amt). Attitude bank and character inquiries reed indicate, however, widespread concern.
Prospects not encouraging for making up apparent deficit £5 million to Dec 31. Brit elections holding up Horowitz London negots and Petsch’s death deprived Horowitz of his best Fr contact. SecGen said £3,000,000–3,500,000 on pledged sterling securities one possible outcome of Horowitz current London talks.
Apparent from above info that unexpected defense obligation was merely breaking point in an already seriously overextended position. Additional details on present sitn were promised by Wed Oct 24 when I plan to see Kaplan with Bayne.
Further comments and recommendations will then follow.
- Not printed.↩