No. 508
The Acting Deputy Director of the Office of European Regional Affairs (Knight)1 to the Deputy Assistant Secretary of State for European Affairs (Bonbright)

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Dear Jamie: I am enclosing herewith three copies of a memorandum which I dictated yesterday and which may or may not be worthwhile. However, the more I think the problem over, the more I am becoming convinced that this is the best and perhaps only way out.

The new agreement with the French,2 which should be firmed up later today, is leaving a none-too-good taste in the mouths of many people. No one to whom I have spoken really believes the agreement is realistic and that the French have the capacity of living up to it. It may have saved “Lisbon” in the narrow sense, but it has not solved the French situation. As a result, David3 and Tommy4 are very fearful that the Faure Cabinet will not last the week. Faure is taking a philosophical point of view on the basis of his youth and in the belief that in the long term his efforts to save the TCC here and to build solid strength in Europe will be an asset rather than a liability in his personal political balance sheet. On the other side of the fence, I understand that Bidault and Bourges-Maunoury wish to resign as the resulting military budget is not adequate for the program which they have in mind. Therefore, we have the slightly paradoxical combination of an effort judged economically too great by many and militarily inadequate by others.

I will fly up to Paris on the SHAPE plane on Tuesday and spend a few days there before returning to Washington. While I would like to return by next week end, I somehow feel it would be foolish to skimp on a day or two as long as I am there and have this occasion to get a personal “feel” of the situation.

Affectionate best wishes to Sybil.

As ever,

[Page 1176]


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Memorandum by the Acting Deputy Director of the Office of European Regional Affairs (Knight)

  • Subject: France’s Military-Budgetary Problem

Despite our immediate success in reaching agreement on the French budgetary and force contribution, I think all of us realize that we are a long way from being out of the woods. The Faure Government is hanging on by its teeth, and recent reports on the black market value of the Franc indicate that the inflationary trend is assuming ominous proportions.

French negotiating tactics being what they are, ill will has been created and apparently is preventing an evaluation of the importance of France’s contribution in the perspective which it deserves. Furthermore, and at least as serious, France’s geographic position also seems to be overlooked. It is not impossible that some members of the Delegation have in the back of their minds the thought that, after all, if France “is too impossible”, or should she fail us, we can always fall back on Germany.

This seems to be a fallacy of the first importance. It is difficult to imagine Europe’s defense based on an arc with no depth. This would be the situation if France does not develop the kind of military strength which we now have in mind. It is now apparent that this kind of strength falls well short of the old DC/28 target.5 It is not impossible, indeed it is felt highly probable, that the Germans themselves would refuse to run the risks entailed in rearming if they did not have a reasonably strong France back of them. Reinforcements during the initial stage of a campaign in Germany would be coming from France and the Low Countries; only thereafter from the UK, and only much later from the US. Consequently, the French military effort is of the most direct interest to Germany.

As a matter of fact, the only probable alternative to the present NATO defense plans, from the US point of view, would be the so-called defense on the periphery: the UK, Spain, and North Africa. The political risk inherent in this alternative, derived from the fact that we probably could not leave US forces exposed in Germany if there is no French strength to support them, would be very great. [Page 1177] As soon as this policy became apparent, neutralist strength in France, Germany, and in the other continental NAT countries, may be expected to mushroom overnight. At the same time, the will to resist Communism on the part of those elements which are now our friends would be so seriously sapped that we could not exclude the possibility of Communist take-overs in the Czechoslovakia style.

It therefore would seem that the first thing which the US Government should do is to decide at the highest level exactly how important France is to us. While no such decision can be made “once and for all”, we need a decision that can stand for more than a few weeks or months—a decision shared in all essential aspects by all governmental departments, by the decisive elements in the Congress, and by the general public.

The second thing to ascertain would be the minimum size of French forces in Europe which would make Germany’s contribution to the EDF politically acceptable to France. This should be approximately the force level being discussed in the current negotiations.

The cost of this force level should then be looked at in the light of our decision as to the importance of France to us. It is probable that when we will have thought out carefully this question, the answer will be that we must make sure of France as an active and full participant in our collective defense, situated at the strategic heart of the continental NAT countries. As a corollary, it is probable that we would conclude that we must somehow attempt to provide France more budgetary support than is now planned, even in our 1953 aid program.

Certainly, we should not give in to any and all French requests and demands. However, we should try to arrive at a fairer evaluation of the French effort and of the situation in which France now finds herself. It is conceded by the French, as well as by ourselves, that the fiscal system is archaic and inefficient. Likewise, they recognize that there is little fiscal equity in fact and that the progressive taxation on the statute books only applies with any reality to the Frenchmen with fixed incomes declared at the source. Nevertheless, it would seem to be a serious lack of statesmanship to permit our decision to be governed by such factors which result from tradition generations old and which cannot be changed except in terms of years.

France as a whole pays more in taxes out of its national income than does the United States. This, rather than the make-up of this total tax take, is what we have the right to judge. Furthermore, there can be no doubt that the French defense effort, at home and in Indochina, is stimulating a growing inflation. We should continue, [Page 1178] of course, to urge the French to take all possible corrective measures. But there are real limits on the extent to which any practicable measures can be immediately successful. Inflation is a fact, and it must be controlled if France is not to break up internally.

It is believed that the French military budget problem cannot be solved by patchwork, by squeezing out a few additional million francs from other parts of the French budget, and by trying to find a few more million dollars in this or that part of MSA funds. In plain words, it would seem that the negotiations over the last year-and-a-half have demonstrated that this problem is of a very different order of magnitude. If so, we face a very difficult decision as to how this problem can be solved in a way that is politically and economically realistic in the United States.

In view of the legal restrictions on MSA funds, it is evident that we are unable to make a substantial additional contribution to France without special Congressional action. The reluctance of the Congress to take such action in an election year is apparent. In fact, there is much evidence that a strong effort will be made in the Congress to reduce drastically the foreign aid program already proposed for 1953. To request a supplemental appropriation at this time, in the face of the existing opposition, might seem to be politically irresponsible. On the other hand, there is a possibility that a bold new program might be the best way to focus public attention on the nature of the problem and to create the support required to sustain our existing program.

It is suggested that it might be possible to peg a new program on the Indochina situation. It is factually correct that, except for the operations in Indochina the French would need no dollar assistance whatever. Moreover, such a program would highlight the fact, largely ignored by our naturally Korea-conscious public, that the French have been fighting a major war against Communist expansion in Asia since 1945. Politically, it would seem highly preferable to concentrate public attention on the “fighting French” in Indochina rather than upon the “laggard French” in Europe. Finally, a program to provide additional dollar support to the French in holding Indochina, with the understanding that the French would continue to supply the manpower, would be difficult for critics of US policy in Asia to oppose without embarrassment.

The foregoing suggestion assumes, of course, that the US continues to consider that a French withdrawal from Indochina, even if logistically possible, would be highly undesirable in its effect upon the total strategic situation in Southeast Asia. In any event, from the point of view of US domestic politics, a bold new program based on France’s fight on behalf of the free world in Indochina would [Page 1179] seem to offer the best prospects of success. The only alternative is an effort to stretch points in our present legislation and to try to increase aid out of the very limited funds presently available, while seeking to minimize the widely-prophesied reductions in the 1953 aid program. This would put the administration on the defensive without directing public attention to the real issues of American security which are involved. A new and special program for Indochina, similar in some respects to the Greek-Turkish aid program, would inevitably arouse new screams of anguish from the diehards, but it would also give us the opportunity to place the facts before the public in a dramatic and convincing fashion. In view of the present state of opinion in the Congress, it would appear that we have little to lose by taking the initiative in this way.

  1. Knight was in Lisbon to serve as coordinator of the U.S. Delegation to the Ninth Session of the North Atlantic Council, Feb. 20–25.
  2. This is a reference to the memorandum of understanding, subsequently referred to as the “Lisbon agreement”, the text of which is in telegram Actel 10 from Lisbon, Feb. 25, supra.
  3. David K. E. Bruce.
  4. Presumably a reference to Llewellyn E. Thompson, Counselor of Embassy in Italy.
  5. NATO document DC/28, Oct. 28, 1950, was a report by the Military Committee on the Medium Term Plan Force Requirements; for documentation concerning this report and its subsequent review by the Council of Deputies, see Foreign Relations, 1950, vol. iii, pp. 1 ff.