Affectionate best wishes to Sybil.
[Enclosure]
top secret
[Lisbon,]
February 24,
1952.
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.
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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,
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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
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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.
