751G.5/7–2953: Telegram
The Ambassador in France (Dillon) to the Secretary of State
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370. Limit distribution strictly. I lunched with Laniel today at his own apartment, and he outlined to me the entire basic policy of his government with particular emphasis on the Indochinese problem. He emphasized several times the necessity for the strictest secrecy on this subject, and said that there would be no possibility of any leaks from Paris, but that he was afraid of possible leaks in Washington. Therefore, the contents of this message must be treated with the utmost care in Washington.
Laniel feels that the large decree powers given him by the Assembly make it possible for the first time since the liberation to put France back on her feet and make her a strong member of the community of [Page 702] free nations. These extensive powers also impose on him a heavy responsibility to use them vigorously. Contrary to indications in the press, it is his intention to attack French budgetary problems with the utmost vigor in the next two months so as to achieve the preconditions for a fully balanced budget prior to 1 October. To accomplish this, he plans to remove from the budget all funds for capital investment and to cover these expenses solely by means of long-term loans, the proceeds of which will likewise be excluded from the budget. After this operation, there will still be left a deficit of approximately 400 to 500 billion francs which he proposes to eliminate by savings prior to 1 October. This will require strong action on all parts of the budget, including the military section. His present plan is to cut approximately 150 billion francs from the military side of the budget and upwards of 250 billion francs from the civil side of the budget. The cuts on the civil side of the budget will include items which will necessarily be very unpopular with various segments of the country and will not be politically possible unless, at the same time, there are substantial cuts on the military side of the budget, and the whole operation is sufficient to balance the French budget and put France on the path of fiscal stability. It is absolutely necessary that military expenses in Indochina bear a share of these reductions. The share presently assigned to Indochina is 50 billion francs, with the reduction in European and African military expenses being 100 billion francs.
If France can achieve this balance of the budget, Laniel feels that her position will be infinitely strengthened, that the Communist vote will decline, and that France will feel herself able to move more rapidly in the field of European integration.
It is also the policy of his government to win the war in Indochina. To do this, they are prepared to adopt the general principles of the Navarre plan, including sending approximately nine battalions of additional troops to Indochina. However, the cost of sending and maintaining these additional troops in Indochina, plus the cost of arming, training, and equipping the necessary additional battalions of Vietnam troops, will be approximately 100 billion francs for the French calendar year 1954. Therefore, the Laniel government, in order to carry out its overall plan of winning the war in Indochina and balancing the French budget, needs an additional 150 billion francs for Indochina in calendar 1954. Laniel said that the 100 billion franc figure for the extra cost in Indochina in 1954 was a maximum figure, and that he had instructed General Navarre to do his best to reduce it somewhat.
Laniel said that Bidault had reported, after his Washington trip, that the Secretary of State and Mr. Stassen had told him that there was no hope of getting any additional funds whatsoever from the US [Page 703] for Indochina, and that Bidault was very discouraged to have to make this report. Laniel added that there was no point in sending any additional French forces from France to Indochina unless the funds were also available to build up the Vietnam army for its eventual assumption of responsibility. He pointed out that it would be impossible for him to make the economies which he plans to make in the civil areas of the budget unless he can make similar economies in the military side of the budget, including Indochina. If funds are not available to carry on in Indochina, the only alternative is eventual withdrawal, the only question being the exact method and date on which the withdrawal will take place. He has instructed General Navarre to prepare a new plan on the assumption that no funds will become available, and this plan will be ready shortly and will be available for our information.
Thus, in conclusion, Laniel pointed out that not only the whole question of Indochina, but also the whole problem of balancing the French budget and putting France back into a position where she could make a strong contribution to the European and Atlantic communities, depended on whether or not approximately 150 billion francs additional could be made available for Indochina in calendar 1954.