Foreign Relations of the United States, 1955–1957, Western Europe and Canada, Volume XXVII

27. Despatch From the Embassy in France to the Department of State¹

No. 173

Paris, July 25, 1956.

REF

• Depcirtel 12, July 10, 1956 (Joint State–Defense–ICA Message)²

SUBJECT

• Military Assistance Program Development—France—FY 1958

1. This despatch contains the material requested in paragraphs 3 and 4 of the reference telegram,³ (a) setting forth a summary of the general approach, major political considerations and basic assumptions used by the Country Team to aid MAAG in preparing its estimate of French requirements for military assistance to be used as a basis for developing the FY 1957 program and the FY 1958 budget estimates, and (b) commenting on the program submitted by MAAG to DOD (MAAG letter 400.314Ex, Subject MDA Program Requirement Estimates, France, dated 21 July 1956).⁴

A. Politico-Economic Evaluation

2. Mindful of the general assumptions regarding the international political and military outlook during the programming period, contained in Section 2000 of DODFY 58 MDA Programming Guidance (I–14821/6) of June 12, 1956,⁴ the political and economic elements of the Country Team undertook to provide MAAG with a politico-economic evaluation of France’s defense capabilities during the next two or three years. It should be noted that this evaluation confirms in specific terms for France the general assumption set forth in paragraph 2003 of the DOD paper—namely, that there will be no developments during or before FY 1958 which will significantly lessen the present obstacles to an increase in the level of French expenditures in support of French NATO forces and that it is therefore unlikely that France will significantly increase that level during the programming period. In fact, as will emerge from the following analysis, even the maintenance of the current level must be considered an optimistic assumption, at least insofar as the earlier part of the period is concerned.

3. Since the middle of 1955 the French defense picture has been dominated by the extraordinary effort which the French military establishment is being called upon to sustain in North Africa, primarily in Algeria. For the purposes of the FY 1958 programming exercise, it is assumed that French military operations there will continue throughout 1956 and 1957 and probably also throughout most, it not all, of 1958, and that France will continue to give priority to this area above all other military requirements. The consequences of this state of affairs on the French defense effort will be far-reaching:

(a) First, it means that a considerable portion of the French forces earmarked for NATO will be dislocated. At the present time France has about 472,000 troops in the North African theater, together with a sizeable number of air and naval units assigned to support the operations of the ground forces. Nine out of the 14 French divisions of M+30 or less committed to NATO are now stationed in North Africa.

(b) There will be a continuing tendency on the part of the French to divert to their North African forces large amounts of equipment and supplies previously available to cover deficiencies of French NATO forces. Attrition of Army equipment and spare parts will be the equivalent of wartime rates, and consumption of ammunition will be increased.

(c) Finally, large-scale appropriations will be necessary to finance the Algerian effort. This in turn is virtually certain to have a depressing effect upon the volume of appropriations for other military tasks. It is now estimated that the North African effort will cost about 300 billion francs ($857 million) in 1956. To help meet this extraordinary burden the Government proposes a 50 billion franc ($143 million) cut in the other sections of the 1956 military budget voted last August—a cut mainly in appropriations for French NATO forces. It seems likely that the financial burden of Algeria will be of a comparable magnitude in CY 1957 and, there is a good chance, in CY 1958 as well.

4. In addition to the Algerian problem, there are other strong political forces at work in France which tend to limit the size of the French defense effort. As in many other countries, the feeling has become fairly widespread that international tensions have lessened considerably over the past year or two—or at least that the nature of the rivalry between the free world and the Soviet bloc has undergone a rather marked change—and that there is no longer the need for a large-scale military effort on the part of the NATO powers that existed during the period of the Korean and Indo-China Wars. While many French leaders may continue to recognize the importance to the security of the Western World of the maintenance of military strength, the French Government will be obliged under popular pressure to accord defense requirements a lower priority than a number of competing demands. Thus even though it seems reasonable to project a continued growth of the French national product throughout the period—at a rate of at least 2 or 3 percent per year—it must be assumed that none of this increment will be available for boosting the defense effort (other than North Africa of course). Rather the policies of the Government will be geared towards directing these additional resources into improving French living standards, expanding investment (including housing and the construction of educational facilities), and working towards a long-term solution of the external payments problem. Even if French forces should be returned from Algeria during the programming period, the above-mentioned pressures would probably prevent the French Government from diverting any large part of the physical and financial resources thus freed into other defense tasks. In fact, under this hypothesis the Government would probably see its military burden in Algeria replaced in large part by a major program of economic development in the area. Assuming a restoration of civil order, estimates place Algeria’s requirements in this field at about 150-200 billion francs ($430–570 million) annually for some years to come.

5. Furthermore the economic outlook for the period ahead tends to reenforce the restraining influence on the defense effort of the political factors analyzed above. Throughout 1954 and 1955 France experienced something really unique in her recent history: a period of economic expansion in a context of financial and price stability. However, in the latter months of 1955 signs of stress and strain began to appear. Prices started moving upwards and the French external position worsened. In 1956 this already grey picture has been further darkened by the effects of the February cold wave on French agricultural production and the consequences of the Algerian policy for the budget and the labor market. Production will probably continue its growth despite developing bottlenecks. It seems likely, however, that it will be outstripped by demand in the months ahead. Finance Minister Ramadier has said that in face of this situation he has had to veto many praiseworthy projects even in the politically popular field of social welfare. In this regard, in a recent speech before the French Senate he characterized himself as “Mr. Nyet”. Thus it is unthinkable that in making up its 1957 budget the French Government would consider any increase in its NATO defense effort. Indeed, with the heavy Algerian burden and with talk in other NATO capitals of cutbacks in defense in the interests of economic and financial health, it is optimistic even to assume a continuation of the current level of effort.

6. At best, therefore, it can be anticipated only that the French 1957 defense budget for “ordinary” purposes⁵ will be in the same range as the 1956 figure after the revisions now under Parliamentary debate—that is, approximately 1075 billion francs ($3,070,000,000).⁶ Furthermore, the likelihood is that availabilities will be about the same in 1958. Even if the Algerian burden should be eliminated by that time, about the most favorable assumption that could be made would be for the restoration of the 50 billion francs now being cut from the regular defense budget to help finance the North African effort. Such an adjustment would bring the French budget for NATO and regular non-NATO forces to 1125 billion francs ($3,200,000,000). This represents about 6 percent of the projected French gross national product

7. The estimate of annual operating costs for the total French forces planned for the end of 1958 (and assuming of course the disappearance by that time of the present distortions in the force structure caused by the Algerian problem) is 915 billion francs ($2,600,000,000). This estimate includes about 35 billion francs ($100 million) for ammunition but makes no allowance for major matériel requirements or military construction. In the current year the French are budgeting about 220 billion francs ($630 million) in such capital expenditures for other than “extraordinary” purposes (170 billion francs for procurement of matériel and 50 billion francs for infrastructure). This minimum figure, which, as a result of the current economy drive, is 12.5 percent below initial appropriations for military investment in 1956, is slightly greater than the difference between the projected maximum 1958 French defense budget and the estimated annual operating costs for end-of-1958 forces. Thus even the most optimistic assumption regarding financial availabilities for defense in 1958 implies the continuation in that year of a military investment program for both NATO and non-NATO forces no larger than the truncated 1956 effort. Under less optimistic assumptions regarding total financial availabilities, the size of this program would be even smaller.

B. Future Aid Assumptions

8. The Country Team sees no justification in the case of France for any defense support or direct forces support aid to help meet the local costs of the French defense program in FY 1957 or later years or for any U.S. aid which would be related to French economic development. It may therefore be stated that the projection of the French defense budget contained in Section A above assumes no U.S. aid in support thereof. It is assumed that the three major U.S. aid programs from prior fiscal years—namely, the FY 1954 Indo-China aid program, the FY 1954 $85 million aid program for the French NATO forces, and the FY 1955 program in support of the French Expeditionary Corps in Indo-China—will be carried through to their conclusion, but this of course will have no influence on the size of the French defense effort during the programming period.

C. Offshore Procurement

9. The Country Team feels that it is no longer necessary or desirable to place OSP contracts in France for general political purposes. Instead, we believe that contracts should be granted only when the justification is lower costs or based upon military considerations. If, however, an OSP program for Europe is continued and orders are placed in various other countries for political reasons, then a political problem would be created in France which would require a reassessment of the above judgment.

D. Comments on MAAG Submission

10. The reference telegram requests comments on the MAAG submission, which will be used in the eventual development of FY 1957 and FY 1958 programs for France. As stated in the MAAG transmittal letter, the Country Team will be prepared at some future date to present its recommendations as to the amount of grant military aid that should be programmed for France under the FY 1957 appropriations and the FY 1958 budget estimates.

11. Size of Program: The gross requirements are placed at $736 million, and net requirements (that is, less assets programmed but undelivered as of March 31, 1956) at $408 million. Furthermore, this net requirement is subject to a possible increase by an unspecified amount to cover the provision to France of certain advanced weapons. At the same time a part of these total net requirements (including advanced weapons) may be met out of FY 1957 MDAP appropriations. Because of these unknowns, it is not possible to establish on the basis of the MAAG submission how large an additional appropriation would have to be requested for FY 1958 if it were to be determined that it was in U.S. interests to cover the estimated deficiencies in full.

12. Distribution by Services: The net requirements of $408 million are distributed by services as follows:

		Millions of Dollars	% of Total
Army		188	46
Navy		163	40
Air Force		56	14
	Total	4087	100

13. Priorities: The estimates have been developed, however, by priorities as follows:

	TOTAL	Army	Air Force	Navy
		(millions of dollars)
I.	129	30	56	43
II.	164	139	0	25
III.	0	0	0	0
IV.	114	19	0	95
	4087	188	56	163

The following table indicates the percentage of the total estimate for each service within the first, second and fourth priorities:

		(Percent)
	Army	Air Force	Navy
Priority I	16	100	26
Priority II	74		15
Priority IV	10		58

14. Main Items: (a) Ammunition is the principal item in the program, accounting for $174 million or 43% of the total. This is mainly to create a 90-day reserve for the French 14 NATO-committed army divisions ($137 million). The ammunition deficiency was greatly increased as a result of the criteria by which excesses in ammunition of like calibre but different type could not be applied to offset deficiencies as had been the case in the programming exercises for previous years. In addition, the French withdrew $19 million worth of ammunition from the list of ex-MDAP assets reported by them as available to cover NATO requirements.

(b) The next important item is ships and harbor craft, amounting to $71 million or 17 percent. This requirement, exclusively for Priority IV vessels to meet NATO goals, is to replace craft determined by the French and confirmed by MAAG to be obsolete. These vessels were acquired mainly under lend-lease and by surrender terms, not under grant aid.

(c) Maritime aircraft amount to $64 million or 16 percent. This item, distributed among first, second and fourth priorities, is to fulfill a requirement resulting from attrition of obsolete non-MDAP craft and increasing build-up to the NATO force goal of 84 such craft.

(d) Spare parts for Army and Air Force equipment total $45 million or 11 percent.

(e) Electronics and communication equipment for all three services, but mainly Air Force, total $28 million or 7 percent,

(f) Attrition-type aircraft total $13 million or 3 percent.

15. French military operations in Algeria have had an incidence, but to date a limited one, upon the estimates. The withdrawal by the French of $19 million of ex-MDAP ammunition referred to in subparagraph 14 (a) above, was doubtless attributable to North African requirements. In the case of the Army estimates recurring costs in attrition of end-items and spare parts support were increased because of Algerian operations in that the 25 percent annual reduction in recurring costs which would otherwise have been required was not made, and an equipment usage factor twice higher than formerly utilized was taken. Since the recurring costs estimate for the Army is $30 million ($28 million spare parts, $2 million attrition), the total effect of North African operations on the estimates is about $27 million only or 6.6 percent of the total. If hostilities continue over a prolonged period of time, the effect could become considerably greater. In the view of the Country Team the fact that Algeria is an active theater of operations and the overriding importance which the French Government attaches to its efforts in this area fully justify, from a political point of view, the allowances made for this factor in the computation of deficiencies.

16. The MAAG estimates are based upon the assumption outlined in Section A above that France would not be likely for politico-economic reasons to increase its defense expenditures to meet these deficiencies. This assumption will be reviewed when the Country Team is asked to make specific recommendations with respect to the FY 1957 and FY 1958 military aid programs.

Douglas Dillon

1. Source: Department of State, Central Files, 75 1.5–MSP/7–2556. Confidential. Drafted by D.J. McGrew, John W. Tuthill, Director of ICA in Paris, and Harvey R. Wellman, First Secretary of the Embassy in Paris; and cleared in draft with MAAG. The source text indicates it is a Country Team message.
2. Not printed. (Ibid., 700.5–MSP/7–1056)
3. Paragraphs 3 and 4 of circular telegram 12, instructed Embassies to report on the general approach, major political considerations, and basic assumptions used in aiding MAAGs in preparing FY 1957 MDAP programs, and to comment on the political and economic implications of programs submitted by MAAG.
4. Not found in Department of State files.
4. Not found in Department of State files.
5. As contrasted to “extraordinary” purposes—namely, the current effort in Algeria and the remnant of the French forces in Indo-China. [Footnote in the source text.]
6. The revised 1956 military budget is broken down as follows:

   “Ordinary” Defense		(billions of francs)
   National Defense Ministry		841
   Overseas		52
   Other (pensions, etc.)		183
   	Sub-total		1076
   “Extraordinary” Defense
   North Africa		296
   Indo-China		18
   	Sub-total		314
   Total			1390
   [Footnote in the source text.]

7. Detail does not add to total because of rounding. [Footnote in the source text.]
7. Detail does not add to total because of rounding. [Footnote in the source text.]