154. Telegram From the Embassy in France to the Department of State0

3124. Regarding Embtel 3115.1

Genesis of Pinay resignation doubtless involved variety of considerations on part of Pinay, Debre and de Gaulle. From Pinay’s point of view, it seems likely that he was motivated on one hand by growing unhappiness over number of issues (NATO, European integration, economic policy, and perhaps not least of all manner in which de Gaulle runs government), and on other by feeling that with deterioration in internal political climate (including attitude his own group) and bearing in mind his own long-term ambitions (i.e., to succeed de Gaulle) this might be advantageous time to leave government at peak of success of his economic program. From point of view of de Gaulle and Debre, there was doubtless growing irritation (shared by several UNR Ministers) with independence of Pinay and his outspoken criticisms and a feeling that, while his departure might have some undesirable repercussions, success of Pinay program such that government could afford to let him go at present juncture if someone like Baumgartner could be counted on to minimize impact on financial circles.
On political plane, Pinay departure likely to have significant though probably not immediate consequences. Independents, who have in majority become increasingly hostile to government over past [Page 324] six months, have privately welcomed Pinay crisis and can be expected to seek to capitalize on Pinay’s departure for purposes of party politics. Flechet may be prevailed upon to resign and resignation of Rochereau is also possible while Giscard d’Estaing and certainly Jacquinot are expected to stay on.
Although Pinay had not been very close to parliamentary group during last year and although he known to be somewhat at odds with majority of party over Algeria, independents can be expected avoid mention of differences and endeavor to rally behind Pinay. Over period of time, anti-governmental trend among independents likely to be accelerated as result both by virtue of fact that party no longer inhibited of Pinay’s presence in government and because party will feel that it has alternate leadership to propose. This does not necessarily mean that party will move into “opposition” at next session of Parliament (April 26) but it will be more prone than before to adopt hostile position on specific issues. Extent to which this trend among independents will be serious will depend, of course, on nature of problems, particularly Algeria, which will arise during next few months. A corollary development will be to give greater weight to position of MRP whose support will become increasingly important to government.
It is well known that Pinay has been critical of de Gaulle policies towards Atlantic Alliance. Pinay is reliably reported to have been told by de Gaulle that government’s policy would be to continue to favor Atlantic Alliance but that his government would insist that United States and France participate on equal basis on development and modernization of Alliance. General then let Pinay know he was aware of and could not countenance latter’s critical comments made in public.
Departure of Pinay from government removes leading political figure advocating close cooperation with United States within NATO but does not in our view signify any change in de Gaulle’s policies.
Problems facing Pinay’s successor concern both foreign and domestic scene. If, as seems very likely, government takes position that economic and financial policies pursued since beginning of 1959 will not change, new Minister of Finance’s first job will be to convince financially sophisticated business and financial groups that there really has not been any reversal of policy. Failure to achieve this could mean a falling off of foreign investment, particularly in quoted French securities, and greater interest on part of Frenchmen to invest abroad.
If Pinay’s successor is Baumgartner, as now seems likely, this problem should not be too difficult, at least in immediate future. For such people he is symbol of financial conservatism and private enterprise. Although Pinay is widely known in France as defender of purchasing power of France, his departure would not necessarily provoke rush to buy goods on assumption that prices would start rising. [Page 325] However, businessmen might be little more likely to raise prices or labor unions to press for greater wage increases. In labor field especially, successor and government in general would have to be careful not give impression Pinay’s departure meant change in policy of trying keep wage increases within limits of annual productivity gains.
Baumgartner has not been a supporter of Common Market although he apparently changed his position somewhat by last summer (see Embdes 184 July 31, 1959).2 However, support for Common Market in France, both inside and outside government, is sufficiently strong that his views are not likely change direction of French policy in this regard.
In longer run on domestic scene, first test of relative weight to be given to objectives of economic expansion and price stability will come when 1961 budget is drawn up this summer. If planned deficit grows, especially when it seems most likely that France will be in period of expansion, it will be evident that financial conservatism of this past year is being abandoned. In assessing likelihood of this change, following considerations should be taken into account: (1) other Ministers are not advocates of expansion; (2) they have very recent memories of b/p crises and understand that present external reserve position too weak to bear triple load of rapid expansion, speculation against France, and repayment debt scheduled for 1960 and 1961; and (3) present government is less likely put itself in embarrassing position of asking for foreign aid than past ones. If government is prepared to resist political temptation to appease pressure groups, present political structure will enable it to maintain stable basis for French economy.
  1. Source: Department of State, Central Files, 751.13/1–1360. Confidential; Priority. Transmitted in two sections. Repeated to London, Bonn, Brussels, Luxembourg, Rome, Stockholm, Bern, and The Hague.
  2. In telegram 3115 from Paris, January 13, the Embassy transmitted the text of Pinay’s statement of resignation. (Ibid.) Finance Minister Pinay resigned from Debré’s Cabinet on January 13 and was replaced by Wilfred Baumgartner, Governor of the Bank of France.
  3. Despatch 184 from Paris transmitted Baumgartner’s views on European integration. (Ibid., 440.002/7–3159)