Foreign Relations of the United States, 1958–1960, Eastern Europe; Finland; Greece; Turkey, Volume X, Part 2

186. Memorandum From the Assistant Secretary of State for European Affairs (Elbrick) to the Under Secretary of State for Economic Affairs (Dillon)⁰

Washington, September 12, 1958.

SUBJECT

• Finnish Loan

1. As a consequence of last week’s Washington visit by Dr. Klaus Waris, Governor of the Bank of Finland, I think some reassessment of the Finnish request for a dollar loan is desirable. Since the IBRD is now apparently prepared to consider a credit in excess of the $20 million originally contemplated, Finland’s loan requirement from us can be scaled down from the initial $30 million to an estimated $20 million. If we can provide a new Finnmark counterpart credit,¹ it is likely that the more pressing Finnish needs can be met with even fewer actual dollars.

2. The political and economic foundations of Finland’s independence have been subjected to a gradual but perceptible attritive process during the past two years. General economic decline has aggravated already serious political instability and contributed to the success of the Finnish Communists who now control one-fourth of the Parliament. These developments have (1) built up pressures for accepting substantial Soviet aid and (2) encouraged some serious consideration of taking Communists into the Government. The realization of either or both of these possibilities would represent a major set-back to the basic NSC 5403² policy objective of maintaining an independent, democratic and western-oriented Finland. I think that this danger can be markedly lessened and possibly removed by adequate and timely contributions to the development of productive capacity which would make the most economic use of Finnish resources and increase trade with the West. (Attached is an independent analysis of the political justification for a loan to Finland.)³

3. Therefore, I recommend that, in reprogramming MSP funds, careful consideration be given to a Finnish loan of $10 million which would be supplemented by a substantial credit from existing and prospective PL 480 counterpart funds.⁴ In anticipation of future Finnish needs, I also propose the inclusion of an additional $10–$15 million for Finland in the FY 1960 MSP budget request.⁵

0. Source: Department of State, Central Files, 860E.10/9–1258. Confidential. Drafted by Nelson.
1. We loaned Finland $14 million in P.L. 480 Finnmarks early this year. [Footnote in the source text.]
2. See footnote 1, Document 179.
3. No attachment was found in Department of State files.
4. A $9 million P.L. 480 agreement was made for FY 1958 and Agriculture proposes $7.5 million for FY 1959. An insignificant amount remains from agreements prior to FY 1958. [Footnote in the source text.]
5. On September 19 Dillon left the United States on an 11-nation tour to study the operation of the Mutual Security Program. He returned in late October, but it is not clear that he studied EUR’s proposal until mid-November (see Document 195).