94. Memorandum From Secretary of the Treasury Dillon to President Johnson1
SUBJECT
- Financial Assistance for Italy
I am attaching a copy of an Italian Government announcement2 describing the agreements reached between Under Secretary Roosa and Governor Carli of the Bank of Italy. It will be given to the press in Rome Saturday afternoon for release Sunday morning. There will be a simultaneous release here in Washington.
The agreements on the part of the United States total $733 million of assistance in one form or another. In addition, since yesterday the Germans, at our urging, have agreed to a $150 million swap with Italy and the British have agreed to a $100 million swap. The overall total has been rounded up to “approximately $1 billion” in the announcement.
As I explained yesterday,3 the United States assistance will include activation of the remaining $150 million of the $250 million standby swap arrangement between the Federal Reserve and the Bank of Italy—a new $100 million swap between the Treasury’s Exchange Stabilization Fund and the Bank of Italy—a $200 million Export-Import Bank line of credit—$250 million in standard three-year CCC credits for the purchase of agricultural commodities, and the purchase by the Treasury of $33 million in lire which is the balance required to offset our outstanding medium-term borrowings from Italy. None of these transactions will have any adverse effect on our balance of payments and the CCC and ExIm credits should result in larger U.S. exports than would otherwise have been the case.
As I told you yesterday, the information given us by Governor Carli of the Bank of Italy leads us to believe that the Italian program to redress their balance of payments will be effective and stands a good chance of eliminating the Italian deficit over the next 18 to 24 months. The funds available to Italy as a result of the current agreements are considerably more than adequate to care for this year’s prospective deficit. The announcement of the large total is designed to obviate any threat of speculative attack on the lira. The urgency and timeliness of this action is evidenced by the fact that rumors of a weekend devaluation of the lira swept the exchange markets today causing one large New York bank to suspend all dealings in Italian exchange. Italian foreign exchange losses today also exceeded $60 million.
The CCC program has been cleared with Under Secretary Murphy at Agriculture and the entire program, including the text of the Italian statement, has been cleared by us with the Department of State.