STUDY OF EXTENSION OF US AID TO FRANCE (FOR SUBMISSION TO THE SWNCC SPECIAL AD HOC COMMITTEE)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002900160002-1
• Release Decision: RIFPUB
• Original Classification: T
• Document Page Count: 77
• Document Creation Date: December 23, 2016
• Document Release Date: March 14, 2013
• Sequence Number: 2
• Publication Date: July 1, 1947
• Content Type: REPORT

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STUDY OF ENroisiow OF US AID
TO PRANCE'
(for eubmiasion to
the gRECC S ?lel Ad Hoe Committee)
July 1, 1947
DOCUMENT NO. I
NO CHANGE IN CLASS. 0
o DECLASSIFIED
CLASS. CHANGED TO: TS
NEXT REVIEW DATE:
AUTH: tRZ-2 CA, ? 14
DATE/VII IEVVER:
rePARTIVENT OF STATE
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41 10 geR. 1E-
CONFIDENTIAL
TABLE 00 =TEATS
Pap
X. Ana1ysis of the Situation . ? ,aa aa a a a.a a. 1
A. B
SIC FOrWgeemoao00600
ea ova am ea o
10 Ito Economic Situation 0000000000 0 0. a o a0
1
2. .Politioal Disillusions and Dissensions . .
3. Appre melon over World Tensions . a a. a a a a. a . 0 10 ?
. French Communist Stra gth a.meimome ma ? o o 11.
The Shadow of Do Gaulle
0 0 0 0 0 0
Bo Present Position of the Ramadier Government . a a a . 15
,C. Objectiv s and Mthoda of -0ther Gra t Po a. a a a . 17
1. Great Britain .. 17
? woomememome mamma
i
2. The USSR 0-00000000006000 a. 0 0 e G e e . 18
IX. U.S. Assistance to Franca Since V-J Day . .........0 21
.. -
e-
A. U.S. Financial Astistance to France ........ ., . 21
B. Oth r Assistance . . . . . a/
00000 0 0 0 0 0 0 0 0 0 0 21
C. Contribution of U.S. Finsnoial Aid to .French Economic
Recovery . 00,000 0 0000000400000 0 00 . . 23
Political Effects of this Aid a . mom ? e o a?mme ? 25
III. U.S. Objectives .. . . .. ............. . . . . . . . 28
XV. Consideration of Means of Reaching Objectives . a a . a. 0 a.. 30
/
A. Economic. Ca a ? 000 000000000o COO 0 0 0 0 32
B. Political .
O00 0000 aol? ? 0000??0 0'00000 0 34
Information 0a a. 6 a 0 a 6 a a a a a a a a 6 060000 $6
D. United Nations .
V.
Fiagnitude,
0 S a 0 a o' a 0 a
0 0 0 0 0 0 0 fa
ature mod Timing of the Measurea Required
A. Cooditr'Nd a a.
37
a.
39
Ff .. 59
I ENTAL
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i? till-N ll/-L
ii
Page
B. Financial Needs .a . . a 006.,00060,00060 40
Co United Nati nsa aa 00 0 00000
0000 a
VI. Probable Availability of Economic Aid From Existing Sources
Under Present Polioi s a . a a a d a a a a a a a 0 . a . 44
VII, Additional Neatures Required from the US a a a a a a a a a a45
47
VIII. Nature of Arrangem nts with Frenoh Government to Ensure
Succ s es of Progrmaa a a . a a , a o 00.00000600 0 .
IX. Effects of Refusal to Grant Aid or of Failure of Program
U dortaken a a a a a48
a 060.00
A0 Effects upon France ..... 00000000000600 48
Be Effects Upon United States Policy a 0600000000 . 51
Xe? Poesible rgency dituations
XI6 SUgMarY 0 000000600
4000
0 000000000 0,52
0 0 0 0 6 6 0
a . a a a . a a a E4
CONFIDENTtAL
ItiKkoreNttEr"
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. ,
37 -
Io ANALYSIS OF THE SITUATION
? Basic Forces
oidepefricieni- ?
France is in danger of failing to be the strong, dsmesmtto and
friendly power which accords with US iniweesta and the desires of most
Frenohmen. The danger to France and US interests lies in the immediate
future, not three or four years off. It is not a matter of the Communist
Party. Which.is already the largest in France, esmrgirag with a majority
c at the next parliamentary elections; the el otiond are now scheduled for
1051 and cannot be held before mid-1948. The danger lips in th possibility
that the attitude of the French poople toward their present middle-of-the-,
road 1 aderS, policies, and institutions will turn from one of fitful
pessimism to one of general antipathy and so offer little resistance to
totalitarian thrusts from either the Communists or such rightist elements
as may r lly around de Gaulle.
/Yo
.?epr???eww'mm?m?p????????????r'SRI?......Wr
If that is the outcome of present efforts to moot Frances eConomio
difficulties, the most likely beneficiary will be the violently anti-American
Freneh Communist Party. At present, despite the fact that the Communists
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are in the opposition and are making the government's task more difficult
by backing -el spread wildcat strikes, their immediate aim is not chaos
but their on return to the GovernMent with increaeed powers. That even-
tuality 'would orient French policy away from the US and toward the USSR0
it would not mean a change of French political institutione fremdemooratio
to totalitarian. But France's economic difficulties may mount to the point
where a mere oabinet reorgenizationeeannot carry conViotion offbringing a
solution, or the Right may try forcibly to prevent the Communists' return
to the Government. In a situation of administrative oollapae or civil
strife, the Communists' carefully built up control of key tradeeunione,
-infiltration of the civil administration, polies, and armedeforces, and
possession of-military formations of their awn would give them an initial
advantage in the struggl for power.
The present year, and even the next months, oonetitute a critical
period. If the preeent Government oan'effeot some immediate economic im-
/
provements and present the country with hope for the future, it should bee
come -progressively stronger. risn the orientation of the French people. toward
the US, not only by immediate economic need but aleo by tradition and prenent
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ideological'considerations, should have its full effect.
1. The'Economic Situation. The root cause of Franco 's unstable
situation Can be found in economic conditions and popular dissatisfaction
with them. The principal characteristics of the economic picture are a
3
standard of living still significantly below prewar 1 vela, inflation,
and a slowing down of the rata of recovery of industrial production.
The French realise th t they are badly off and that the available goods and
services are badly distributed; of still greater importance? they feel that
there is little Chance of economic betterment in the near future under xist
condi
ing institutions leadership.
A geed part of the caus of France's economic plight is beyond ito
control. France must import CO,i9 food, fertiliser, and machinery, but the
are in short world supply. /he first three are subject to international
allocation, so that France's needs can' be met only if the amounts available
as.cul.u6iO4 am4 cw.romf
to others are reduced. Most orders for machinery uet compete with
IBIEMEf US and world demand. The general impoverishment of daarope makes the
export of nonessential French items diffioult and obliges Francs to purchase
ita essential requirements from the US (paid for in largo pardolLar
t byAcrediten,
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and therefore at greater cost than would be the case if Europe were able
to supply the e Goods as in the past.
The fact that France was defeated and occupied before it had a chance
to recover from the depression of the thirties, and the current politiCal
fnatability, nOtably,th lack of public respect for governmental authority
and of confidence in the'compotenes and good faith of officials, are
further reasons for the unsatisfactory state of the French economy.
The Standard of living. Current consumption is roughly the same
as in 1946, when the average r to of consumption was probably 75 to 80 rcent
, If-19,113 -7'm depression year, But the leTe of oongImption of the urban
wage erner ranges only from 60 to at most 70 percent of 1938. Farmers
and many traders including those operating illegally on the black market')
probably maintain rates of consumption equal to or greater than those of
prewar years.
The general standard of living is lower than is indicated by the abov
data on consumption. After five years Of,war? and occupation,,Ahich were
preceded by the long depression of the thirties and followed by only a
Modest recovery in 1946, the consumer's stock of durable and 8%mi-durable
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goods has rapidly dwindled. Housing has been destroyed and damaged and is
in a poor state of repairs Clothing, kitchen utensils, and the like have
been used up at a much faster rate than they mere replaced.
The urban French have been hard hit in their diet-- the single most
?important sign to a Frenchman of his Ltate of mall.-being. Per capita urban
food consumption, for example, has dropped from a daily caloric intake of
2650 before the war to 2250 today., and .many working-class families receive
less. There has also been a considerable reduction in the quality of the
diet. The responsible factors include: (1) food production has been held be-
low prewar levelo by wartime losses,, the need of demining, lack of fertiliser,
shortage and depreciation of agricultural machinery, and adverse weather
conditions in the minter of 1946-47; (2) food distribution has been inequit-
able as peasants have retained a larger share of their output, diverted some
of their produce to the black market; or withheld it in expectation of higher
prices later on; and (3) imports have been restricted by the needs of other
countries at a time of world shorta a.
- b, Inflation. The inflation is primarily a function of the Government
budgetary deficits, financed through larg monthly advances from the bank of
France at a time when the( factors of proftetAtn co Thflj omPloYad; of the
restricted volume of goods and services available; And ofexpeothtions of
continued price rises. It results in t decrease in total economic output since
it places a premiem on n' produotiv tradinx, the production of leas
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essential commodities, and speculative hoarding, It also places a
disproportionate share Of the economic bur n on the fixed income group
Industrial production. French industrial production which
made a steady recovery from the low level prevailing during the four years
of occupation and the depths to which it fell at he time of liberation.
\
.reached a peak of roughly 90.95 peroont of 1938 in October 1946, subso-
quontly dropped to roughly 85 percent. but now shows signs of improvement.
(It should be noted again that 1938 was a depression year in,France'.)
..The most important economic factor determining the neral course of
:French industrial production in 1946 was the availability of energy0 primF.
arily coal. The world, shortage of coal,has restricted French imports below
what they were before. the war ahd had caused France to use opal of lower
than. prewar quality, BQ that for the sameeconomie results the tonnage roc,
?quiremente Are greater than before the war. Fhs faet that French Coal pro-
duction haa stood at over 100 peroimt of 1938 aims the beginning of 1946:
has been unable to Make up the. difference caused by. ? lower British an
_Oen= production, and no great Additional production increase in France
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can be xpected.
In 1947 the shortage of ,coal still limits the level that industrial
, output might attain, but other restrictive factors axe becoming inoreasingly
important. The margiti of unused plant capacity has narromid. The in-
? flation is interfering with production by making it profitable to accumu-
late inventories all along the line in anticipation of higher prices an
by reducing the incentive for productive work. Further production increases
have more and more to be based on inoreased efficiency of both management
and labor.
The =et Plan. The met Plane officially adopted by the
French Goverment early in 1947D was designed primarily to inoreaae? and
morns Franc industrial plant and equipment in the years 1947-50 in
order to. raise the productivity of the oountry. Only by such increased -
productivity can France expect to achieve-and maintai whigh standard
of living.
The program cells for a rate of gross capital formation in 1947
equal to approximately 20 percent of the total amount of goods and servioes
estimated to be available during the year. This is an extremely high r te
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t any time'. It is es cially so when. national inoow and consumptien
are deprosied. Primarily for this reason, the investment prograa is not
being and cannot be implemented in fUll this year. Although estimates vary,
it is li ly that the actual rate of grois capital formation in Prange in
. 1947 will not to more than $3.7 billion(in 1946 prices), as opposed to the
$5.7 billion originally planned.
st. Forei tr;xdo. In additionto,its import difficulties, Fraftoo.,
with low domestic produetion and relatively high consumption needs t homeb-
has little available' for export. Thia problem has boon mat by drawing on ita
oredit;and capital. In 1946 France was able to Pay for lass than half ofrits
imports out of current earnings'. Fotei oredito, principally from the Mo..,
and /iqui tion of Fraomcs- gold and foreign exch go reserves have paid in
roughly equal parts for the other half. It is expected that the balanosof-
PaPas
ts disequilibrium will continue for several years, thereby draining
France's reserves and forcing it to attempt to obtain noW foreign credits in
order to Maintain a Modest,standard of living)))
.2, POlitical Disillusions and Dissensions. The ?ranch have been
grievously disappointed in their hopes that a political "brave new world"
would follow.libor tion and victory'. Humiliated and angered by defeat and
occupation, they started-tho,nower with zeal for purging the institutieneo
4:01iticians, and political practices that had, they felt, led to the collapse
of the Th4rd)Repuh/ica Repistamos had brpuktht a nye spirit of ttply-1; the
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firat resister of Francon-was the chief of state-; and the "charter'
?
of .the National Council of Resietance provided eeprOgram Of reforms?
In the referendum of October 1946, 96 percent of the voters called for
a new constitution?
But the new constitution of October 1946 came 'remarkably close to
the provisions of that of 1876?' It was approved by only 36 percent of ,
the registered voters with 33 percent voting against and 31 percent
abstaining? By that time many Frenchmen had become disillusioned beeause
the parties were as divided and as selfish as before the war? though the
number of parties and the distribution of their strength in parliame t
made coalition governments inevitable and because old-style scandals
tainted political 3eaders. The center and Right beoame disturbed beause
the Constitution makes the National Assembly -- which cannot be dissolved
before mid-1948 7- strong relative to the executive and because the
electoral law makes any radioal change in the strength of. the political
partiee extremely difficult and even tends to:perpetuatethe same party
leaders in office? The Fourth Republic had no sooner begun. than the die-
oontentedv instigated by General
Oaullee.ware-at uprk in-an attempt
to revise the balance of its fundamental institutions,"
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French Governments have therefore found it difficult to get
popular support even when they -were in no danger of being overthrown by
the National Assembly. Government decrees have not brought prices down,
and government appeals have not brought food to market or an and to wage
demands. The Parts have not been ready to make immediate sacrifices for
the-ultimate good of the thole, largely because they have not had cenfi-
dance in the disinterestedness of their leaders.
4. Apprehension over World Tensions. French morale is further
lowered by the acute national fear of a third World War and the realisation
that France can do. so little to prevent it. The French are not adjusted to .
being a great power in name only and to having the late of Europe in the
hands of extra-European super-powers. Their fear both attracts them toward,
and repels them from, the US. On the one hand, the great majority prefer
democracy to totalitarianism. the US to the USSR. On the other, they are
apprehensive over the Truman Doctrine, not so muoh because -specific politic
strings might be attaohed to US aid, but because its direct challenge to the
Soviet Union appears to force aid recipients to choose their side in a pot...
ential world conflict They have been correspondingly reassured by Secretary
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Marshall's Harvard speech, which seems to them to encourage Europe to
draw together again.
Coupled with this fear of war between the US and the USSR is an
,almOst uniVersal fear of Germany. The Frenoh are obsessed with the be-.
lief that the" Big Threes, unable to settle the East-West rivalry, are build-
ing Germany up and will eventually enable the Germans to play east against
? West.for their own benefit and with inevitable disaster for France. Only
after the 1947 Moscow Conferencedo s there sem to have been any reali-
zation in France that US policy, gives real consideration -- and more than
that of the Soviet Union -- to the security needs of France'.
Finally, ,the average Frenchman is bewildered and resentful over the
inabilityef'r form programs to satisfy the'rising.colonial nationalisms
in the French Empire. Here again there is a tendency to ,lay part of the
blame on the United States, whose policy many Frenchmen regard as cempoudded
of political anti-colonialism ind economic imperi lien both directed toward
leesening France's hold on its overseas possessions.
40- French d mmunist Strength. These economic dissatisfactions, politi-
cal disillusionments, and worries over world tensiOns and US policies all
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play direbtly into the hands of the extremely powerful French Communist
Party. It is already the. laost in the Assembly, has over a million
rty members, and in the November 1946 election polled 5,500,000 votes
(28.5 percent of the total), the largest of any party and the largest in
its history. This preeminent position the Communists hold by reason of:
(1) their patriotic record during occupation and since liberation; )
their position on the extreme left of the political spectrum, where they
catch the protest vote against administrative inefficienpy or economic
inequities; (3) their unceasing and well-designed appeals to particular
groups, including the farmers; (4) possession of a cynical propaganda
machine, first-rate in polemical quality, nation-wide in'scepe? and in-
cluding two of the four.newspapers with the highest circulation in France;
acdaras to unlimited funds; (6) their drive and efficiency, which haS
given the impression that they at least could get things done! (7) the
offer of hope for a better future, to whioh they alone among?th parties
:gloom able to given authentic ring; and :(8) the "band wagon" urge of French-
men who see Communism as the "wave of the 'future."
VI a crisis, however, the strength or the Communiats wOUld lie less
inbeing-"the first party ofFrance than in their,potaession of:
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(1) Domination of the Major tradeeunienerganization (the CGT
control of important component unions;
(2) Infiltration by trusted Communists into the highly centralized
French administration, principally in,those ministries which have been headed
by Communist ministers; Industrial Production,eArmaments (which controls
the State arsenals), Air, Reconetruction, Labor, Veterans, and Public Health;
(3) Infiltration of undetermined but differing degrees into the Army,
Air Force, (notably ground force personnel at the Oerfields)., Gendarmerie,
and Municipal Police Forces (including that of Paris); and
,(4) Command of clondeetino armed forces ofundetermined -strengthp
well organized around the battle-tried nucleus of the Communist under-
ground_ (the\FTP), and of reactivated international units d ting from the
Spanish Civil War.
While there is some doubt as to the Communists ability to seize powere
and much more as to theireabilitY to retain it after a successful coup dg
4tatta DD one questions that they could for a time totally dierept the life of
Frahoe.
The apparent Unreadiness of thR Soviet Union to support the Premix
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Communists if they became engaged in civil strife has encouraged them:
up to Very recently at least, to follow an outeardly constructive, pat-
.
14.
,riotio line. The Communist Party has aimed at respectability as a political
party like the others, has preferred being in the government to being in
the opposition, has been instrumental in raising coal production to new
' heights end until recently prevented strikes by the longdiscontented
workers. At the sane time, Communist ministers have influenced French
Foreign policy along lines favorable to the Soviet Union, dad the.Coesonist
press, while constantly praiiing the USSR as Frances best friend, has
lost no opportunity to misrepreeent,and Vilify US foreign policy and con-
ditions inthe US.
The Shadow of De Gaulle. In opposition to the present goverment,
to the present functioning of-the institutions of the Fourth Republics
but even more to the Communieteand all their works is General de Gaulle.
He expects that the eoonomic crisis will prove too much for the ordinary run
of politicians and that he will Once more be called upon by the people to
save -France. T0 prepare the road he has founded end accepted the leader-
ship of the RPF (Rassemblement du,Peuple Franeais), anextra-parlismentary
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movement whose existence has so fir served chiefly as an influence on the
Government parties to adopt Gaullist policies for fear of having to adopt
the General himself . "
So far. De Gaulle 's ideas and movement have attracted followers *largely
from the parliameatary and extr Parliamentary Right and Right Center9
which have been in hopeless opposition to the post-Gaullist governments
and have lacked any leader of stature. The Left does not trust him; the
Communists and most Socialists believe that he would not merely strengthen
the executive but turn the Republic into a dictatorship. For that'reason.
a move to b74ng De Gaulle to power would. invite a Communist-led gereral
strike and perhaps civil war.
. Present Peoitien of the Ramadier Government.
TheRamadier Government faces a grave but not hopeless eilmaelene
The .bread ration was out on May 1 and its maintenance oven at present?levels
until the new crop is available is problematic; meat is prohibitively ex-
,
pensive, and the wine ration a month in arrears. With prices etill rising. .
mounting worker discontent has brought defiance of .the Government in a
aeries of wildcat Strikes that ehows, few signs of abating. These strikes
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now have the support of the Communist Party, which, having gone into
opposition on the wage issue, is attempting to show that it is impossible
to govern France without the "working classes," still less against them.
The Gornmunista are also plugging for abandonment of the economic controls
which the Government officially favors but which the Radical Socialists,
though still in the Government, have long opposed0 In the face of such
challenges, and insecure in control of his own party, the Socialist
Premier has had to make conoessions in the form of disguised wa in
creases and relaxed controls that may critically aggravate the national
economic crisis in the near future,
Nevertheless, if Ramadier can survive th next two months, the French
political picture may gradually brighten By August the new wheat crop
uill be in, more German coal should be available to France primnriky
through increased 'CZ exports, and Parliament Should be in'reoess, The
'
ComMunists arwunlikely to use the weapon of et general strike merely to
overthrew the Ramadi r Government, reserving that rather as a weapon
against De Gaulle. The dioal Socialists are, in the last resort, un-
likely to upset the Government for fear' of 'a orisis that would bring the
Communists back into the oabitteC Seoretary Marshallgs Harvard speech
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has given the French hope? that the US means to aid than if they are con-
struotive Suropeans, and not merely -to Use them to battle CemmUnism. Ram-
dior has already revived French donfiden somewhat by the relative vigor
with which he has attacked his problems. If he w ethers the immediate crisis,
? his very success will attract support that will make the uphill road ahead
somewhat easier.
C. ageotiVes arid thods of Other Great-12awers
I
Great Britain. The British desire a strong, friendly, and demo
oratic France. This desire includes all political groups in Britain. Not
only those who desire close teamwork between 3ritain and the US:Mut even
more those. who, like Churchill, advocate a. United States of 4urope? or whop
like the Labor baCkbenchers of the Crosamen soheol, want Britain to stand
between the US and the USSR, require a strong and friendly France for the
success of their polieiec.
.Implementation of this desire has been on the whole die ppointing.
Postwar fatigue and preoccupation With their own troubl s have lad the British
to focus their attention on the United ,States and Russia at the expense of
Franco4Sritish relations., The impact-of British Socialism has been barely
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felt in France. where \)it-could have done 'ranch to bol r the badly divided
Soaialitats.- and the British have made no, real effort to 0.0711P060 their .
dangerously profound differences with France over? the German settlement*
The credit side4, however4, is far from negligible and includes the
? following:
Groat Britain and France are bound by the fifty-ye r alliance of March
4, 1947 to prevent the emergence of an aggressive Germany and to promote re-
ciprocal economic cooperation. Britain which is a creditor of France botti
for past indebtedness and on current account - though 032 nowhere like the
scale of the US an agreement late in 1946 permitting the initial
post-ponement and gradu 1 liquidation of this debt. The British have tried
to remove French siispicions that they.kre' trying to build up .Garmany to a
dangerous extant and at Moscow joined the US in pledging an lawman? in coal
deliveries from the bizonal area it proportion as Garman goal production
romp* Th British -hove supplied some military equipment to the French armed
forces and have invited French outfits to certain British military schools
2. The USSR. The twofold objective of Soviet policy has been to
neutralize Franco an .a factor in any politic 1 or economic grouping or
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aleusodial4olit of ,Western European nations through the FrenchCommunist
Party and to prepare a struoture of government for use if the Kremlin ?
ahould take direct control of 'nestern Eumpe.
scow regards France as the moat important potential outpost of
19
Sovietrpower in Western turops. Tasonover possible the USSR striVea both
directly and indirectly to Make itself mg rded as Franc a truest ftore
friend. The Soviet -Government consistently gave slightly more roue
forms, of recognition to General de Gaulle before theliberation of France
than did -01) US and Great Britain; it into the first goWernment to conclude
)
p. long- alliance against /Germany with France. Soviet work in cultural
lations with Franconia ;Intensive, both in propaganda inside France and -in
invitations to French groups to visit the Soviet Union. The. USSR is handl...
capped by being unable to give France substantial economic aid, but Soviet
wheat shipments in the spring of 1946 were both good publicity for the USSR and
a fillip to the Communist Party on the eve of a general el ction. In goneral,
the Soviet Union stands behind the French Communist Party, both with guidance
on pelities and with radio broadcasts signed to help the French Communists
and embarrasa their politiol Opponents0 sovi t broadcasts maks t special
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point of trying to drive a wedg between France and Britain and the U.S.
never higher priority long-range Soviet objectives require ita
the French Communist Party may be expected tochange its lino at the risk
of being accused of subservionce, or to maintain an unpopular position even'
at the cost of losing followers. Thus the Frenoh Communists have had to
shift the emphapis in their necessarily nationalistio,German program to fit
Soviot:refusals to woe to French policies which might harm the Soviet '
aim of a Communist-dominated Germany. Moscow is likewiee respensibie for
the fact that the French Communists have remained the advosates of colonial
nationalists in the Prench Wen and thereby outraged MOst Pranchm nh,
while dangsrously isolating themselves on thia important issu
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?
1V.S. ASSISTANCE TO FRANCE SINCE V4 PAY
A. U.S: Financial Assistance to France
From 11-J Day until Jun 1967,, the V,S. authorised $1076
million of oredits for the French Union. (Table 1 contains a sUmmary of
thee credits by type and byamounts disbursed to date) Of the total,
the. largest part was provided by the 2xport-Import Bank. Its share amounts
to $1,200 million, or one-third of the Bank's total 1 nding authority.
The remainder of the oreditsare divided ae follows: $56 mil/ion for the
purchase of U.S. surplus ships, $500 million for the purchase of U.S. sur-
plus property in France and $420 million to cover French liabilities for
post 'F-J day deliveiles.
B. Other Assistance
Financi 1 assistance is both the largest single factor in our aid
to France and the most tangible. No less real, however, have boon a whole
series of other f (store such s (1) politioal.support of France's claims
to sit as an equal with the principal viotorious powers -- which, ezoopt
for the Potsdam moetingw?have.boen satisfied since the San Francisco con-
femme; (2)' the commitment (about ti) be bola
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dly fulfilled) to grant
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20
3.
of,
5.
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U.S. Financial Aid to the French ViliOn
Since. V-3 Dt,,y
(in millions of dollars)
Export-Import Eani.c Credits':
Amount
Authorized
Amount Disbursed
By"June 1, 1947_
December 4, 1945,
550
550
July 13 1946
650
424
Ship,Sales Credit
56
40
Surplus Property
3004)
300
:Settlement of 1end4ease and
war-claim: accounts-(May 28.9 1946)
420
420
6. Total credits
01,976
W An additional $100 million has been authorized, but
$1,734
no contract has yet
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To finance the completion of
purchases requisitioned under
lend-lease but not contracted
for as of V-J Day,
To finaice purchases of U.S.
equipment and raw materials.
To finance purchase of up to
100 U.S. smrplus war-built
vessels.
To finance purchases of U.S.
surplus property in France.
The original post of this.
property estimated at $1,000
million; French estimate value
.to them approximately 8100
million, .
To finance V-4 Day lendlease
inventories, and post_LV-J Day
transfers.
been signed with the French.
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'Fiance a part of our share of the German and Japanese 210:41.13,3 (3) the
"loan" of 7509000 American-captured Geo POW/s; (4) inastimable aid
in procure t of scarce items, nutritional, ical,- and induatrinl
during the irmsedLi ts post-hostilities period; (5) a real understanding an
the part of U.S.?representatives onIEFC d ECO for Frame s needs in
Wheat and (coal; (6) support of the French requests for credits from the
International Bank for Reconstruction and Development; (7) first choice
) ? -
in many su,rplus items or.. great interest to French. recovery, etc. veise.??? ?
Finally, although this is a nom-Government item, mention should be made of
the large amount or direct aid to special groups in France by the American
Red Cross, American Friends Service- Committee0 Almeria= Aid to France, and
-Other relief organisations.
C. Contributioaac2L.LJ: iconomic
During 1945 and 1946 France received and utilised foreign 'credits
totaling about 82,800 million, of which alexost 'ore-half (01,560 million)
TM IV from the U.S. During the same period the French expended approximately
?
01,800 million or their gold and foreign exchange resources to finance the
pert/on of their balance-of-mments of deficit not covered by foreign or dits.
Thus U.S. oreaits utilised by France since IT.4 Day represent over one-
quarter of all credits and foreign exchange resources (above currant French
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moranoaCitire.S.Oussaamra2?i.
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?
? earnings) that were used by Frame* in 1945 and 1646e
7
It is difficult to evaluate the contribution of 11.6. financial aid
to French economic recoverY. Certainly it was more important than is in-
dicated by the relative Biel) of U.S.oredits to Franco, or by the fact
that in 1946 snag!. aid ,provided France directly withgoods and service
amounting to approximately 5._percent of the qmantitiee that were produded
that year in France itself. The larger portion\of the 110S, oredits finan=6
oed the purchase' of too de which were absolutely necessary to the recovery
of the French economy. Without imports of foreign materials and equi rite
? the French economy could have recovered only with the greatest difficulty
? and at a much slower rate fret the extre ly low production levels at which
French induetry, was operating,toward the end or the War.. French forceIgn
exchange or gold reserves were insufficient to finance all French ireport
requirements, and France, unaided, could not .have financed the balance of
such.requireatents by increasing its own exports. French production ,and
consumption during the immediate postear period were at levels too low to
allow an appreciable margin for exports, and the resumption of French exports
themselves were ler ly dependent upon the prior reconstitution of stooks
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of raw rials of foreign origin. It is, therefore,: beyond doubt that
if U.S. credits had ,not beenlextended since V-J pay, not only would the
total amount of goods and servioes-availoble to France have been =eller
by the amount of snob credits, but also th actual volume of geode -and
services produced domestioalky would never hav been achieved.
D. Political Moots of this Aid
(
Although there is no exact way of Measuring the political effects
Of US aid to France, it is probably that it has had its greatest direct
effect on government officials, less on deputies in the national assemblies,
and least on the public. Those most closely concerned with solving France's
economic problems have been most au re of the country's debt to the US
and most graieful for our aid. The general public has not been subjected
to a publicity campaign on our assistance in anyway comparable to the
efforts expended by the Commmnist Party to make every Frenchman aware of
the Soviet wheat shipments imsvdiately prior to the June 1946 elections?
There have probably been few voters in any French election ho oat their
ballots for the representative of a particular party primarily because it
was thought to stand wall with the US Government. Nevertheless, the
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favorable accounts of US aid given by the'Sooialist and moderate press
and the constant allegations by the Corn net papers that the US is
atte pting to stiflo'French ind stry and agriculture it the interest
rican exports indicate that the French polit
al aders thesivee
believe US aid has been one factor in the voters' minds..
The Department's Office of International Information and Cultural
Affairs maintains a small staff in France which makes as much use of the
public media of disamsination as its very limited funds and personnel
permit. French newspapers? however, are by and large instruments of
?
sections of internal political opinion and also suffer from aoehronic lack
of newsprint and funds. Thi means that the press of the extreme i.ft,with
its. ample funds and secret subsidies, has had the' fulr at opportunity to
distort or misrepresent the nature and the extent of US economic aid to
Prance, in spite of the constant stream of facts and figures which.th
Information Officers of our 4mbassy make available to editors of newapapers
throughout France. The unremitting and shrill Oomaunist attacks and =cu.-
satiens against the United States suggest that there is active resistance
on the part of the French public to accepting the Communist version of our
achievements and our motive in the economic field. It is turivavor certain
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?
?
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that brcamparison our.own inform tion,effortsare puny and feeble,
though .they are certainly.plying a highly important role which should?
? be greatly intensified
Indirectly the fact at Franch.voters'h ye been ,better off- becau
of IP aid has probably inclined.thet to vote for less radical parties than
thoy would have done if their airs stances :had beton even worse. In this
27
connection, however, allowance must be made for the fact that the French
Communists thmas lves have not been advocating a revolutionary program, .
but at the time of all three French elections have been formost in de,.
mending from the working classes discipline, hard work, and ?adherasm
=erotic parliament ry institutions?
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III. US OBJECTIVES
The United Stateawishes to France Which is friendly end
- strong, serving as a bulwark of our-secUrity and our concept of mocracy
in the Continent of urope Conver ly we strive to preVent the develop
bent of a France which might ventually bcoine thR western bastion of an
inherently hostile "continental system." Our i
alate and long term in
teats,.therefore, lie in the success of the liberal democratic forces
'
,in France which represent a substantial if divided majority now and, poten-
tially, the overwhelming mane of Frenchmen should then political forces
fail, the whole orientation of US policy toward France and,V; stern Europe -
,
will have to be revised. Tlta keystone of our policy ha bee that in the
present battered state of Franca a return to economic health must precede
a return to political h alth. 6ithout neglecting diplomatic and morel
support in the international field, we must do our, utmost to assiet in '
France's economic rsoovery.
France controls overseas areas, of vital strategic importance to
this country whose inhabitants are not ready for completo, much' lean
sudden, indepen noe. The prmnises of greater autonomy and improved
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conditions for dependent peoples contained in the Atlantic, Charter, the
Chartsr of the Unitsd Nations, and the new French Constitution, as 11
as the weak nod co dition of Franos. have given an impetus to the Rationalist
movements in these areas such that a considerable degree of satisfaction
must be given to their political and economic aspirations. Their continued
assoiition with a democratic France on a voluntary basis and under mutual
gUarantces of politioaL COMOMIO, and cultural tights is a primary obcp
jective Of this GoVernmento The collapse or serious deterioration of
French authority in such areas would result in chaotic conditions Thich
Might well require an assumption by ths US of wide and costly responsi-
bilitie military0 economic and a inistrative, to prvt those areas
from falling directly or indireotly within the Soviet orbit.
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SECRET 50.
IV CONSIDERATION OF MEANS OF REACHING OBJECTIVES
Aside from broader considerations arid merely so far as our ob-
jectives in-France are concerned, it would be of the greatest advantage
from both the economic and political points of view that our aid program
to France be part of a larger eoheme for the recov ry of Europe. This
is true economically first of all because the revival of France is bound:
up lidth that of Europe. The latter will permit an expansion of French
1
exports and ultimately make available lees expensive sources of essential
imports. Conversely, the recovery of France in an organised framework
of European economic relationships vill maximize France's usefulness to
the rest of Europe. An over-all economic program offers the best chance
of limiting the waste implicit in duplications of now capital formation.
It alone will permit an initial rational allocation of US aid -- which
cannot be unlimited --? among various countries and prompt readjustments
from country to country in the light of emergenciee.
Politically, the French have been more encouraged by recent indi-
cations that the US Government is thinking in terms of Europe as a whole
than by any specific post-liberation act of direct aid to their awn country.
(-
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In their ea mess to avoid the consequences of a clash betwe ra the
US and the USSR they ware seriously disturbed by their earlier
. /
belief that the US considered its mid program a mane of attaching
European countries to it as bulwarks gainst the USSR. This meson
tuated the divisions among Frenchmen and afforded telling propaganda
material to the Communists. The mere first step toward rer2ovtal of
the fear that the US wae prepared to accept "two worlds is an immense
one in terms both of strength ring France by unifying Frenchmen and
of making them more favorably disposed toward this country. Further-
more, although they recognize the practical difficulties in the way,
Frenohme n /are recouraged by the Implications in the Secretary of
State's speech at Harvard that the US believes uopeena capable of
working out a r asoned common program. United Euro to an ideal which
commands re I allegiance among forward-looking Frenchmen?
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A. Economic
In order that France may achieve a reasonable degree of political
stability and ay maintain its democratic traditions, the standard of
living of the people and primarily of the urban workers will have to be
'raised quickly, and economic) prospects will have to improve.
Any permanent, self-sustaining rise in the French standard of living
can come only from a largo-scale capital formation program such as that
envisaged with the aid of foreign credits under the,Dbnnet Plan, Given
the present unstable political situation however, prompt Substantial
and effective increase in consumption will yield the most beneficial re-
sults. The first step in this direction must be assistance from abroad.
If this initial aid is forthcoming end extensive, it should enable the
Government to win the necessary public support for an economic program
designed at least to limit further price rises, to induce increased deliveries
of domestically produced food to legal markets, and to reduce uneconomic
inventories. In this may domestic production can be raised and France can
oilpply by its own means a larger part of its consumption needs,
'This short-run, emergency consumption support program will permit
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only a small iae in investment in 1947 and 1948 over what would
otherwise have taken place, :? that total inv stseent will probably be far
short of the Monnet Plan program. See Section IA A, 1, d)
The second and final economic measure .which must be taken is to-
. )
assist France in implementing its capital formation plans. These plena
can probably be completed from one and one-half to two years behind the
original optimistic ?Sonnet schedule. It is desirable to reaffirm early
and in concrete terms US support of these plans in order to permit French
planning to proceed efficiently and to give the French people reason to
believe the US fully expects and desires them to have a useful, prodtactive,
and bright economic future.
Far reasons of- both conomic efficiency and political tranquillity
it will be neoessary that th various rritories of the French Union bene
fit from the progr of aid to Franc Franoe has recently been unable to
? supply the consumption Goods demanded by the local populations if they are
? to work and has regulated and limited their purchases abroad. The aid
program must therefore provide increased-imports of incentive goods',
Partly in response to accumulating pressures from restive native populations.
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partly from a genuine sense of the inadequacy of past policy. the
Preach Government hat committed itself to programs of economio and social
Inatome in it overseas departments and territori a and in ite Worth
African protectorates. This means, in addition to the need of alloffing
increased imports of consumer goods, a rise in the rate of capitalif
mation dependent on foreign assistance via metropolitan Prance.
a Political.
Aside fro k encoUra slant of g;uropean cooperation? the most
fruitful field for US political mid to France lies in adjustments of
those aspects of our wan Gorman policy -- both as to occupation and
as to the treaty settlement in which US and French policies hcw
differed.
In general, our political effort with regrd to France .should
(
be directed toward assuring the French people that we respect France and
ita Government, in the hope that this will increase the self-confidence of
the Government as well as public confidence in it0 atepa in this direction
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-should consist less in specific acts granting bilateral concessions than
in the continual exercise of care in the manner in whichwe conduct
our relations with France. The US Government should continue to make
allowances for the. hypersensitivityof Frenchmen resulting from the
shock of their fall from real great-power status, from their guilt com-
plex over abandoningthe RePublioans in the Spanish Civil Par and their
British ally in 1940, and from the unexpected bitterness of colonial
nationalists in the French Empire.
This careful handling of the French will have to take place to some
extent in the un,, wher the US will have the opportunity of giving a ,yon-
sidered hearing to French proposals, of supporting French nominees for
committee posts, and the like. Other opportunities will present them-
selves in direct contacts over such affairs as the expression of US con-
cern over rel tionships within the French Union and the negotiations of
agreements on the rights of US military personnel in France or the term
of recruitment of German labor from the US occupation zone in Germany.
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. .0. Infoniation
i
3''':- '-ah'PtcipCitiOn,4's riliiiifedatidpregtaM ?
I
. .
to France may prove effective and may dispose _
. Fren66 opinion more favorably toward the United
attach-, '---.3tStea4thie?'1--i t-- '''''ti' ' 'drobl- t-tes- --3-"'
., pr nc p..es, mo ves an.. .ec.1 ,--- .,
,o..-
Of such a progrr,mill continue 1-,..c be distorted-
and attacked'4by the extreme left:: - _;.,...,, '
prove; ::., _3\_17.: "A"t'll ,. ;A ' 'a a7, .,:7 7,' -,:s; 5' ,t.r2.-. ' ;_:~ 1"-n,`-, CfrraAVC1rOt t-7:4,Eard
4,.
It ii not difficult to foresee en intensification of the ournent.
party line .which accuses the United States of intentions to subordinate
the French economy to the far-reaohing designs of the "trusts," to
exert a stranglehold on French political independence, and to reduce
France to the position of a dependent pauper vahile the United States th-.
vailss end exploits the markets offered by French colonial possessions..
In view of these existing and future subversive and tolpazilety,
effective sinti-Amerioan ciampaigns? consideration should -be given to a
highly selective. information program on the spot, as. part of the general
information and cultural work of the embassy. Soh a program must roach
the key points in .the nerve system of French politics, .and of the labor
structure. The great industrial centers such as Lille? St. 4tienneo
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Lyon ? Strasbourg, as as the lea ruhip of the CGT must, be the
- targets of such a program, which should include, lectures by com
tent
visiting pokesmon from the United States, the :periodical publication
of facts, figures, texts., and speeohes, said exhibits and film showings
in factories and labor 'centers. This local program would naturally have
37
to be combined with the continuous long range tatformatio program from the
United States by radio and with the ?intensive cultiVaten of french
papers (by direct or indireot'metheds). lip.abkoviireVVVITIrth
lmgsmor'It is not enough to tpeet that the official pcsitien of. the
United- States, as expressed through the Uni
betseen our governments
d Nations and hi, agreements
will ba understood or appreciated-by the Pram%
,public? Or willstand up against the violent and penetrating camp igns of
the Communist Party.
D. United N tions
r present world conditions, the United Nations should not be
regarded as a major alternative means for the achievement e United Ste
objectiveein Prance. Homover. the United Nations is a vit 1 means of
supporting and strengthenin United States action0 Moreover, if aid to
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? France beoos part of an overall program of world reconstruction, this
program might be brought into relationship with the UN as suggested in the
Adds tee of June 10 to svwc 360.
In connection with the broad political objectives f the United
States? the vexes% es of the Charter and the machinery of the United
tions will assist in maintaining the ' Ospon
nee and statue of France.
provide opportunities for close Franco-American collaboration? ho/p t
Contain Soviet expansion and maintain the i.togriV of small states whose
decline would adVersely'affect Frames. By fostering the improvement or
_
conditions in trust territori the trusteeship System Will be a- pmgar,
ful.means of supporting prograsSive colonial policies generally,
France is an attire member of all United Natione,agencies, and i
an important participant in their overall economic programs0 The kinds
of technical assistance which Might be extended to Franco by then* agencies
in specific cases, especially for 1ong7!razios, programs, have been, set forth
s
n addendua of June 10 to SNMCC 360,; The Department would need to consid r
. (
any recomMendationit made-for- the use of these agencies in the litIA of'.
the aid program as a.-whole.
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V.; MAGNITU "A NATURE AND TIMING OF TRE MEASURES REQUIRED
Commodity Needs
Though the emergency consumption-supportprogram should allow for
increased availabilities for nonfood consumers goods through increased im-
ports and increased retention of domestic production, its primary objective
for the fiscal year 1948 ehould be to raise the urban diet from the present
average of 2250 calories per capita per day to roughly 2,500 calories, and
to improve its quality. This would permit the bread ration to rise from
its ourrent unsatisfactory level of 250 grams per day to 350 grams-- equal
to the highest the ration has been since liberation. To achieve this at a
time when Frances breadgrain. crop will be 1.5 million tons less than last
year will require imports of from 2.0 to 2.5 million tone in the crop year
1947-48. (This is to be compared with allocated imports of 1.0 million tons'
in 1946-47.)
In order to permit a substantial recovery of French industrial produotion,
&reater coal imports will be necessary than the 12-14 million tons that will
probably arrive in 1947 under present programming. It is estimated that im-
ports of 18-20 million tons would be required to run French industry-at close
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to its capacity in 1947. This would allow industry to operate at a,level
-roughly 15 percent higher than it could without the additional 678 million
..tons of coal. As the investment program expands this papacity, still
. 'greater imports ,'averaging 22-25 million tons annually by 1949 and 1950,
will be required.
France will also need assistance in the procurement of fertilizers
and agricultural machinery to permit it to expand its domestic food pro-
duction: as well as assistance in obtaining all sort of capital equipment.
Details as to requirements of these commodities are not now available.
% Bo Financial Needs
For the economic program outlined in Fart IV.? the French Union will
ed #4.4 billion worth of goods and services (valued at onrrent'prioes)
more than it will be able to pay for out or its current earnings in the
period 1947-50. To finance this amouttpf capital imports France will -
probably liquidate #1.1 billion of its gold and foreign tweets and will ex-
haust its exipting #1.0 billion of foreign credits. To finance the esti-
mated $2.3 billion uncovered deficit for the period Of 1947-50 France will
have to look almost entirely to.the US. and to the International Bank and
Vonetary Fund. It is probable that after 1950 no additional foreign funds
will be required by Franeeo
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The table below summarizes France a foreign capital reseds and the
?
means by which some part may be financed from existing sources:
ESTIMATE OF THE FOREIGN FINAUCIALREQUIREMENTOF itUeFRENCH
r UNION, 1946-50.
(In billions of dollars)
41
Ac?tUT-t onal
Groas Capital Liquidation of Financing Dollar
Import Requirements Now Available Requirepente
Foreign Assets Existing
and Gold Credits
? 1946 ..2.2
1947 .1.6 ?
1948 1.5 .
1949 - 9 ?
1950 13-4
Total
-1947-50 4-04i1 100205
G.0
3,01
0,8
004
Note 2 1946 data represent actual achievements; 1947-49 estimates are valued
in current prices?
These estimates are made in current prices. They assume a high level
of income in the 'US and a substantial recovery of the European economy to
provide markets for the goods which France will be able to export. The non-
fulfillment of either of these twq assumptions would increase the funds re-
quired to reach our economic objectives for France.
Although total import requirementa,, not shown in the table, will in-
crease over the period, Frame's exports and tourist trade are expected to
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? recover in even greater proportion so that its foreign capital needs.,
or balance-of-payments deficitsL, will decline annually. Thug Prance's
total gross capital requirementa are expected to fali. it an =yam rate.,
from $2.2 billion in1946 to $0.4-billion in 1950.
At the end of 1947 Flrench. gold and .foreign exohange -reserves. not
? including an unknown quantity of blocked dollar gavots held through
Smitearland will be reduced to an all-time low of roughly $0.?to $0.6
by that time France will have. no long-term dollar assets avail-
able for liquidation. This will mein -despite repeated assurances to the
French public that reserves will not be allowed to fall below the figure 1
? of $1.0 billion. Any further reduction of these reserves may have ?un-
favorable repuroussions in terms of the general confidence in the vmlme of
the franc, for some time the subject of grave misgivings on the part of
the French people From 1946 through 1950 the $0 4 billion in foreign
assets that France is expected to draw ()twill consist entirely of non
dollar long-term vecnrities6 both publicly andTrivately owned.
The sums estimated as required for the French Union (aside from
French Indochina) in the above calculations total approximately $100
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million for each of the years ,1948. 1949, and 195a.
C. United 'Nations
The geroral United untions .measures uhioh would aupport action
by the United States have been t 'forth in IV (I)) abov,e.
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? VI, PROBABLE AVAILABILITY OF ECONOMIC AID FROM EXISTING SOURCES
UNDER SE POLICIES
64
Of the .additional $2 7 billion whioh France will require in the period
, 1.947-50, some part may be financed by ark additional International Bank loan.
It seems probable that the International Bank, which granted France a $250
million loan in May 1947, will extend a aec'cr.zi credit- n 1948 amounting to
$250 million and possibly to as' much as4500 million. In addition, :France
is negotiating with Switzerle.nd for the -control of private French dollar
assets held through Swiss bak0 It is possible that these- negotiations
will prove successful in releasing by the end of 1948 approximately $200
million of convertible currency for the use of the French Government. Thus
it is likely that France will have available from $450 to $700 million to
cover part of its deficit.
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VII. ADDITIONAL MEASURES REQUIRED FROM THE US
It is estimated that France will need $1,3 to $1.6 bi/lion over and
above what it already has at its dispesal.and_what it may obtain from the
International Bank and from negotiations with the Swiss. This can probably
be obtained only from the US Government. _
Though the additional funds required mill not be used until 1948 and
will be needed through 1950, it is desirable thatethey be given early.
This procedure will make the task of the4irenchsplanners easier and will
give the ordinary Frenehman the sense ,of security that derives from his
faith that the US is taking a long-term interest in his welfare.
Franoe, which is now a net international debtor, has already don-
-
erected to make payments of interest and principal of over $150,mi1lion
annually for 10 years after 1950e For the following 10 years tho,Nymputa
may be less, -but they will remain substantial. Thus, a requirement that
France repay the additional fUnds now needed would place another burden on
its standard of living in the future. Furthermore, since it now seems likely
that prices will fall, repayment would require France to export more' real
goods than were originally imported. Such repayment, consequently, would
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be extremely difficult both for the US domestic economy to receive and
for France to pay. On balance, then, it is desirable that the additional
funds required by France be granted outright as a gift
The problem of giving France mote of the commodities in short supply
is a world problem. A system of preferred treatment for France in the
allodating systems of the IEFC (for breadgraina), the ECO (for coal), eto.9
would rocessarily moan a retardation of recovery elsewhere. Hence,
American assistance to France in the procurement of commodities in short
supply can probably be best given in the form of (1) increasing total US
exports and (2) exertion of US influence toward increasing production else
where so that the French may share equitably in a growing world: output.
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' VIII. NATiRa OF ARRANGE NTS WITH FRENCH GOVEMENT
RAM:
While it is dosirabl to find some sautually Eigresabl formula
whereby inoreased production in France would be closely relatad to
AlEaricran assistanoe, no direct American supervisio of the aid program
can?be contemplated in thim? highly oivilised, nationalistio,and menti.7
tive dountrye, which.still'has the statu of a great power, ?NoWo.vorp
the adoption by. the US of a substantial aid program-for France wouad
certainly inoreaae US influence with. the French Government9 and this
influence could and should be discreetly exorcised not only regarding
general French economic policies as they affeot the program itself.
but also pith regard to bread international and colonial questions. ouch
as the Carman settlement d the relationships between France and its
dependent peoples?
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IX. EFFECTS OF REFUSAL TO GRANT AID OR OF FAILURE OF
PROGRAM
UNDERTAEEN
AL Effeots upon France
48
Either the absenceor the f ilure of the short-term consumptionF,
support program r France would have prompt and disastrous consoquences
Economically, inadequate wheat shipm nts would mean an even more deficient
diet for the urban workers. Yailure to increase coal deliveries to France
would keep industrial production at the present depression levels and would
mean another winter with inadequate heating for French homes. These economic
effects would aggravate popular dissatisfactions sufficiently to bring about
the fall of the present government and strengthen the factions advocating
extreme solutions? These political effects in tura mould make it more
difficult for France to organise its economy so as to make the maximum use
of its domestic economic resources.
Absenoo of a US short-term aid program, or failure to implement
wotad tremendously increase the puselement and resentment in France at the
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-49-
policies of this "land ,of pleptty." It would play into the hands of the hos-
tile Gem-uni t propaganditts.
Absence of a US program of grants or loans to France (or for Europe
with a French share duaranteed) for the years 194S 950 would have adverse
effects far ahead of the time when purchases made under such a grant would
reach Frano For failure n the part of the US to pass an mid program
would tend to sap the hope of the Erenoll They would conclude that the
US had no faith in the trustworthiness or ability of them or their govern-
ment and would thereby lose still more of their inadequate self-oonfideno
The diminished prospects for French recovery Would in themselv s lower French
hope in a better national future.
French solf-cenfidonce will not of itself cure France's economic
political. and administrative ills. But lack of it will very probably re-
sult in the abdication of thos elements in French life that are friendly
;
to the United -States and 'uphold the same values. Conscious of Francs
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ir
eeenemic and military weakness,/these elements fee/ that they cannot count:
on at least the economic aid of this country they will yield leadership to
.those Frenchmen he claim to be able to count on the economic and military
support of the Soviet Union. Failure of the US aid program would have
similar final results from loss of hopeyonly later.
The purely economic effects of absence or failure of the long-term
financial aid plan would bee, at the least, a serious postponement in the
rate of 'Tench industrial r covery. By saddling France for a longer period
with obsolete and inadequate production facilities it would both weaken the
country economically and decrease its strategic ability to contribute to
its own security or to a collt,ctive security system.
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B. Effects Upon Unitsd States !calory
A special pr gram of aid to Prance will be underttken only if
it is the considered jud
?go ?
nt Of this:Government that failure to do so
would imperil the maintenance of the strong, friendly and democrati
France which the United States desires& A hopeless enfeebled Fra.lse
.invites the direct or indirect domination of the USSR. A France so
dominated would require basic revision of our policy, both diplomatic
and military