Foreign Relations of the United States, 1952–1954, Western Europe and Canada, Volume VI, Part 1

850.33/1–1354

No. 194
Memorandum by the Acting Director of the Foreign Operations Administration (Rand) to the Secretary of State¹

confidential

Washington, January 13, 1954.

Subject:

• U.S. Loan to the European Coal and Steel Community

In amplification of our recent letter² on a United States loan to the European Coal and Steel Community, we request your concurrence on principle at this time to this loan. Prompt agreement will permit Ambassador Bruce to advise Mr. Monnet of the favorable U.S. decision including the amount of the loan in advance of Thursday’s (January 14) special meeting of the Common Assembly in Strasbourg to review the CSC investment program.³

The loan would include the following main features:

(1) $100 million would be set aside from the obligational authority of the Mutual Security Program, entirely or principally from the FY 1954 appropriation (probably requiring Presidential approval of a transfer from military to economic aid funds); though possibly also from the FY 1955 appropriation, depending on other programming and timing considerations.

(2) The loan to the Community would be made at U.S. option either in dollars or local currency with repayment in the same. Thus insofar as the U.S. Treasury has local currencies for this purpose they would be used, but insofar as none is available, the Community would be obligated to repay in dollars. Local currency loans would have a guarantee against exchange depreciation.

(3) With regard to the use of local European currencies for any loans to the Coal and Steel Community, the Treasury is using local currencies accruing to our account for all U.S. Government expenditures as rapidly as possible. Based on present estimates, local currency accruals in general will not be sufficient to cover regular expenditures for U.S. agencies plus loans to the Coal and Steel Community. It is not recommended that local currencies be held exclusively for Coal and Steel Community as this course would result in maintaining a long position in currencies which may be devalued.

(4) The loan would depend on U.S. agreement with the CSC on general principles and policies, such as over-all directives of investment, operating and integration policies, as well as approval of individual projects.

(5) Security for the loan would be based partly on prospective CSC tax revenues (estimated at $50 million annually of which $30 million will be available to guarantee CSC financial commitments), and perhaps on the assignment of subsidiary CSC loans.

(6) Loan terms and the provision for repayment are to be approved by the National Advisory Council.

Finally, we propose that the question of additional extension of credit in the next three years be analyzed by FOA, and that upon the concurrence of the Secretary of State, the Secretary of the Treasury, the Secretary of Defense, and the Director of the Bureau of the Budget and the approval of the President the subject be taken up with the Congress during this season.

1. Copies were also sent to the Secretary of the Treasury, Secretary of Defense, and Director of the Bureau of the Budget. Attached to the source text was a draft press release announcing the proposed $100 million loan and a copy of a letter from the Bureau of the Budget, dated Jan. 14, approving the proposal for a $100 million loan. The Executive Secretariat also attached a memorandum, dated Jan. 20, which indicated that Rand’s memorandum, although dated Jan. 13 and requesting action by Jan. 14, was not received in the Department of State until Jan. 18.
2. This is a reference to Document 191.
3. For information concerning the Extraordinary Session of the Common Assembly, which met in Strasbourg Jan. 14–17, see the editorial note, infra.