850.33/1–2654: Telegram
No. 196
The Deputy United States Representative
to the European Coal and Steel Community (Tomlinson) to
the Office of the United States High Commissioner
for Germany, at Berlin1
168. HICOG Berlin distribution as determined by Bruce.2
- 1.
- Following letter received today from Monnet:
Begin text. Before you left for Berlin to see Secretary Dulles, I acquainted you with some of the points which my colleagues and I would like to have clarified in the proposal submitted to me in Strasbourg by Mr. Tomlinson on behalf of your government and some of the difficulties which we have found with that proposal. I thought it would be useful to confirm by means of the attached aide-mémoire the views I expressed orally to you before your departure. End text.
- 2.
- Attached aide-mémoire reads as follows:
Begin text. In June 1953 President Eisenhower, in an exchange of letters with the chairmen of the Foreign Relations Committee of the United States Senate and the Foreign Affairs Committee of the House of Representatives, suggested that a loan of funds by the United States Government or one of its agencies, to assist in a portion of the financing of the development program of the European Coal and Steel Community, “would foster European integration in a tangible and useful way”.
Following this exchange of letters, officials of the High Authority of the community and the United States Government have engaged in a preliminary exchange of opinions in order to give practical effect to these views. This exchange led to the proposal submitted to the High Authority by Mr. Tomlinson in Strasbourg. The High Authority is still giving study to this proposal, but my colleagues and I wish to inform you of some of the facts which the High Authority feels are important in this consideration and some of the points upon which it wishes clarification.
The institutions of the community are now effectively established. The authority and the sphere of sovereignty of the High Authority are recognized. The single market is functioning. Now the High Authority must turn its principal attention to the problems of investments. The High Authority from the beginning has been aware of its responsibility under the treaty for increasing the financial resources accessible to the enterprises of the community. [Page 357] One of its first acts was to establish the basis of its own financial capacity. On January 1, 1953, it began to levy a tax on the production of the community, in accordance with the powers given it by the treaty. That tax has been regularly and successfully collected; today the dependability of this permanent source of income is established.
The total annual receipt from this levy may be estimated at the equivalent of approximately $50 million. Of this amount at least $30 million are available annually to guarantee financial commitments assumed by the High Authority. The High Authority will use the funds which it borrows to lend directly to the enterprises or to guarantee loans of the enterprises. The substantial interest income the High Authority will thus receive from its loans will add to the borrowing capacity based on its annual tax income.
The High Authority considers it of first importance to increase its operating funds as much as possible in the first critical years of the community’s existence. First, this is the period when, as the first governing institution of integrated Europe, the High Authority must demonstrate its capacity to contribute to the resolution of Europe’s problems. Second, it is during the period of adjustment to the single market that new financing is urgently needed by the industries of the community and that the way should be prepared to obtain in the future additional financing on more reasonable terms from the European capital markets.
Thus, the intent of the High Authority is to borrow in the immediate future the maximum amount possible on the basis of a reasonable estimate of its capacity to repay, and then to use the funds obtained to help the industries with their financing, to bring about better conditions in the capital markets of Europe, and otherwise to carry out the objectives of the treaty. Because of the continuing inadequacy of savings in European capital markets, for reasons well-known to the United States Government, the High Authority wishes to utilize a considerable part of its borrowing capacity to obtain credits outside the community.
It is in the light of the above considerations that the High Authority has thought in terms of a loan from the United States Government in the range of $400 million to be repaid with interest over a long enough period to permit a reasonable rate of amortization. My colleagues and I believe that an amount of this magnitude would be in line with the High Authority’s capacity to repay and would be consistent with the scope of the problem before it.
The High Authority again wishes to emphasize that the relationship between the United States and the new Europe must not be on the basis of donor and receiver. The High Authority is not asking for aid. It is proposing consideration of a loan to be secured by real resources accruing to it in its capacity as the first supranational institution of the new Europe.
It does not appear possible for the High Authority to consider the suggestion in the proposal from your government that the United States Government might conduct a project-by-project review in the use of the loan funds. Such a suggestion would appear to be inconsistent with the necessary independence of the High Authority in its administration and, moreover, might be the [Page 358] cause of considerable misunderstanding and thus be detrimental to relations between the United States and the community.
In administering the proceeds of the loan, the role of the High Authority will be that of an informed and prudent lender. It will assure itself that the projects submitted to it constitute sound financial investments for enterprises operating within the competitive conditions of the common market, that the proceeds will be properly applied and that the prospective earnings of the enterprise support the expectation of amortization over a reasonable period. The High Authority would not, however, be obligated, nor would it wish to direct the investment activities of the enterprises. The enterprises will retain full initiative and responsibility for the development and execution of their investment projects.
In its lending activities, the High Authority will also be guided by the necessity to use financing powers to help re-awaken the capital markets of Europe so that industries can obtain local financing at lower rates of interest and with longer amortization periods than are now the rule.
The community must prove by the material benefits it can offer to the European people that a unified Europe can provide a better way of life than the present separate national states. It must demonstrate beyond question that free competition maintained throughout the territory of the community by a government of supranational powers can breathe new vigor into the industrial heart of Europe. This is a test not only of the federal idea but of the determination and vitality of the European people. End text.
- Repeated for information to the Department of State as telegram Coled 136, with the instruction that distribution within the Department be determined by the Under Secretary of State.↩
- Tomlinson sent this telegram to Bruce who was in Berlin for consultation with Dulles. Dulles was in Berlin to attend the Berlin Conference.↩