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

850.33/2–1054

No. 200
Memorandum by the Deputy Assistant Secretary of State for European Affairs (Bonbright) to the Acting Secretary of State¹

top secret

[Washington,] February 11, 1954.

Subject:

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

Problem

What action should be taken in Washington in light of the Secretary’s telegram on the proposed loan to the European Coal and Steel Community.

Discussion

The attached telegram, Dulte 60, of February 10 (Tab A)² transmits the Secretary’s view that an effort should be made to reinstate the availability of $100 million for the purpose of a loan to the European Coal and Steel Community. We interpret the word “reinstate” as a reference to the fact that, at one point, agreement had been secured from Defense by Mr. Rand to the transfer of $100 million from Title I military funds, exclusively or principally from the FY 1954 authorization, for the purpose of the loan. Subsequently, Mr. Kyes withdrew the Defense Department’s concurrence. Mr. Merchant and Mr. Bruce were aware of this problem and have presumably informed the Secretary. The Secretary would, therefore, appear to be reaffirming his support for the transfer.

The incoming telegram proposes that the $100 million should be payable half in FY 1954 and half in FY 1955, but all within calendar year 1954. Formerly, an offer had been made to M. Monnet to loan the High Authority $100 million, which would be made available over a period of two years.

Finally, the Secretary states that the European Coal and Steel Community is under serious attack by the enemies of EDC and European unity and records his belief that it is important at this time to give evidence of U.S. support to the Coal and Steel Community along the lines of the President’s letter of June 16 to the Chairmen of the Committees on Foreign Affairs and Foreign Relations, and the White House communiqué of December 23. Both of these messages alluded to the President’s desire to assist the Community through a U.S. loan. It is apparent that the Secretary intends that the “U.S. support” should be in the form of a specific loan offer from the U.S.

A brief review of the developments on the loan is contained in my memorandum to you of February 4 (Tab B).³ It should be recognized that a transfer from military funds for the loan would cut into end-item deliveries. It is considered likely that Defense would cut off-shore procurement in Europe by an amount equivalent to the funds transferred.

Recommendations

1. That you discuss the problem with Messrs. Wilson, Humphrey and Stassen in order to seek early agreement on making $100 million available as a loan to the European Coal and Steel Community within calendar year 1954, with half being made available prior to June 30.

2. That, in light of the Secretary’s telegram, you seek their agreement on securing these funds through a transfer from FY 1954 military assistance funds, as previously envisaged; if agreement can not be reached on this course, that you elicit their views on other means for securing the funds and specifically on the alternative procedures mentioned in my memorandum of February 4—i.e., a request for Congressional authorization for the Treasury to make the loan as a public debt transaction, or for Congressional authorization and outright appropriation of the funds.

3. That, if possible, the above action be taken on Thursday, February 11, 1954, inasmuch as Mr. Stassen, who is very familiar with the loan problem, will be leaving Washington for two weeks early Friday morning.⁴

1. Drafted by Boochever and cleared with Nolting, Corbett, and Palmer.
2. Not found attached to the source text; for text, see Document 198.
3. Document 197.
4. No record of the recommended meeting between representatives of the Departments of State, Defense, and Treasury, and the Foreign Operations Administration has been found in Department of State files. However, according to telegram Tedul 22 to Berlin of Feb. 11, Dulles was informed that agreement was reached among the interested parties to reinstate the availability of the $100 million for a loan along the lines recommended in telegram Dulte 60 “after a bloody struggle”. (850.33/2–1054)