U/MSA files, lot 56 D 551, “MSP FY 1954–55”
No. 285
Memorandum by the Acting Special
Assistant to the Secretary of State for Mutual Security Affairs
(Nolting) to the Deputy Director for Programs and
Planning of the Foreign Operations Administration (Ohly)1
Subject:
- Mutual Defense Financing FY 1955 Title I, except France and Berlin
The interested officers of the Department of State have reviewed the estimated requirements you submitted to us on October 26, 1953 on Mutual Defense Financing, FY 1955 Title I, except France and Berlin.2
It is my understanding that this submission of estimates at this stage is on an informal basis, and we appreciate the opportunity of commenting informally. It is my further understanding that we will be called upon for formal concurrences and comments at a later stage.
We are in general agreement in most instances with the FOA estimates and planning assumptions. Of course if the basic assumptions prove incorrect, it will obviously become necessary to review the situation in the light of the altered circumstances. There are a few differences in estimates of requirements which are set forth below.
Greece While we generally support the reasoning and conclusions in the FOA paper, and while it is admittedly difficult to justify marginal amounts of aid which would accrue in the relatively distant future, we nevertheless would prefer that aid to Greece in FY 1955 be maintained at $20 million, rather than the $15 million proposed by FOA. In view of the continued low Greek living standard as contrasted with the high level of military effort and the need for economic expansion in Greece, we believe that the higher figure will be more effective in assisting Greece to achieve this expansion, while maintaining economic stability and military strength.
Yugoslavia Any comments on Yugoslavia are, of course, premised on the assumption that the Trieste situation will not develop in such a way as to require a major revision in our approach to the question of furnishing assistance to Yugoslavia.
[Page 590]While any judgment as to Yugoslavia’s economy in FY 1955 is very preliminary at this time, it is our view that aid in the amount of $25 million may not prove sufficient to accomplish US foreign policy objectives in Yugoslavia. These objectives are to maintain and strengthen Yugoslavia’s potential for contributing to the defense of the West. We suggest that $35 million would be more adequate. This amount is consistent with the overall policy of progressively reducing assistance.
Technical Assistance There would appear to be no need for continuing TA in Europe in present form, except for the less developed countries. Certain TA projects connected with defense production and OSP may be desirable, but those should be primarily the responsibility of the appropriate military service within the DOD.
Spain and Portugal It is understood that FOA is revising its papers on these countries to reflect certain foreign policy aspects not included in the original papers.
As indicated in the FOA paper on Spain, the US is committed to provide $465 million in military and economic aid to Spain during the four years through FY 1957. The question of how the balance remaining after FY 1954 will be divided between economic and military aid spread over the three years has not yet been settled.
We agree that no aid is required for Portugal in FY 1955.
United Kingdom The UK has included $75 million special aircraft financing by the US as an assumption as to resources in its 1953 Annual Review submission. The record of the April discussions appears to indicate that such financing was contemplated by the US at that time. A final decision as to the need for this amount for FY 1955 would appear to be related to the final outcome of FY 1954 programming operation, including Plan “K” and other MDAP aid, as well as further discussions with the British prior to the completion of the 1955 Annual Review.
Germany The Department agrees with the estimate of FOA that the Federal Republic will not require external economic aid or defense support in FY 1955. We hesitate to comment in detail on the analysis and conclusions of FOA respecting the German defense contribution and equipment for German EDC contingents, since an inter-agency working group is studying these problems with a view to reporting to the NSC in November. However, accepting the assumption of the paper on pay-as-you-go for the present, the estimates derived from this assumption require checking and probably should be modified. The requirements of the US and UK should be checked and the amount of funds available to them in FY 1955 from occupation costs and troop support available in the period until June 30, 1954, but carried over for later expenditure, [Page 591] should be applied against requirements estimates to arrive at an estimate of pay-as-you-go expenditures in FY 1955.
Belgium–Luxembourg–Netherlands–Denmark and Norway It is agreed that these countries should require no economic aid in FY 1955. We consider it most unlikely that these countries can be expected to increase the level of their defense expenditures above that currently projected.
Italy It is agreed that no economic aid should be required for Italy in FY 1955. However, receipts from OSP are particularly important to enable Italy to maintain a satisfactory B/P and reserve position. Despite competing demands for its budgetary resources, Italy should be expected to maintain and possibly increase its defense commitments during FY 1955.
Austria The country statement as drafted is acceptable for planning purposes. If the basic assumptions prove incorrect, it will obviously become necessary to review the situation.
Turkey We concur in the level of aid proposed for Turkey in FY 1955 ($40 million). Continued aid is important to assist the Turkish economy eventually to expand to the point where it may be able to support its proportionately large military strength without outside assistance.