Foreign Relations of the United States, 1952–1954, Western Europe and Canada, Volume VI, Part 2

751.5 MSP/12–952: Telegram

No. 556
The Ambassador in France (Dunn) to the Department of State¹

secret
priority

Paris, December 9, 1952—noon.

3361. Cotel. This is joint Embassy-MSA/Mission telegram. For Acheson and Harriman. French will undoubtedly raise with you when you are in Paris question of final aid figure from FY 1953 funds in support their 1953 military budget. Labouisse and I thought it might be helpful for you to have our views as to action US should take in light all circumstances. Following brief paper recapitulates background and contains our recommendations.

Begin text.

I. The problem

To determine the final figure of US assistance from FY 1953 funds in support of the French CY 1953 military budget, taking account of the important political economic and military factors involved.

II. The background

A. In his letter of August 8,² PriMin Pinay informed the US Govt that one of the assumptions on which the French CY 1953 military budget was being constructed was that French resources available for the 1953 military effort would be augmented by the franc equivalent of $650 million in US budget-supporting assistance, and he asked what form the US assistance would take.

B. The French Govt had taken the position that on the basis of the bilateral discussions at Lisbon in February 1952, when coupled with the Letourneau talks in Washington last June, had good reason to count on $650 million of budget-supporting assistance from the US for application to the CY 1953 French military budget. The French agreed however there was no firm commitment made in those talks as to the final amount of aid.

C. The US replied to M. Pinay’s letter on October 6,³ stating that $525 million was the maximum assistance on which the French Govt could count at that time, but indicating that the final determination as to the amount of US assistance would depend largely on the NATO annual review.

D. Between the date of Pinay’s letter and our reply, the French had made known publicly that they were planning on $650 million of assistance, and that their budget was being made up on that basis. The PriMin has informed us that French opponents to ratification of EDC, as well as those wanting to curtail Indo-Chinese operations, will use the fact that the military budget must be reduced by an equivalent of $125 million as an argument to support their views to limit French commitments. He twice requested, on October 8 and October 21,⁴ reconsideration of the $525 million figure. Upon Washington’s instructions the French Govt was informed on November 7⁵ through M. Pleven that the request for increased aid had been reconsidered but that it had not been found possible at that time to go beyond the statement on aid contained in our October 6 letter.

III. The present status

A. On December 1 the French Govt laid before Parliament the text of the CY 1953 overall military budget, including Indo-China.

B. The elements of this budget are as follows, in comparison with those of the CY 1952 military budget (billions of francs):

(Note: Two columns headed: 1952 voted and 1953 proposed— latter subdivided into three columns headed (1) unconditional portion, (2) conditional portion, and (3) total both portions.)

French contribution 1205; 1247; blank; 1247.

US assistance 195 (see footnote 1); 173 (see footnote 2); 44 (see footnote 3); 217 (see footnote 4).

Total appropriations 1400; 1420; 44; 1464.

Footnote 1. This figure is composed of the counterpart equivalent (175 billion francs) of the Lisbon figure of $500 million in budget supporting aid from FY 1952 funds, plus additional 20 billion francs which is expected to accrue in CY 1952. 175 billion francs has already been released to the French in CY 1952 from FY 1952 and prior aid, and they have now requested utilization of the additional 20.

Footnote 2. Counterpart equivalent of $525 million in FY 1953 aid, less 10 percent of the defense support segment of the total (French estimated this segment at $300 million).

Footnote 3. Counterpart equivalent of $125 million (difference between $650 million and $525 million).

Footnote 4. Counterpart equivalent of $650 million in FY 1953 aid less the 10 percent deduction described in footnote 2 above.

C. The French Govt’s budget presentation states that the “conditional” appropriations of 44 billion francs will be utilized in CY 1953 only if additional assistance (above $525 million) is forthcoming from the US.

D. A total French military budget of 1464 billion francs in CY 1953 has been described by Prime Minister Pinay and Defense Minister Pleven as the minimum needed to allow France to fulfill its commitments, both for the defense of Indochina, and for the NATO build-up.

IV. US objectives

A. We want the maximum French military budget in CY 1953 that is both possible and desirable, taking into consideration political and economic factors. It seems to us clear that a French contribution in the neighborhood of 1250 billion francs is the limit of France’s present politico-economic capabilities, viewed on a realistic basis. On the other hand, it would be most desirable to have the French overall military budget in CY 1953 attain a level of 1465–1475 billion francs, both because of the increase in standards of readiness and infrastructure construction of a budget of this size would permit, and because of the fact that such a budget has been accepted in French parliamentary and public opinion as the minimum required to fulfill France’s military commitments.

B. In terms of Franco-American relations and our wider political objectives, it is in our interest to eliminate the question of the level of US aid to France in 1953 as a possible adverse factor in the question of the ratification by France of the EDC, and in the question of the continued defense by France of Indochina.

C. We should seek to achieve the maximum advantage from the use of available MSP funds. In light of the fact that FY 1953 is almost half over and as it appears possible that the available funds may not be fully committed, we should make the decisions now when they can have the greatest effect, rather than postponing decisions until the completion of the annual review or until it is too late to make effective use of the funds. Solution of the question of aid, particularly on the basis of the French effort in Indochina, is one of the few areas where positive action is open to us at this time.

V. Recommendations

A. We therefore put forward the following recommendations:

1. That the US proceed to inform the French Govt at the earliest appropriate time that the final figure of US budget-supporting aid for France from FY 1953 funds has been fixed at $650 million.

2. That the additional $125 million be provided either: (A) In the form of additional budget-supporting OSP to be derived from uncommitted end-item funds, or (B) in the form of defense support aid transferred from uncommitted end-item funds.

3. That we inform the French that all counterpart (or its equivalent) accruing in CY 1953 will, in accordance with paragraph VII of the Lisbon memorandum of understanding, be applied to the French CY 1953 military budget. Any “Moody Amendment” counterpart would of course be treated separately. (The French would be urged to include at an appropriate time this counterpart in their budget at the figure which would probably actually accrue in CY 1953 on the basis of $650 million in aid. We believe this figure would be in range of 220–230 billion francs.)

4. That the remaining amount of counterpart to accrue in CY 1952 from FY 1952 and prior appropriations (between 15 and 20 billion francs) be released at the end of the present month for application to the CY 1952 military budget (or alternatively, to the civil investment program, the French switching the funds this displaced to the military budget).

B. If the foregoing recommendations are adopted, the final CY 1953 military budget would be (in billions of francs):

• French contribution 1247.
• US assistance 220–230.
• Total appropriations 1467–1477.

End text.

Dunn

1. This telegram was sent in response to telegram 3203 to Paris, Dec. 5, which informed the Embassy that the Secretary wanted a paper giving the historical background of the problem concerning aid to France and making recommendations relating to the issues involved, in case the French raised the subject during the NAC meetings in Paris in December 1952. (751.5 MSP/12–552)
2. Transmitted to the Department of State in Document 535.
3. Transmitted to Paris in Document 542.
4. For a summary of Dunn’s meeting with Pinay on Oct. 8, see Document 543. For a summary of the Oct. 21 meeting, see Document 548.
5. A record of this meeting was transmitted to the Department of State in Document 552.