740.00119 Control
(Italy)/10–2346
The Chargé in Italy (Key) to
the Secretary of State
restricted
No. 4188
Rome, October 23, 1946.
Sir: I have the honor to report that the
Italian Ministry of Foreign Affairs on October 19 delivered an
undated Aide-Mémoire to Admiral Stone, Chief
Commissioner of the Allied Commission, for transmittal to the
Commanding General of American armed forces in Italy, wherein the
views of the Italian Government are expressed concerning the draft
of a new Military and Civil Affairs Agreement, and the related
Financial Agreement. Those documents were delivered to the
Government for its consideration and comment on June 14 and on
September 3, 1946, respectively.
A copy of the original Aide-Mémoire in
Italian, and a translation which was made in the Embassy and
concurred in by Admiral Stone, are attached hereto. A summary of the
Italian reaction was reported to the Department by telegram no. 4058
dated October 23, 1946.63
The Aide-Mémoire, doubtless because it was
drafted earlier, contains no reference to the decision of the United
States to grant to Italy the “suspense account” dollars in
reimbursement for non-troop-pay expenditures in A.M. lire by our
armed forces. In view of that action on our part and of the Italian
negative reaction to the negotiation of a new Civil Affairs
Agreement, it would no longer appear to be untimely or in any way
damaging to our position to withdraw both the
[Page 866]
Civil Affairs and Financial
Agreements, should the Department so desire, and possibly to
substitute therefor a proposal to modify the situation with respect
to requisitions.
In the light of such a possibility, the Embassy wishes to record its
impression that the objections of United States military authorities
to the retroactive feature in the Financial Agreement, referred to
in the Department’s memorandum of conversations dated September 18
and in the Embassy’s telegram 3900 of September 26,64 appear to arise very
largely out of the undoubted difficulties involved in obtaining
accurate and acceptable figures on the value of requisitions since
July 1, 1946 and on the value of public services, including
transportation and communications, which have neither been paid for
in lire nor formally requisitioned. It would also appear that the
army authorities may foresee some difficulty in obtaining
appropriations to cover the repayment in dollars for requisitions
after July 1, the value of which is unknown but thought to be of
considerable importance.
In view of these objections, the Embassy is of the opinion that if
the War Department so desires, in its reply concerning the financial
aspects of the Italian Aide-Mémoire, it would
appear reasonable and practical to emphasize to the Italian
Government the extent to which the suspense account and troop pay
dollars already cover the bulk of the direct cost to Italy of our
forces during the entire occupation, to reaffirm our willingness to
recognize any additional expenditures not already covered by dollar
payment, such as requisitions, as credits to the Italian Government
which may be offset against its recognized debt to us for civilian
supplies, and to assure the Government, while requesting its
cooperation, that every effort will be made by our armed forces to
place all outstanding requisitions on a current cash payment basis
at the earliest possible moment.
If it is true that dollar transfers now being made from the “suspense
account” will cover the occupation expenditures other than
requisitions in Venezia-Giulia and the Province of Udine, assurance
in that sense might be added to the foregoing. Reference to the
matter might simply be omitted if, on the contrary, a division of
occupation costs as between Venezia-Giulia and the rest of Italy is
in fact being established unilaterally by the United States.
The foregoing comments have not been discussed with the military in
this theatre and are submitted only for the Department’s background
information.
Respectfully yours,
For the Chargé d’Affaires, a.i.:
Charles A. Livengood
Counselor for
Economic Affairs
[Enclosure—Translation]
The Italian Ministry of
Foreign Affairs to the Chief Commissioner of the
Allied Commission (Stone)
Aide-Mémoire
The Italian Government has duly examined the Draft Civil and
Military Affairs Agreement between the United States and Italy,
annexed to the Draft Modification of the Armistice regime.
That examination has led to the conclusion that the specifically
military and political proposals of the agreement itself pose
graver problems of a domestic and international character
destined to give rise to serious apprehensions and opposition
(contrasti) in the country.
The total effect of the dispositions referred to in articles 1 to
7 in fact only confirms and consolidates in substance, as
regards the matters treated in those articles, the actual
situation which has come into being under the Long Armistice
regime.
On the other hand, in view of the imminence of the Peace
Conference and the hope that it may within a short time bring
about the conclusion of a definitive Peace Treaty, the Italian
Government believes it unnecessary and in any case not urgent to
initiate discussions which might very probably become
unnecessary before they were concluded.
Still, in compliance with the courteous requests of the
Department of State, the Italian Government nevertheless submits
to the Government of the United States its principal
observations regarding the economic-financial clauses proposed
for the new Armistice.
The system proposed by the Government of the United States for
the regulation of financial relations, forthcoming from the new
Armistice, may apparently be summarized as follows:
- a)
- To set aside (accantonare) the
system of financial relations initiated on the basis of
the Armistice of September 29, 1943 and carried out from
its entry into effect up to June 30, 1946;
- b)
- To charge to the Italian Government the occupation
expenditures, exclusive of net troop
pay, for the direct
maintenance of American military forces in
Venezia-Giulia and the Province of Udine;
- c)
- To charge to the Government of the United States for
payment in dollars currently all
services and all supplies (prestazioni) rendered to the American armed
forces.
The Italian Government believes that the proposed system is in
general acceptable and that it constitutes an appreciable
improvement in the financial situation which had been imposed on
Italy with the preceding Armistice.
[Page 868]
The cessation of the arrangement of financial relations carried
out up to June 30, 1946 is reasonable and opportune. Such an
arrangement would have complicated the negotiation of the new
Armistice.
The Italian Government hopes that, when it may be appropriate,
the United States Government will wish to take into account the
considerations set forth by the Italian Government in its
memorandum of January 7, 1945 in the sense that all supplies,
all services and all payments made by the Italian Government for
the account of the American armed forces during the long period
of co-belligerency, may be recognized as dollar credits of the
Italian Government to be applied against its debts for the civilian supplies.
Notable relief will thus derive to the Italian economy from the
payment in dollars which the American Government declares itself
disposed to make for all supplies, services, requisitions, etc.,
which the Italian Government will place at the disposition of
the American armed forces beginning from July 1, 1946 and for
the full duration of the new Armistice.
Encouraged by such good dispositions, the Italian Government
permits itself to request that it be exempt from the occupation
expenditures for the direct maintenance
of troops which it is desired to charge against it. It is true
that this concerns only the troops stationed in Venezia-Giulia
and in the Province of Udine, and it is further true that troop
pay would be excluded, but that a part of the burden for
occupation expenditures would nevertheless continue to bear upon
the exhausted Italian economy, notwithstanding that the
Armistice regime has continued by this time almost three years,
and that Italy has continued to bear, through no fault of its
own, burdens from which it should have been freed for some
time.
The Italian Government, which is grateful to the Government of
the United States for the favorable arrangements, which have
enlivened the regard of the Italian Government and people, hopes
that its request will be granted and that the burdens of
occupation expenses will thereby cease completely to exist.
In that spirit the Italian Government has also examined the text
of the separate draft agreement provided for by paragraph 9 of
the Armistice Draft transmitted last September.
Accordingly, the observations which it advances below with regard
to the last mentioned document are presented without implying
any denial of the point of view expressed above.
Such observations are the following:
- 1.
- The Italian Government requests at the least exemption
from the transportation expenditures, not only in order
to eliminate the need for laborious calculations for the
division of the expenditures
[Page 869]
themselves between the two
Governments, as is provided in Section 1, paragraph 2,
but also in order to relieve Italian finances from a
burden of which a not unimportant part consists of
disbursements in foreign exchange for supplies of fuels,
lubricants, etc.;
- 2.
- The amount of the current account in lire which, by
the terms of paragraph 3(a), the
Italian Government must place at the disposition of the
Commanding General of the American armed forces might
conveniently be established in agreement with the
Minister of the Treasury;
- 3.
- The second section of the Draft does not appear
entirely clear: it is thought possible to deduce,
barring errors of interpretation, that the supplying of
lire to the American armed forces for troop pay and for
other expenditures reimbursable in dollars should take
place by utilizing the balance in lire already in
possession of the American armed forces or through the
acceptance and payment of the counter-value in lire by
the Bank of Italy of United States Treasury checks. The
payment in dollars for lire received in advance would
occur immediately, with the undertaking on our part
however to repurchase lire not utilized and to exempt
the American forces from any loss deriving from
devaluation of the lira.
With regard to this last request it is considered that the
providing of funds in lire to the American armed forces assumes
in this case practically the character of a normal foreign
exchange operation. Therefore, an eventual exchange
guarantee—enacted in a public document—would certainly be
invoked by third countries in similar cases, without Italy being
able to advance serious arguments to resist such a demand.
Not only [that],65 but this
[request] also may not be granted for technical-economic reasons
connected with foreign exchange operations and deriving
especially from the present situation in which the Italian
Government, far from being able to save the available foreign
exchange must employ it immediately for reconstruction purposes.
In fact, whereas the dollars received may actually be utilized
immediately or very soon by Italy, which means under present
exchange conditions, the restitution [of dollars] for the
repurchase of lire not used by the American armed forces might
come about much later under different exchange conditions and
with a considerable loss to the Italian economy.
That inconvenience which would be serious enough even if the
advances in lire were not limited to a pre-established figure,
remains equally serious even within the limits of the amounts
proposed in paragraphs b (1) and (2).
[Page 870]
It is pointed out, anyhow, that the exchange guarantee could be
applied in any case only to official funds, and possibly to
those which are semi-official, but not also to those personal
funds of individual members of the American armed forces.
