London Embassy Files: Lot 59 F59
The Administrator for Economic Cooperation (Hoffman) to Certain Diplomatic Offices in Europe1
File 850 Marshall Plan: Circular telegram
Sent Paris for Harriman and Bruce. We recently requested the advice of the National Advisory Council as to the amount of assistance which should be extended on a loan basis during the period from April through December, 1948. On July 6 the council took the following action: “The National Advisory Council has reviewed the loan-grant ratios which it recommended for use by the ECA in the first ERP quarter (April-June, 1948) and does not find any basis for changing them for use in the period April–December, 1948. The National Advisory Council advises the ECA, however, that the ratios may have to be revised once the allotments of ECA assistance have been determined for this nine-month period or for the full year.”
The following is the background and basic considerations in determining the loan quotas recommended: in its action of April 14, 1948, the Council recommended for each ERP country an appropriate percentage of total assistance to be extended on a loan basis during the first quarter of ERP. This apportionment was substantially adopted by us to achieve a total of loan funds for the first ERP quarter which would not be less than 20% of the total allotments. Subsequently, we and the Export-Import Bank felt that the quarterly basis for determining loan quotas was not practicable. A longer period of time was required to negotiate the programs under loan commitments. It was, therefore, suggested that the council recommend percentages of assistance to be extended in the form of loans for a 12-month period.
Upon investigation, we concluded that it was impossible to provide at this time a tentative estimate of annual allocations. Consequently, we suggested that the Council recommend an appropriate division of assistance between grants and loans for April–December 1948. This would enable the Council to review the situation after the annual programs developed in Paris have been received by US. When the annual allotment of assistance can be estimated with some assurance, this would enable us to set up lines of credit as soon as possible with the participating countries, and, hence, would provide an additional means by which we can oblige countries eligible for loans assistance to draw upon lines of credit in such a way as to assure that the ratio of loans to grants for the full year is in accordance with the desired proportion for each country. We are advising each country accordingly.
In the absence of further information concerning probable allotments, previous ratios have been reviewed in the light of allocations made for the first quarter of the program. The application of the council’s [Page 467] loan ratios to these figures yield a total in loans of $758 million for a nine-month period. This application is given in Table A below.
Loan Assistance to Participants on Projection of Existing Loan-Grant Ratios (April–December, 1948)
Based on first quarter allocations:
| First quarter allocation on nine months rate (million dollars): | Percent in Loans: | Amount of Loan (million dollars): | |
| Austria | 210 | 0 | 0 |
| Belgium-Luxembourg | 60 | 85 | 50 |
| Denmark | 60 | 25 | 15 |
| France (inc. Saar) | 1125 | 15 | 170 |
| Greece | 150 | 0 | 0 |
| Iceland | 3 | 100 | 3 |
| Ireland | 30 | 100 | 30 |
| Italy | 495 | 10 | 50 |
| Netherlands | 315 | 25 | 80 |
| Norway | 60 | 50 | 30 |
| Portugal | 0 | 0 | 0 |
| Sweden | 0 | 100 | 0 |
| Switzerland | 0 | 0 | 0 |
| Turkey | 30 | 100 | 30 |
| United Kingdom | 1200 | 25 | 300 |
| Bizone Germany | 240 | 0 | 0 |
| French Zone-Germany | 60 | 0 | 0 |
| Total | 4038 | 19 | 758 |
If Belgium’s total allotment of funds is reduced, it appears logical that the absolute amount of loans to be taken up by France and the United Kingdom in particular would be increased. However, until more definite information is received concerning the actual size of total allotments, departure from the judgment of the Council with respect to the ratio of loan to grant does not appear to be warranted.
The amount of loans to be extended to a given participant has been related to the National Advisory Council staff committee’s preliminary judgment as to the general capacity of each country to effect repayment over a long period of time. More thorough studies of this subject are now being made. We particularly request no public release that we expect countries to take up amount of loans apportioned for period.
- Sent to offices in 14 CEEC posts.↩