Foreign Relations of the United States, 1949, Western Europe, Volume IV

ECA Telegram Files, FRC Acc. No. 53A278, Paris Toeca: Telegram

The Chief of the ECA Mission in France ( Bingham ) to the Administrator for Economic Cooperation ( Hoffman )

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priority

Paris , August 26, 1949—7 p. m.

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Toeca 1173. Attention James Brooks.¹ Counterpart series number 59.

1. Mission recommends that Administrator authorize mission to approve counterpart release of 27 billion francs for September investment and reconstruction expenditures. Reply required August 29.

2. Monthly review indicates trends in French economy remain essentially same as indicated in recent counterpart series. Pressure on prices, and developments in gold and foreign currency markets in first weeks of August confirm view that measures of French administration have not been adequate to contain inflationary pressures. It should however be remembered that agricultural and international monetary situation are less favorable than French could reasonably have expected when basic budget and financial policies were established early in year.

3. Mission and Embassy were surprised by sudden action of Cabinet last Saturday to combat economic deterioration. (See Toeca 1159 and Embtel 3514.²) French administration has apparently recognized that stabilization program is in serious danger, Measures to tighten credit controls and to liberalize imports of consumer commodities may not be adequate but certainly they represent positive steps and also courageous ones in face of immediate protests from French special interests concerned. Effectiveness depends of course upon enforcement and extension these measures, as well as prospects food production balance of year. French state precautions are being taken to trace imports to be certain they are not stockpiled and are sold at reasonable prices. Petsche hopes to carry out additional liberalization measures before leaving for Washington, and is now discussing matter with Lacoste³ and later with Pflimlin.⁴ Outcome is not certain as technical ministries claim they need more time to study proposals.

4. New measures taken are of course intended to avoid additional pressures for wage demands this fall on grounds of increased living costs. Nevertheless, government may be underestimating seriousness of labor dissatisfaction. In all likelihood, government will have to make decision on advisability of small money-wage increase, even if prices can be maintained at present level. This question will probably arise during period when government may be faced with problems of additional Treasury requirements this year and preparations for next year’s budget. See Toeca 1112 and 1147.⁵ If small wage increase is to be absorbed in present price level, reinforcement of credit controls and liberalization measures, together with maintenance of increase in production levels, become all the more important.

Ambassador Bruce and OSR concur in recommendation.⁶

Bingham

1. James R. Brooks, of the Local Currency Branch, Fiscal and Trade Policy Division, of the ECA.
2. Neither printed.
3. Robert Lacoste, French Minister of Industry and Commerce.
4. Pierre Pflimlin, French Minister of Agriculture.
5. Neither printed.
6. In telegram Ecato 831, August 26, 8 p. m., the Acting Administrator for Economic Cooperation (Foster) conveyed authorization to agree to the utilization of 27 billion francs for September investment expenditures (ECA Telegram Files, FRC Acc. No. 53A278, Paris Ecato).