Foreign Relations of the United States, 1958–1960, Western Europe, Volume VII, Part 2

305. Telegram From the Embassy in Spain to the Department of State⁰

Madrid, March 24, 1958, 7 p.m.

1024. Pursuant to instructions contained Deptel 1100,¹ I will make following points in meeting with Castiella now scheduled for Tuesday, March 25, about noon Madrid time.

As introduction, indicate careful consideration US has recently given various Spanish requests for additional military and economic assistance; cite importance both governments attach to 53 agreements and their contribution to deterrent strength free world. Indicate mutual benefits derived therefrom stating US generally satisfied with way Spain living up to agreements and reviewing in detail our contributions in military and economic aid, beyond agreed commitments, as significant evidence our good faith.

Nevertheless US in consideration Spanish military and economic position willing to undertake extensions assistance these fields on an annual basis. Will point out what we specifically prepared do in economic field including $15 million dollars, lira, finmarks, Danish kroner, or counterpart change, and additional cotton.

Will then state as reported last paragraph Embtel 967² this additional assistance being made available because US knows in years to come it will continue receive cooperation Spanish authorities which is necessary to effective operation joint bases. Will seek his confirmation that such is case and attempt to establish basis on which I may feel free count on his assistance in solving any future problem connected with our military activities in Spain which may become of sufficient importance to pose challenge to intent or content our agreements.

Will briefly advert to conditions under which future military assistance being given, emphasizing importance we attach to ability of Spain to absorb and utilize military equipment effectively without serious impact on its economy.

On economic aid will stress this assistance being made available to help Spain help itself and will emphasize Secretary Dulles’ statement that economic aid cannot be more than marginal contribution to any country’s development efforts.³ Will recapitulate what this additional amount means in terms of total US contribution in fiscal 58. Will emphasize significance of counterpart change, not only in increasing Spanish receipts under defense program but also in broadening possible uses of pesetas so developed.

Will recall Spanish note 310, April 5, 1957,⁴ which contained undertakings on economic stabilization, noting that progress achieved in reducing inflation, but expressing concern that foreign exchange position has shown no real improvement. Will indicate particular interest in receiving information re success of steps being taken reduce budget deficits, control private and public credits, contain internal demand and, in general, adopt measures bring Spain’s foreign exchange position into better balance. Will add desirable encourage selective private foreign investment to increase export earnings or save foreign exchange. Finally, will point out such steps are not only in Spain’s interest but should strengthen possibilities their obtaining EXIM and private bank loans and assistance from IMF, IBRD and other international organizations.

Based on past experience, believe foregoing points can be made to Castiella more effectively orally than in aide-mémoire. This will minimize danger that Foreign Minister might out of disappointment with amount of aid, submit our document directly to Cabinet. (As reported Embtel 833 February 11,⁵ Cabinet desires revise 1953 agreements.) I of course, recognize Foreign Minister may request record points made in which case substance foregoing will be incorporated in memorandum and sent him after meeting.

Press release on additional aid being cabled separately.⁶ In accordance Deptel 1203, March 22,⁷ any release on counterpart change will be made later.⁸

Lodge

0. Source: Department of State, Central Files, 752.5–MSP/3–2458. Secret; Priority.
1. Telegram 1100 to Madrid, March 5, authorized Lodge to inform the Spanish Government that the United States was prepared to grant $15 million to Spain from the fiscal year 1958 funds and that it was prepared to revise the 60–30 division of counterpart funds to 90 percent Spanish economic use. (Ibid., 752.5–MSP/3–558)
2. Not printed.
3. Not further identified.
4. A copy of this note was transmitted as an enclosure to despatch 1102 from Madrid, undated. (Department of State, Central Files, 752.5–MSP/4–1157)
5. Document 304.
6. Transmitted in telegram 1026 from Madrid, March 24. (Department of State, Central Files, 752.5–MSP/3–2458)
7. Not printed. (Ibid., 752.5–MSP/3–1158)

8. On March 25, Lodge reported that he had met with Castiella and made the presentation outlined in this telegram. Castiella confirmed continued Spanish cooperation on the joint operation of the bases, stated that he would advise the Ambassador on the progress of the Spanish economic stabilization program, but was not enthusiastic about a press release concerning the $15 million grant since he believed the public would be disappointed by the small amount. Lodge characterized the presentation as “well received.” (Telegram 1038 from Madrid; ibid., 752.5–MSP/3–2558)

   On April 10, the Ministry of Foreign Affairs transmitted to the Embassy a note outlining the measures that had been taken to strengthen the Spanish economy. A copy of the note was transmitted as an enclosure to despatch 797 from Madrid, May 5. (Ibid., 752.5–MSP/5–558)