FOREIGN RELATIONS, 1946, VOLUME IV



  Memo concludes requesting Embassy to inform United States
Government "very grave consequences which might derive" from
economic financial clauses peace treaty. Identical note apparently sent
United Kingdom Embassy.
  Accompanying letter from Prunas Foreign Office Secretary General
states Government is "proceeding to detailed examination of economic
financial clauses" and will supplement its earlier arguments "which
do
not appear to have been given due consideration." General impression
of Italian experts is that if clauses remain unchanged, "consequences
would be fatal for Italy" which would emerge "scarcely alive"
from
application of treaty. Prunas believes it clear Allies "did not wish
pursue that objective" when drafting treaty but fears that "perhaps
permanent weakness Italian economy has not been sufficiently made
known" and that "apparent and momentary abundance of goods may
have been considered indication well being when it is actually sign
profound economic weakness due almost total lack purchasing power
Italian population." Similar phenomenon observed in defeated coun-
tries after First World War preceding their collapse, he adds.
  Prunas questions finally "whether sufficient evaluation has been made
of consequences capable of being produced on Italian economy by total
effect of individual clauses taken all together", adding that if economy
is pushed toward collapse, it would become "element of permanent
disturbance for all Europe with incalculable consequences for all."
  Texts follow airmail.
  Sent Department 3414, repeated Paris for United States Delegation
523.
                                                             KEY

740.00119 EW/8-646
Memorandumn by the State-War-Navy Coordinating Conmmittee to
                     the Secretary of State

SECRET                               WASHINGTON, August 6, 1946.
Subject: Military Implications in Internationalization of Trieste.
  In response to a request 7 from the Acting State Member of 15 July
1946 on the above subject, the Joint Chiefs of Staff have advised the
State-War-Navy Coordinating Committee as follows:
  "In accordance with the request contained in State-War-Navy Co-
ordinating Committee memorandum of 16 July 1946, subject: 'Secur-
ity of the Proposed Free Territory of Trieste', the following views of
the Joint Chiefs of Staff regarding the military features of arrange-

' Not printed.



822