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 Rh 6. On Friday, 4 September, at the joint State - JCS meeting, the JCS further stated they believed the necessary financial support should be granted, conditioned upon the French assurance of expanded effort. They felt this financial support should not be doled out in a bargaining fashion but should be made available, with such savings as possible, for the stated purposes. We should leave the French no loophole in this regard to consider that we were showing lack of intent to support the Indochina operation and hence give them an excuse for insufficient action.

7. On 1 September, the French presented to the United States a memorandum, in answer to the U.S. questionnaires, which gave fairly detailed information on their programs. This memorandum states that even if France's financial situation requires a reduction of her military budget, the French government nevertheless intends to carry out General Navarre's recommendations, and implementation has already began. Complete execution remains subject, however, to U.S. aid amounting to $385 million up to the end of 1954. It goes on to say: " In the event this aid could not be granted, a complete reconsideration of the plan of operations in Indochina would be unavoidable." The memo then gives further information on plans and requirements. The French have indicated 9 additional infantry battalions of French Union forces cnacan [sic] be in Indochina by 1 November, that they are increasing the build-up of the native forces, that they are offering independence to the Associated States and that they will remove "colonial-minded" French officials.

8. The FOA has considered the legality of providing the funds required to meet the French program. They state that by use of the President's powers to transfer funds within "Titles" of the MSP Act, plus mineymoney [sic] already appropriated for additional support for Indochina, the requirements can be met. However, this may require a transfer of up to $235 million from "ItleTitle [sic] I", the NATO area, and we have not yet fully worked out what the impact of this transfer would be on NATO programs and on "offshore procurement" in the NATO area.

9. Mr. Dulles, at the NATO Council meeting in April of this year told the NATO countries he expected offshore procurement contracts in Europe during our fiscal year 1954 to amount to $1.5 billion, subject to appropriations by ContressCongress [sic]. This was important for helping meet the European balance of payments. Congress seriously cut appropriations, and the transfer to Indochina of an additional $285 million from available funds will further reduce opportunities for offshore procurement in Europe (although some of the Indochina funds may be expended in France for OSP). However, the military services have been reviewing world-wide overall MDAP end-item programs during the past month against the foreign military units, in being or clearly to be created, which would recievereceive [sic] the end-items. This review is scheduled to be complete in about a week, but very rough preliminary indications seem to show up lessened requirements to meet priority programs due to slowness in the creation of

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