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8. We have very serious problem finding $385 million and unless there are compelling reasons to contrary we would plan to release counterpart accruing Calendar Year 1954 (now estimated $70-80 million) to help meet total. Realize French may be counting on this counterpart for other purposes but trust you will be able reach agreement along these lines. This connection, would like to know lines French thinking on how they would present US aid figures to parliament, whether as separate amount outside regular French budget for 1954 or as item only on resources side as shown heretofore.

9. Will expect you keep us currently informed regarding negotiations on language of note.

10. Copy memo submitted NSC being pouched FYI. Copy NSC action paper will follow soonest. Will inform Heath separately of developments. FYI, current planning envisages following MSP sources for $385 million:


 * 1. $70-80 million MSA counterpart accruing in Calendar Year 1954;


 * 2. Rescreening of Fiscal Year 1954 French MDAP program;


 * 3. Rescreening of Fiscal Year 1954 Indochina MDAP program;


 * 4. Transfer of Title I and possibly II MDAP funds from Defense to FOA (thereby possibly reducing amount of regular OSP that NATO countries including France could otherwise have received).

DULLES

Rh