Letter from Seán MacBride to all Ministers (Dublin)
(Secret and Urgent)

The whole question of E.R.P. is now rapidly reaching definiteness and a stage when important decisions concerning our future economic development will have to be taken.

The all-important question of whether E.R.P. aid to Ireland will be by way of loan or grant will be decided within the next week or so. Likewise, the Bi-lateral treaty, which will specify inter alia the purpose for which the Local Currency Fund can be used, (i.e., the fund which will accrue here as a result of the goods made available under E.R.P.) will be under negotiation within the next few days.

I have already clearly indicated to the State Department that unless E.R.P. aid is made available to us by way of grant (and not loan) that we shall not be able to avail of it as we would be unable to repay it and as we are not prepared to undertake obligations that we are not in a position to meet, in the hope that these obligations would be scaled down or remitted altogether. The reactions to these representations have, so far, been favourable, although nothing tangible has yet been decided.

For the purposes of the negotiations which must begin at once in Washington, it will be necessary to indicate to the State Department and to the E.C. Administrator, the plans we contemplated for economic development and the use to which we propose to put the Local Currency Fund which will become available if the E.R.P. aid is given to us by way of grant.

Both privately and officially the U.S. State Department officials have made it clear to us and to the other European countries:

that our plans must be dynamic in their constructiveness and must aim at increasing production; that we must not merely avail of E.R.P. aid to 'carry on as we are' but that we must avail of it to rebuild our economic structure so as to render us independent of outside help, to increase production, to ensure full employment and to ensure prosperity.

I would like to urge the importance of this approach in considering the use to which we propose to put the funds which may become available to us. This is vital not merely to satisfy the Americans that we will make proper use of this fund but also to ensure that we shall build our economy on a proper basis. The key-note of our approach should, I suggest, be dynamic and should indicate a definite intent to lift ourselves out of our present rut.

It has now become a matter of extreme urgency to decide broadly the use that it is proposed to make of the Local Currency Fund if it is given to us by way of grant. An indication of this will be required by the U.S. in the course of the present negotiations. This must be done on the basis that the maximum aid will be made available to us. Hereunder I give, therefore, the maximum aid which I expect will be made available to us, but I want to warn the members of the Government that this is a maximum which may not materialise and that, therefore, there should be no undue optimism and that no public references to them should be made by members of the Government. I give these figures merely as the basis upon which planning should be made for negotiation purposes.

On present prognostications we will receive $34 millions per quarter this year or a total of £38.1 millions for 15 months. On the assumption that we will receive the same sum during each of the four years during which aid is expected to be forthcoming, our total receipts would be approximately between £100 and £150 millions.

Our development plans should, therefore, be on the basis that we will have £30 millions per year for four years. Should this sum, or anything approaching it become available for development, we should be able to transform our country; it would provide an opportunity such as never offered itself before of building our economy on really constructive lines. But again, I want to warn against optimism. We may not get as big a sum; it may not be by way of grant, or may be only practically by way of grant; it may not continue over the four years; there may be a war. These are all possibilities, but we must plan on the most optimistic basis and we must be dynamic in our approach.

I append hereto a number of suggestions as to the type of work we propose to carry out with the Local Currency Fund, if made available to us.¹ I do not think that we shall require at this immediate stage, to provide details of the schemes but we shall have to be ready to do so if called upon at fairly short notice. Such schemes, in order to be acceptable, to the U.S., must be designed to increase production, to reduce dependency on materials in short supply and to provide full employment.

The negotiations in relation to both the Loan-Grant issue and the Bi-lateral treaty will have to be undertaken at once and I have to-day received an invitation to discuss these matters in Washington on the 10th, or as soon as possible thereafter. I expect to receive on Monday the 10th or the next day, the U.S. draft of the Bi-lateral treaty. I think that for many reasons we should be prepared to negotiate and conclude these matters as soon as possible. They are of vital importance and I think the earlier we are in the field the better from our point of view; day by day pressure will increase on the part of other countries, thus reducing our chances. In any event, all the Bi-lateral treaties with the sixteen participating European countries MUST be signed by the 10th June next. We have been given the opportunity to be at the head of the queue and I think that we shall fare better there than at the end. Hence, I should like to intimate to the State Department that we shall be ready to negotiate in Washington not later than Monday, the 17th instant.