Letter from Seán Nunan to John J. Hearne (Washington DC)
(Copy)

We have been giving a good deal of thought to the subject dealt with in Mr. McCann’s¹ minute (115/6) of the 3rd April² reporting on his conversation with Mr. Alan Christelow of the British Treasury and Supply Delegation, during the course of which Mr. Christelow discussed the possibility of a Pan-OEEC démarche with the object of obtaining the cancellation of ECA loans.

Our view is that as the Irish Government accepted the ECA loan made to Ireland and agreed to the repayment conditions, Ireland is under a moral obligation to make every effort to repay the loan so long as it has the means to do so. The Government, as you will be aware, has on several occasions during recent debates in the Dáil reaffirmed its intention of discharging this debt in full. We repaid our 1920-21 Republic of Ireland external loan to the people of America even though not legally bound to do so and there is no desire to follow any other course in regard to the ECA loan.³

Nevertheless, we realise that the means of payment may not always be available to us. Our balance of payments is structurally in deficit with the dollar area and though our dollar earnings are steadily increasing as a result of expanded exports and our dollar purchases decreasing, the gap between dollar income and expenditure is still very wide and likely to remain substantial for a long period to come. We are thus dependent for our means of payment of our obligations under the ECA loan upon our access to the sterling area reserves and in view of the parlous level to which these reserves have now been reduced it may well be that unless the balance of payments position of the sterling area with the dollar area undergoes a radical transformation for the better – a contingency which is by no means certain – Britain will be forced to seek at least a moratorium on her enormous debt to the US. In that case it might be difficult to resist pressure to seek a similar easing of the conditions in regard to our own debt, particularly if other US debtors were being forced by economic circumstances to parallel action. The fact that the deficit of the EPU area with the US for goods and services was in the fourth quarter of 1951 running at an annual rate of $3.7 billion and that [the] US was at the same time in surplus with all parts of the world suggests that the possibility of some efforts by America’s European debtors to obtain relief from the burden of their debts cannot be excluded. No doubt such an effort is unlikely to be made until after the Presidential Election in November.

There is, of course, no question of Ireland’s taking the initiative in any such effort but if specific proposals were to be made we would have to examine them in the light of all the considerations involved.

The foregoing is for your general information and guidance only. Any approach from OEEC delegations in Washington should be treated with non-committal reserve.