Courtesy Reuters

The Revision of the Intra-European Payments Plan

Before the British crisis developed, the main subject of concern this year for the European Recovery Program had been the revision of the plan for intra-European payments. This is too technical a subject for extended treatment in a note; but the large amount of time that has been devoted to the plan, both last year and this, and the nature of the conflict that arose over the revision of it, seem to require that an attempt be made to see this aspect of the recovery program in the right perspective.

The plan as adopted in October 1948, with its provisions for drawing rights and conditional aid, supplied a means whereby part of the E.C.A. aid from the United States could be used to finance intra-European trade balances and enable the countries to obtain imports, not only in the United States or by such "off-shore" purchases in non-O.E.E.C. countries as E.C.A. would approve and pay for (for example, Canadian wheat), but also from each other. The amount of trade actually financed in this way to the end of June 1949 was $677,000,000, or roughly 14 percent of total E.C.A. aid for the fiscal year 1948-49. Much has been said in criticism of the original plan, in particular that it provided wrong incentives to both debtors and creditors -- to the former by encouraging them to have deficits (France, for example, got from us not only $981,000,000 of direct aid to finance her dollar deficit but about $280,000,000 net additional to finance her intra-European deficits, or more than a quarter of total E.C.A. aid), and to the creditors by encouraging them to have intra-European surpluses when their main problem is to try to sell to the dollar area. Another important criticism, which in the present revised plan achieves further significance, has been that to the extent provided for in the plan we have departed from our basic principle of direct control of aid.

A further complaint concerned the

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