Further to our cable dated November 22¹ advising the Department that our 1950/51 allotment of ECA funds amounting to $13 million is all in the form of grant I took occasion to refer to the matter in the course of an informal conversation yesterday with Mr. Hopkinson, Director of the European Programme Division in ECA. I expressed our satisfaction at the decision to give us the entire sum in the form of grant. Mr. Hopkinson told me that they had a terrific struggle with the NAC in our case. He went on to say, however, that the struggle was not so much as to whether our aid should be in the form of loan or grant but as to whether we should receive any further aid at all at this stage.

I immediately expressed serious concern that there should be any question of cutting off our aid before the termination of ERP in 1952 as originally contemplated. I said that any such step would have the most serious consequences for us as apart from our limited dollar earnings we were entirely dependent at present on American aid to finance our essential dollar imports. I said to Mr. Hopkinson 'Surely there is no real possibility of ECA aid to Ireland being suspended in the near future?'. To this Mr. Hopkinson replied that there was a very real possibility of such action and he urged that the matter should be receiving our most serious consideration. He said that if on account of the improvement in the sterling area gold and dollar reserve position it were decided not to give any further aid to Britain it would be very difficult to justify further aid to Ireland as our normal source of dollars apart from our own earnings was the sterling area dollar pool. He mentioned how the position was aggravated by the worsening of the international situation and the huge tax burden which would fall on the American people for defence purposes.

When I went on to emphasise the seriousness of any such decision from our point of view Mr. Hopkinson suggested that we should now be able to get dollars for our essential requirements from the sterling area dollar pool. I pointed out that we had undertaken not to draw on the pool for the duration of ERP and even if we were to draw on it now we would probably not be able to secure sufficient dollars to continue our recovery effort at its present level. The British might seek to impose on us cuts which were not altogether rendered necessary by balance of payments considerations. Mr. Hopkinson indicated that he would like to know more about what we might expect to receive from the sterling area dollar pool but he discounted our undertaking not to draw on the pool as an argument against suspension of American aid as the undertaking would have been discharged if aid should cease.

The foregoing discussion took place at a cocktail party and was quite informal. In case the matter should be mentioned to me in a more official manner in the near future I should be glad to be advised as soon as possible as to what line of argument it is desired to use if we are asked to make a case as to why our aid should not be suspended if aid to Britain is suspended.