The Department of Finance have suggested that we, immediately, enter into negotiations with a view to obtaining premises for use as residences and Chanceries in partial settlement of the military relief credits owing to Canada by several European countries. In the case of Italy and Greece, these premises would be accepted in full settlement of the military relief obligations. While the credits are large in the case of these two countries, their financial position will make it impossible for them to make any substantial payment and the Canadian Government has already agreed to accept a nominal sum as full settlement. In the case of Denmark, the total debt is only $565,000 and, therefore, even though their financial position is better than that of Italy and Greece, a premises could he accepted as settlement in full. In the case of the other countries where the obligation is large, the financial position is such that we would expect to obtain a fairly large sum in discharge of their obligations and the transfer of premises would only he accepted in partial settlement. There is no doubt, however, that in all cases it would he easier for the countries concerned to effect partial settlement by the purchase of local properties which would involve an expenditure of only local currencies rather than effect full settlement in convertible currency. For this reason it is believed that a more satisfactory settlement from the point of view of Canada can be achieved if part of the payment is used for the purchase of premises.

The Department of Finance believe that, if negotiations for the settlement of these credits is not undertaken immediately, there may be difficulty in obtaining any value whatsoever for these obligations. It is quite possible that, if the United States begins making payments to these countries under the Marshall plan, they would object to any repayment by those countries on account of relief credits.

While it appears that the acquisition of properties in this manner will not, in fact, cost the Canadian Government anything, it will probably be necessary to obtain Parliamentary approval. Under these circumstances, I would like your authority to send the necessary instructions to the Chiefs of our Missions in the countries concerned to commence negotiations and where any definite offer is obtained to refer these back to Ottawa for final approval.

The situation in the countries concerned is as follows:

France - Relief credits amount to approximately $12,400,000 and in addition there is a credit of $1,000,000 for relief distributed in the French zone in Germany.

We think it probable that the French Government would be ready to sell to the Canadian Government either the Hotel de Talleyrand or the Hotel de Castries. Either of these properties would be eminently satisfactory as a combined residence and Chancery. It would be necessary to obtain not only the property but to have the French Government agree to make the necessary expenditures to modernize the buildings since neither of them would be satisfactory unless completely new plumbing, wiring and heating were installed. There would also be fairly substantial alterations to adapt them to our purposes. Therefore, if we obtain the premises without an additional agreement that the French Government would pay for the modernization we might find ourselves faced with an expenditure of an amount that might reach one-half million dollars. It might also be possible to have the French Government agree to pay for the purchasing of furnishings in France.

The Netherlands - The relief credit amounts to approximately $14,000,000. If a property more suitable to our requirements than the present residence could be found, I would suggest that the Ambassador negotiate for some different premises. If, however, nothing else is available, the present residence but not all of the grounds would be satisfactory. Our present Chancery is not satisfactory either in design or structurally. Our Ambassador should, therefore, he asked to look for alternative Chancery premises or for vacant property and the credit would be used for the purpose of building a Chancery. An endeavour should also be made to permit the purchase of furnishings for the properly purchased.

Belgium - The relief credit amounts to approximately $7,800,000. We would recommend the purchase of the present Chancery which is admirably suited to the needs of all Canadian Government offices in Brussels. The present residence is very satisfactory in its interior and its location but it would he preferable to obtain a different property if at all possible as it is semi-detached. I would, therefore, suggest that the Ambassador he instructed to look for an alternative residence which might be obtained, but if nothing is available, to negotiate for the purchase of the present residence. If possible, arrangements similar to those suggested for France for repairs and furnishings should he made.

Denmark - The relief credits amount to approximately $565,000. Our present building in Copenhagen is very satisfactory as a combined residence and Chancery. I would, therefore, suggest that our Minister negotiate to obtain this property and if possible also furnishings for the property to he purchased in full settlement of the relief credits.

Norway - The relief credits amount to approximately $1,700,000. Our Chancery is at present in an office building and the residence, while it appears to be the best available at the moment, would be more suitable for a diplomatic secretary than a Minister. I suggest, therefore, that our Minister he asked to look for a property that might be purchased for a residence and to commence negotiations for the transfer of that property to Canada together with an agreement to finance any necessary repairs. If no alternative property is available, he might negotiate for the present residence which, at a later date, could he used for a member of his staff.

Yugoslavia - The relief credits amount to approximately $226,242. As our Minister has not yet arrived in Belgrade, we have no specific properties that we can recommend. We do, however, know that the accommodation situation in Belgrade. is desperate and, therefore, we would suggest that the Minister be instructed to look for a house and that we be ready to accept a property that, while not just what we desire, would serve our purpose until the housing situation improves.

Greece - The amount of the relief credits is $612,352 but Canada has already agreed to accept a nominal settlement. The present residence is entirely satisfactory and the Chancery, although well located, might he a little on the small side. It would, however, serve if nothing better presents itself. I, therefore, suggest that our Ambassador be instructed to negotiate for the purchase of the present residence, and to look for other Chancery premises hut, if none are available, to negotiate for the present Chancery premises.

Italy - The relief credits amount to approximately $28,400,000, but Canada has already agreed to accept a nominal settlement. Neither our present residence or Chancery in Rome would be suitable for permanent use. I, therefore, suggest that we instruct our Minister to look for premises for both residence and Chancery purposes which could be purchased for the Canadian Government.

For your information, I am attaching a table showing the rentals at present being paid in the capitals referred to above.†In France, in addition to the rentals being paid by External Affairs, premises arc also leased by the Department of Trade and Commerce and the Immigration Branch of the Department of Mines arid Resources.

[L.B. PEARSON]

⁹Note marginale :/Marginal note:
Seen by St. Laurent. 19 February 1948