162 Mr S. M. Bruce, High Commissioner in London, to Mr J. A. Lyons, Prime Minister

Cablegram unnumbered LONDON, 24 March 1938, 4.35 p.m.

SECRET PERSONAL, HIMSELF

Reference statement Prime Minister of Great Britain. [1] Draft has presented grave difficulties and my view of the result is as satisfactory as could have been expected.

Paragraphs 3 and 14 are intended as an indication to Czechoslovakia that she must be reasonable and this will be reinforced by diplomatic representations, with which it is hoped that France will be associated, to the Czechoslovakian Government.

Paragraph 10 following on the general statement in paragraphs 4 to 9 is intended as an indication to Germany that unreasonable attitude on her part would probably lead to intervention by the United Kingdom.

Paragraphs above quoted are designed to meet the points set out in my telegram of 21st March [2] under the heading of Czechoslovakia.

Rearmament paragraphs are reasonably satisfactory particularly in the admission that vital rearmament requirements cannot be met without some dislocation to normal trade and the priority that is given to the requirements of the Royal Air Force and anti-aircraft defences. Provided that the course outlined is resolutely pursued points I have been urging on Prime Minister with your approval should begin to be met.

I understand that the Conference the Prime Minister had last night with representatives of trades unions Congress was satisfactory.

Spain. I am by no means happy as to the position but probably at the moment and in view of discussions with Italy, Prime Minister's limited statement is wisest course.

Suggest your considering whether it would be desirable for you to make a statement indicating acceptance and approval of Prime Minister's statement, welcoming determination to accelerate rearmament and pointing to your statement as evidence of Australia's preparedness to co-operate with the United Kingdom Government in their defence efforts.

1 Documents 154, 160.

2 Document 149.

[AA : A981, GREAT BRITAIN 8B, ii]