127 Mr S. M. Bruce, High Commissioner in London, to Mr J. A. Lyons, Prime Minister
Cablegram unnumbered LONDON, 22 February 1938, 4.52 p.m.
Eden's resignation  immediately caused by difference of opinion with all his colleagues as to time for opening conversations with Italy. The Italians recently indicated that they desired conversations to be undertaken immediately. The Prime Minister's  view was that this offer should be accepted provided the Italians were prepared to include every subject of difference between the United Kingdom and Italy in conversations, including Spain. This basis ltaly accepted. 
In opposition to this view, Eden maintained that reply to the Italians should be that while we were anxious to enter into conversations with them it would be useless to do so until a satisfactory arrangement had been arrived at with respect to Spain, a cessation of Italian propaganda in the Near East and a withdrawal of some part of the Italian troops in Libya, as an evidence of good faith. This the Prime Minister maintained was an impracticable proposal, would be rejected by the Italians and would intensify the differences between the two countries.
Broadly, the position is that the Prime Minister maintains that the European situation is so serious that unless some new move is made by Britain to resolve it, it must inevitably lead to war.
That the only way to bring about a settlement is for Britain to undertake conversations with both Germany and Italy provided that those two countries are prepared to discuss all questions without any exception, with a view to determining whether of not there is any basis upon which an improvement can be brought about.
I These conversations would be entered into without any prior commitment or reservation on either side, and the Prime Minister would be prepared to give undertaking that while conversations were designed to bring about a general appeasement he would not endanger any vital British interest or sacrifice any fundamental principle.
Eden maintains that both Germany and Italy have shown by their past actions that they are not to be trusted and until they have given evidence by their actions that they are sincere it is useless to attempt to negotiate with them.
To this the Prime Minister replied that while admitting that both Italy and Germany have been guilty of flagrant breaches of their undertakings and that these breaches cannot be justified there are arguments in extenuation of them by reason of international failure since the war to provide for any means for the peaceful settlement of justifiable grievances.
This broad divergence in outlook has, during the last few months, been the subject of a certain measure of difference between the Prime Minister and the Foreign Secretary. It, however, only came to a head on Saturday last  and the serious developments were quite unexpected. After Eden's resignation and prior to debate yesterday afternoon in the House of Commons, the atmosphere was that it might have most serious repercussions and even endanger the Government's position. The impression after the debate is that Eden's case was not convincing and that his sudden resignation was not justified having regard to the serious international situation. This position may be changed by the debate on the censure motion this afternoon when both Lloyd George and Churchill  will probably intervene and cause maximum embarrassment to the Government.
Subject to this afternoon's developments, the present position is that the Prime Minister, who is supported by the Whole Cabinet, has justified his attitude, although it is recognised that a great deal of feeling will be engendered by misrepresentation of the situation in Opposition press and serious misunderstandings will be created abroad including suggestions that Eden has been sacrificed to placate Dictators.