Eden's resignation [1] 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
[2] 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. [3]

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 [4] 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
[5] 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.