No. 346
The Secretary of State to the President 1

Memorandum for the President

Subject: German Interim Financing

There is full agreement among the Department of State, the Treasury Department, the War Department and the Foreign Economic Administration regarding proposals which should be made to the British, the French and the Soviets with respect to procurement and interim financing of essential German imports. Such proposals would, of course, state that the sum necessary to pay for imports into Germany should be a first charge on all German exports from current German production or stocks on hand. These proposals, as recently advanced to the British, are contained in the attached memorandum.
In recent discussions the War Department has pointed out that up to the present its financial responsibility for supplies for Germany has not included imports necessary to meet all of the objectives of the Government of the United States included in the directive to General Eisenhower. In particular, the War Department has confirmed [confined?] its financing to imports for the consumption of occupying forces, displaced persons, and such minimum consumption by German civilians as is necessary to prevent disease and unrest. This would exclude imports necessary to effectuate approved programs of reparation, restitution and relief of Allied countries, and imports made necessary by reason of the elimination or restriction of particular German industries for disarmament purposes.
The War Department has not indicated any unwillingness to accept any of these responsibilities but is of the view that it should do so only under explicit instruction from you.
Since the Commander-in-Chief of the United States Army Forces in Germany in his dual capacity as United States member of the Control Council and Commander of the zone of occupation is entrusted with full responsibility for carrying out all objectives of United States policy in Germany, it is the Department’s view that the War Department should assume procurement and initial financing responsibilities with respect to all imports into Germany for which the Government of the United States assumes responsibility. In the view of this Department, moreover, the War Department’s responsibility should extend to the United States’ share of any combined financing which may be undertaken in concert with the other occupying powers.
J[ames] F. B[yrnes ]
German Financing
It is the expectation of the United States Government that the Control Council for Germany will begin to function quickly in accordance with existing Allied agreements and that redeployment of Allied Forces in conformity to agreed zonal boundaries can be carried through without delay. It is expected that the present combined command (SHAEF) will be discontinued on July 1, 1945 or shortly thereafter.
Formulation of the principles governing the procurement and financing of essential German imports should be an immediate task of the Control Council. If possible, an agreed supply program for Germany as a whole should be put into effect as soon as redeployment into zones has been completed. Such a program should include provision for equitable inter-zonal distribution of supplies available within Germany so as to minimize the net deficit for, and imports into, Germany as a whole. The sum necessary to pay for imports into Germany should be a first charge on all German exports from current production or stocks on hand. In the event, and to the extent, that the proceeds of exports are insufficient to pay for approved minimum imports, the necessary arrangements for interim financing should be made by the Allied countries concerned on a basis to be negotiated. Reimbursement for any net outlays made in connection with the provision of supplies for Germany should be sought from subsequent German exports.
The United States Government is not prepared to continue the present combined military procurement and supply program and machinery beyond October 1945 loadings.
Arrangements should be made effective August 1, 1945 for making records of all distribution of supplies into the three western zones. The three occupying powers, the United States, U. K. and France, would be billed for supplies imported into Germany distributed to their respective zones after August 1. The amounts for which the three governments would thus become individually responsible as well as the amount arising out of deliveries to Germany prior to August 1, 1945 would of course be a first charge on German exports.
Each occupying power should, in [the] view of the United States Government, assume procurement and financial responsibilities for the supplies required in its zones with November loadings unless prior to that time the Control Council has established in effective operation a supply mechanism along the lines of paragraph 2.
  1. Printed from the copy forwarded to Clayton and Byrnes as an attachment to document No, 854 (see vol. ii, p. 779).