Foreign Relations of the United States: Diplomatic Papers, The Conference of Berlin (The Potsdam Conference), 1945, Volume II

Frankfurt USPolAd Files—800 Germany

No. 850
The Director of Political Affairs, United States Group, Control Council, Germany ( Heath ) to the Political Adviser in Germany ( Murphy )

[ Babelsberg ?], July 17, 1945.

Memorandum

Attached is the memorandum which you directed the Division¹ to prepare on “Problems with which we are or may be confronted in the US Zone and in Germany as a whole”. I don’t think the paper is in the Division’s best vein. Some of the problems mentioned are small or are on their way to solution and some of the policy guidance asked for in the memorandum will be supplied as a result of the Conference, at least if the American thesis is accepted.

I have tried my hand at a new document, a rough draft of which is attached for your consideration.

Don[ald R. Heath]

[Enclosure 1²]

[Political Problems]

There follows a list of the principal problems with which we are or may shortly be confronted in the U. S. Zone or in Germany as a whole for the solution of which high level decisions or policy guidance is needed.

1. The problem of the large numbers of Nazis who have been or shortly will be removed from public office and important positions in private enterprise. Should they be interned, put in labor camps, or be allowed to remain at large?

2. The problem of political decentralization. As the Political Division sees it the problem of decentralization of the German governmental structure is that of re-establishing a federal government utilizing as federal units the historical Länder and provinces. The problem is not great in the American Zone. Bavaria is a natural unit of a German federation and lies entirely within the American Zone. Württemberg is another historic unit, the difficulty in this case being that a large part of the Land of Württemberg is in the French Zone. It is to be noted that it will later be possible to recast the zones to bring Württemberg entirely within one zone. The same is true of the state of Baden, the northern part of which located in the American Zone should be reunited with the southern part and the whole Land placed within the French Zone, possibly in return for restoration of the southern part of Württemberg to our zone. On the other hand Hessen, Hessen-Nassau, and the newly created province of Kur-Hessen might well be combined into one Land.

The problem is more acute and complex in the British Zone where there are several small political divisions which are too small to serve as proper units in a refederalized Germany. In the Russian Zone there is the problem of dividing Prussia and restoring some of the old states which Prussia absorbed in its long history of aggression.

The problem of federalization or refederalization of Germany is a complex one which cannot be solved without further experience in military government and very considerable study. The question arises whether we should not at an early meeting of the Control Council if not at the present Conference seek a declaration in favor of eventual reconstitution of Germany as a federalized state. When J. C. S. 1067³ was submitted to the EAC we put forward our position as favoring decentralization. Decentralization is a rather vague term. “Federation” and “federalization” are much more precise. Why cannot we strive at this conference to obtain clear agreement on a federalized Germany with Prussia dismembered into appropriate political units?

3. The problem of the organization of relations between the Control Council governing Germany and allied and neutral states. Should a declaration be issued by the Control Council announcing that it is de facto the Government of Germany? Should the Control Council notify neutral states of this announcement and request the return to Germany of the German diplomatic and consular personnel? Should Allied and neutral states be invited to accredit small missions (military or civilian or both) to the Control Council? Should the Control Council confine its relations to [with?] other governments to such missions as may be accredited to it or should it, in certain cases, be permitted to communicate with other governments through one or all of the diplomatic missions of the four powers in other countries?

4. The problem of uniformity in the information services of the zones. We are at present in our zone proceeding from the phase of operation and control by American authority to operation by licensed Germans under American control. The essential problem now is one of consultation and agreement with the British, Soviets and French on a uniform information and operation policy for all of Germany.

How shall official news originating inside Germany be distributed outside Germany? Will a new German press service be established?

It is understood that an attempt will be made at this Conference to reach uniform policy regarding the movement and activities of accredited correspondents in and between their respective zones.

5. The problem of the resettlement of stateless persons and nonrepatriables in Germany. The German laws which deprived many Germans of their German citizenship have been revoked. Must these persons undertake some positive action on their own part to re-establish their claim to German citizenship? If not, by what process is their citizenship to be restored? What provision is to be made for those persons who do not wish to re-assume German citizenship?

6. The problem of the protection of American property interests. Estimates place the total value of pre-war American investments in industry and other property in Germany at some $1,200,000,000. The present custodianship of American and other foreign property in the American Zone is vested in the Property Control Branch of the Reparations, Deliveries and Restitution Division. As its authority is restricted to the American Zone, the Property Control Branch will be required to establish cooperative relations with corresponding agencies of the other three Occupying Powers for the control of American Property in their respective Zones. Effective steps towards this end, however, can be taken only after the Control Council has started normal operations.

Because of the large scope and complexity of the subject, a certain amount of time will be required for developing definitive policies in all their details and organizing necessary administrative machinery for the effective protection of American property interests.

A considerable portion—figures not available at this writing—of American investments in Germany are located in the Russian Zone. The question arises whether at this Conference we should not intimate very clearly to the Russians that we expect protection of American investments in the Russian Zone. A preliminary list of principal direct investments in the Russian Zone could be prepared in a short time.

Economic Problems

7. Trade and Travel. It is understood that the problem of the movement of goods and persons between the four zones and the problem of German exports, particularly in relation to reparation policy will be studied and discussed during the Conference.

8. The problem of coal and food. The problem of coal and food during the next twelve months is probably the leading economic problem facing the Military Government in the separate zones, and in Germany as a whole. It is less acute in the Russian Zone and, as regards food, most acute in the British Zone. There is full realization of the gravity of the problem of providing food and fuel and adequate attention is being given to the problem in the British and American Zones at least.

9. The problem of inflation. Intimately related to the problem of maximum production of food in Germany to prevent hunger and dangerous political disorder is that of inflation. At this Conference and at [an] early meeting of the Control Council effective agreement should be reached as to the establishment of a functioning central banking machinery and monetary system.

10. The problem of quadripartite action to vest or freeze Germany’s external assets. Will a special agency be established within ACC to handle developments?

[Enclosure 2]

secret

[ Babelsberg ?], July 16, 1945.

Memorandum ⁴

Subject: Problems with which we are or may be confronted in the US zone and in Germany as a whole.

I. Economic Problems

See the attached statement prepared by Mr. Tuthill of the Economics Branch of the Political Division.

II. General Political Problems

1. How soon and to what extent shall political party organizations be permitted (a) locally, and (b) on a provincial, zonal or national basis? How far shall we accept those political parties already permitted by the Soviets to exist in our sector of Berlin, or those formed in the Soviet zone on a “national” basis? It would seem that the problem of policy toward political activities must be worked out by the Control Council at the national level, as otherwise there may be such divergencies of attitude as to create a serious divisive factor.

2. To what extent should exiled German political and trade union figures be brought back into Germany with our support and assistance? This question applies equally to cases in which we might bring such persons back to serve in appointive positions and to cases in which they might wish to come back “on their own” to engage in political activities.

3. What policy should be adopted toward the large numbers of Nazis removed from office and those who will be removed from office and private enterprise in the future? Should they be interned, put in labor camps, or be allowed to remain at large?

4. The original directives called for the removal of all Nazis from public office and leading positions. These have now been modified so that only active Nazis or Nazi sympathizers are to be removed. These two policies are being applied in various parts of the American Zone, and in other zones, with varying degrees of thoroughness. To what extent, if any, should the policy be reviewed, with the object of allowing somewhat greater discretion in areas where it seems almost impossible to find qualified persons for public or private positions who were not members of the Nazi Party?

5. To what extent should former provinces or Lander be combined into larger areas (with specific reference to the recent proposal to form one Land out of the Western Military District of the US Zone⁵)?

6. How are the relations between the Control Council and Allied and neutral states to be organized. Should a declaration be issued by the Control Council announcing that it is de facto the Government of Germany? Should the Control Council notify neutral states of this announcement and request the return to Germany of the German diplomatic and consular personnel? Should Allied and neutral states be invited to accredit missions (military or civilian or both) to the Control Council? Should the Control Council confine its relations to [with?] other governments to such missions as may be accredited to it or should it, in certain cases, be permitted to communicate with other governments through one or all of the diplomatic missions of the four powers in other countries?

7. Should the British and American elements of former SHAEF missions be dissolved? Could not the American Military Governor make use of American military attaches in our established diplomatic missions, in place of the American element of the former SHAEF special missions? In such case could the Military Governor issue instructions directly to such diplomatic missions (military attaches) or would he have to transmit instructions via the War and State Departments? This question applies likewise to cases in which the Control Council might wish to issue instructions to the diplomatic missions of the four powers in any given capital.

8. As the situation has developed, does the policy of non-fraternization, in its present limited status, serve any useful purpose politically?

III. Archives and Interrogations

1. Arrangements must be made for us to have access to documents held in the British Zone. The British are already operating jointly with us on documents held in the American Zone.

2. To what extent and under what reciprocal conditions are the Soviets and French to have access to the American-British document centers in the US Zone? Specifically, when and how shall Foreign Office archives at Marburg be made available to the Soviet authorities?

3. Will the State Department make available adequate, properly briefed and experienced special personnel to carry out a program of interrogations of persons detained at Ashcan , Dustbin , Ministerial Control Center (Kassel), the Seventh Army Interrogation Center (Augsburg) and elsewhere?

IV. Information Services

1. We are at present in our zone proceeding from the phase of operation and control by American authority to operation by licensed Germans under American control. The essential problem now is one of consultation and agreement with the British, Soviets and French on a uniform information and operation policy for all of Germany.

2. In the field of press relations, the principal problem is to reach agreement with the other three powers on a uniform policy regarding the movement and activities of accredited correspondents in and between the respective zones.

3. How shall official news originating inside Germany be distributed outside Germany? Will a new German press service be established?

4. Should we persist in our present policy of “austerity” in our radio broadcasts, or should our programs include more music and other features, making them of much the same kind and quality as programs in the US?

V. Displaced Persons

1. What plans have been formulated or policies adopted looking toward the resettlement of stateless persons and non-repatriables in Germany?

2. The German laws which deprived many Germans of their German citizenship have been revoked. Must these persons undertake some positive action on their own part to re-establish their claim to German citizenship? If not, by what process is their citizenship to be restored? What provision is to be made for those persons who do not wish to re-assume German citizenship?

VI. Protection of American Property Interests

See attached statement prepared by Mr. Redecker,⁶ which furnishes certain information on this subject.

VII. War Crimes, German Prisoners of War and United Nations Prisoners of War

See attached three statements⁷ prepared by Mr. Buhrman which furnish certain background material on these subjects.

[Subenclosure 1]

[ Babelsberg ?], July 14, 1945.

Some Economic Problems of Immediate Interest to the Economics Branch of the Political Division

Note: This is not an attempt to list all German economic policy matters that will require attention. For example, it is assumed that the following general problems will be discussed:

1. The movement of goods and persons between the four zones.

2. The question whether SHAEF and Russian laws and directives will be compared and coordinated with the objective of issuing Control Council laws covering all of Germany.

3. The role of various agencies and committees, such as (a) the London Group—ECO, EECE, etc., (b) the Reparations Committee (Moscow) and (c) those in Western Germany such as CRAB. (The Control Council will have to be given clearer authority and implementing powers if major economic policies and decisions are to rest with it.)

Other matters that should be discussed are:

A. Trade and Reparations

1. Assuming that exports will be used to obtain sufficient foreign exchange to pay for essential imports, what machinery will be established to handle the transfer problem involved?

2. Is it possible to obtain a statement on reparations policy that will indicate the time schedule (a) of removing heavy machinery and (b) supplying raw materials, finished goods and labor?

3. Can Russia be induced to make Austrian, Hungarian, or Rumanian oil available to our zones in Austria and Germany?

B. Labor

1. Assuming that Allied demands for reparations labor will be supplied by active Nazis and ardent Nazi sympathizers, how soon can this policy be made effective?

2. Is formal international judgment that the NSDAP, SS, SA, etc., are criminal in purpose to be a prerequisite for the removal of their members from Germany for reparations labor?

3. What is the current agreed policy on trade union activities involving organized meetings, collection of dues, publications, and posters? Should the Works Council Law of 1920 be restored?

C. Finance

1. What form will quadripartite action take regarding vesting or freezing German external assets? Will a special agency be established, within ACC, to handle developments?

2. What is the position regarding German debts to neutrals and how is this related to Question 1?

3. What banking and accounting procedure will be established on a quadripartite basis to allow effective operation of one currency for all of Germany?

4. Can, at least, a functional central banking machinery be established? If so, what are the agreed objectives of inflation controls, servicing of public debt and possible currency conversion?

D. Industry

1. What quadripartite action is possible in order to take over management of combines (Farben) and aimed ultimately at dissolving cartels and dispersing combines?

2. Assuming quadripartite agreement on denazification policy, can an agreed public statement be prepared emphasizing unanimous determination to use anti-Nazi workers and businessmen to help root out Nazis in industry?

3. Can Combined Resources Allocation Board be broadened or abandoned in order to obtain Russian participation?

4. Coal

a. Will Russia participate in ECO?

b. How can the Russians be induced to make the hard coal from German and Polish Silesia and the brown coal fields of Central Germany available for minimum essential needs for all of Germany, as well as for export subject to ACC policies?

J[ohn] W[ills] T[uthill]

[Subenclosure 4]

The Status of German Prisoners of War or Disarmed Enemy Forces as Related to the Political Division of US Group CC

The handling of German prisoners of war or disarmed enemy personnel is the responsibility of the Demobilization Branch of Army Ground Division, US Group CC. Our relation to the problem entails keeping the State Department informed and acting in an advisory capacity as to our treaty relations.

According to the report of this division as of June 16, 1945 the total number of prisoners of war or disarmed enemy personnel originally held by the United States, Britain and France was 7,500,000. Of this number approximately 1,200,000 had been discharged by the United States as of June 18, 1945. No figures are available as to other discharges. The principal problem in relation to this body of disarmed enemy personnel is to effect their discharge and distribution to meet not only the labor requirements in Germany itself but those of allied countries which have specific claims for German reparation labor. According to these demands the United Kingdom requires 250,000 men, France a maximum of 2,000,000, Belgium 45,000, Norway 25,000. The labor demands of Russia and other United Nations countries are not yet known. Disarmed persons still in United Nations Western European hands who will be discharged and returned to what is now known as the Russian Zone of Occupation number 2,520,000, while those who were originally domiciled at [in] East Prussia are estimated at 360,000.

P[arker] W B[uhrman]

1. i. e., the Political Division, United States Group, Control Council (Germany).
2. This memorandum is in rough form. Manuscript corrections and revisions have been made as indicated on the original.
3. J. C. S. 1067 was the first in a series of drafts and papers produced during the development of the directive to the Commander in Chief, United States Forces of Occupation in Germany, regarding the military government of Germany (text in Foreign Relations, The Conferences at Malta and Yalta, 1945, p. 143). The directive was finally issued in May 1945 (see Department of State Bulletin, vol. xiii, p. 596).
4. By Perry Laukhuff. Printed from an unsigned copy.
5. See vol. i, document No. 340.
6. Not printed.
7. Two of these statements are not printed.