The United States Political Adviser for Germany ( Murphy ) to the Secretary of State

612. For Matthews.32 At the last meeting of the Finance Directorate, September 21, the Russian member, Maletin, made some interesting observations regarding the German national debt. He remarked that 90 per cent of the 400 billion Mark national debt is the result of war; that Germans have used loans as source of financing the war. Therefore decision as to payments must be of a political character. To decide to make payments on it, he believes, will assume payment for war losses to the German people. Such treatment would also serve to support German faith in Nazi government which borrowed the funds. In Maletin’s opinion the Allied Control Council should not take on the responsibility of debt at the expense of reparations. There would be no physical possibility of payment without resort to loans. He suggested that the 1933–34 German payments amounted to 8 billion interest and 7 billion amortization, or a total of 15 billion. The 1944–1945 total was 13 billion, artificially lowered by reformation of debt and postponement of payment. If the responsibility for the old debt would be accepted the total amount required for annual payments would exceed 15 billion. Could this be done, he asks, without prejudice to reparations? In principle, the Russian representative maintained, there is no obligation to reorganize. To do so would be to contradict the Berlin Conference agreement requiring the Germans to bear responsibility of participating in the war.33

The French representative proposed to divide the problem into two parts, i.e., the old debt and the new debt; then study the effect of payment of all, part, or none of the old debt. He would also authorize issue of relatively short term new debt at Laender or large city level for the necessary rebuilding of utilities, investing new deposits, reducing cash in circulation. According to information in French Zone, situation favorable to issue loans against fresh money.

  1. H. Freeman Matthews, Director of the Office of European Affairs.
  2. See section IV of the Report on the Tripartite Conference of Berlin, Foreign Relations, The Conference of Berlin (The Potsdam Conference), 1945, vol ii, p. 1505.