800.515/10–2246: Telegram
The United States Political Adviser for Germany (Murphy) to the Secretary of State
[Received 10:55 p.m.]
2423. My telegram 2402, October 18. 1. Questions of banking and currency production transmitted from Coordinating Committee failed [Page 627] of agreement against continued Soviet opposition in 44th meeting Control Council October 21, which engaged in recriminations regarding responsibility for breakdown economic unity principle. Kurochkin substituted for Marshal Sokolovsky.
2. Soviet member perceived no connection between decentralization features of banking plan and proposal for establishment central Laender banks which he considered new attempt to save monopolies from liquidation. In Soviet zone decentralization was completed in May 1945 and only provincial banks existed; Soviet member claimed reorganization had favored reconstruction of paralyzed peacetime industries. British member asserted Soviets should apologize instead of taking credit for unilateral action and stressed that establishment of sound banking system was imperative and urgent need of financial reform. According to Soviet member zonal measures conformed fully with Potsdam Agreement and he said he could bring up many matters under this agreement for which British should apologize. United States member mentioned Soviets were mistaken as to existence of banking monopoly in United States zone and he pointed out that in Soviet zone there was completely controlled government monopoly of banking. He continued he might accept Soviet proposal for banking decentralization if there were any assurance that German financial structure would be resolved in near future; he had noted no progress within past year toward economic unity and therefore considered that long time would elapse before this goal could be reached by quadripartite agreement. Control Council decided item should be withdrawn from agenda and that delegates should inform their respective governments, each delegation retaining its freedom of action.
3. Soviet member still opposed production of new German currency in anticipation of completed program of financial reform, asking in whose name such currency would be issued. British member stated present farcical system must cease whereby each zone commander issues currency, taking current proposal as important test case he fully indorsed. British member’s remarks in Coordinating Committee that British delegation could only conclude that Soviets had no intention of treating Germany as an economic or political unit for long time. Soviet member maintained economic unity depended on execution of reparations program and liquidation of German economic war potential, he said Soviets do not take part in bilateral decisions which ignore these matters. He still maintained currency production was linked with financial reform plan which was being debated in Finance Directorate and also in public press notwithstanding pledge of secrecy. Soviet administration did not unilaterally change price levels in contradiction of Potsdam decisions as had been done in other zones and with respect to absence of report on Allied marks, Kurochkin said [Page 628] Soviet administration had not abused its rights since no issue of currency has taken place. United States member recommended that printing of new currency be started now simply to assure adequate supply in time. With respect to larger issues discussed, he believed many problems of quadripartite government cannot be settled until certain policies are determined by four Governments. He referred to French policy regarding Saar, Rhineland and Ruhr as fully understood by everybody but described Soviet position as somewhat of mystery.
Soviet member endeavored to refer currency printing plan back to Finance Directorate but item was simply withdrawn from agenda on insistence of British delegate who pointed out Directorate would be free to consider it again in connection with financial reform.
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Repeated to Moscow as 331; to Paris as 345; to London as 359.