740.00119 Council/4–1447

Memorandum by the British Military Governor for Germany (Robertson)42

secret

Memorandum on the Operation of the Fusion Agreement after the Moscow Conference

Presented jointly to the U.S. and U.K. Secretaries of State by Major General W. Draper on behalf of the Commander-in-Chief and Military Governor of the U.S. Zone and Lieut. General Sir Brian Robertson on behalf of the Commander-in-Chief and Military Governor of the British Zone.

section “a”—operation of economic fusion

1.
The Fusion Agreement signed in New York on the 2nd December, 1946,43 shall continue to be operated fully in the spirit in which it was conceived with the object of securing the maximum success in the joint administration of the economy of the Combined Zones.
2.
While it is not necessary that there should be identity of views on the future political structure of Germany, the broad principles of the division of powers between the centre and the Laender, supported by the U.S. and U.K. Delegations in document CFM/47/M/121,44 Section “E”, as amended during its discussion in the Council of Foreign Ministers, shall be regarded for the purposes of the operation of fusion as the accepted policy of both Governments. These principles are summarized in Annexure “A”.45 They will be regarded for the present as applicable to the division of powers between Land governments [Page 480]on the one hand and Military Government and the Bi-Zonal Administrations on the other hand.
3.
(a) The Bi-Zonal Administrations shall be concentrated in one area. The choice of location for this purpose shall be determined primarily by the speed at which an efficient concentration can be effected.
(b) The Bi-Zonal Administrations shall be accorded sufficient executive authority and shall be staffed in a manner adequate to enable them to perform their functions. While excessive staffs are undesirable, both Governments agree to provide such Allied personnel as are essential and to ensure that adequate German personnel is assembled to execute the work efficiently.
(c) The chairman of each executive committee shall devote his whole time to his work as such. He shall be vested with executive authority subject to the decisions of his executive committee.
4.
(a) In accordance with the principle contained in paragraph 2.(c) of Annexure “A”, the distribution of food and raw materials in short supply and the planning of industry shall be carried out centrally by the Bi-Zonal Administrations under the supervision of the appropriate Allied Control staffs.
(b) The planning of industry shall be done in a manner to ensure the best possible use of available resources, including particularly coal. This is necessary firstly to reduce as quickly as possible the expenditure being incurred by both Governments on the economy of the joint Zones and secondly in order to ensure that the export of coal is at the highest level consistent with the maintenance of a proper economy in the Combined Zones.
5.
The execution of the plans for the distribution of food and raw materials in short supply and for industry shall be carried out by the administrative machinery of the Land Governments. Adequate measures of control shall be taken to ensure that this execution is prompt and effective to avoid the dissipation of resources and the waste of Allied money.
6.
Measures shall be taken to develop greater freedom of trade between Germans in the Combined Zones and other countries, particularly by making it possible for the German exporter to negotiate contracts with potential buyers abroad subject only to essential control of foreign exchange. Financial resources available for the purchase of raw materials, etc., shall not, in the first instance, be used with the object of achieving a general improvement in the economy of the Combined Zones, but shall be used boldly to secure those things which are shown to be necessary for the rapid development of exports.
7.
Prompt measures shall be taken to bring about financial reform, [Page 481]if possible on an all-German basis, including the issue of a new currency.

section “b”—level of industry and reparations

8.
Immediately after the conclusion of the Moscow Conference, a joint Declaration shall be made by U.S. and U.K. Military Government to the effect that they intend forthwith to establish a fresh level of industry for the Combined Zones and that they do not intend to agree to any lower level in the future. The basis of the new Plan shall be an annual production of 10,000,000 tons of steel and consequential increases in the level of other industries. The details of this Plan will be worked out in Berlin. The percentage increase in the permitted level of all industries need not be uniform. In some cases all restriction of level may be removed on industries at present restricted. In other cases a special quantitative restriction may be imposed. The new Plan shall be announced by the 1st July, 1947, and the final list of plant and equipment to be removed from the Combined Zones shall be issued not later than the 15th August, 1947.
9.
Plants rendered surplus by this revised level of industry Plan shall be offered to the Control Council for allocation between the Western and the Eastern Powers. Consideration shall be given to the advisability of reserving from immediate allocation a margin of plants, both to allow for the possible attachment of the Saar to the French economy and also for the possibility of excessive removals from the Eastern Zone.
10.
The U.S. and U.K. representatives on the Control Council and its Committees shall insist on more expeditious means of valuation and allocation than are in force at present.
11.
When plants have been allocated they shall be delivered both to the Western and to the Eastern Powers.
12.
All plants rendered surplus by the new level of industry Plan shall be closed immediately irrespective of whether or when they are to be delivered for reparations. Exceptions shall be made in the case of certain plants on the prohibited list which are by agreement to be retained in operation until imported supplies can be procured.
13.
Consideration shall be given to means for ensuring that the U.K. receives certain plants which are most urgently required.
14.
Within the level of industry fixed under this new Plan, every endeavour shall be made to build up the economy of the Combined Zones to the highest possible level. In particular steps shall be taken to ensure adequate supplies of food and also to raise the level of coal production in the Ruhr to 300,000 t.p.d. as quickly as possible.
  1. The source text is marked “SECOND DRAFT. (Not yet approved by British Secretary of State.)”. Attached to the source text is a copy of a letter, dated April 17, 1947, from General Draper to General Robertson which reads as follows:

    “I have received your memorandum on the operation of the fusion agreement which will be brought to General Marshall’s attention immediately. I see from your note that it is a first draft and not yet approved. But since it is drawn up as if presented jointly by you and me on behalf of our respective Commander-in-Chiefs, I must point out that I am not authorized to speak for General Clay on this matter. As you know, he believes that no specific decisions should be reached concerning the management of the bizonal area until you and he have had the opportunity of discussing the questions involved and of making joint recommendations. You indicated that Mr. Bevin would probably see General Marshall on Thursday [April 17] so I wanted you to have this word immediately.”

  2. For the text of the Memorandum of Agreement under reference here, see Department of State Treaties and Other International Acts Series No. 1575 or 61 Stat. (pt. 3), 2475.
  3. Ante, p. 436.
  4. Annex A, not here printed, was an extract from Section E of document CFM(47) (M) 121.