CFM Files: Lot M–88: Box 104: Anglo-US-French Conversations

British Memorandum of Conversation24

top secret

Mr. Marshall paid a farewell call on the Secretary of State at the Foreign Office at 6 p.m. on December 17th. The situation resulting from the breakdown of the recent meeting of the Council of Foreign Ministers and other subjects concerning Anglo-American relations were discussed in a conversation lasting 1¼ hours.

Germany and the General European Situation.

The Secretary of State said that the problem was to decide what we should now do. He had discussed the position with M. Bidault that morning. His own idea was that the problem should not be isolated into a mere quarrel between the western Powers and the Soviet Union. The issue, to use a phrase of the American Ambassador’s, was where power was going to rest. His own idea was that we must devise some western democratic system comprising the Americans, ourselves, France, Italy etc. and of course the Dominions. This would not be a formal alliance, but an understanding backed by power, money and resolute action. It would be a sort of spiritual federation of the west. [Page 816] He knew that formal constitutions existed in the United States and France. He, however, preferred, especially for this purpose, the British conception of unwritten and informal understandings. If such a powerful consolidation of the west could be achieved it would then be clear to the Soviet Union that having gone so far they could not advance any further.

The Secretary of State would have to make a statement in the House of Commons tomorrow, but he would say little about the future and he thought it better that no public pronouncements of future policy should be made until our planners got to work. He himself favoured the whole problem of Germany, e.g. frontiers, the three zones, political organization, economic rehabilitation, balance of payments, etc., being discussed between British, American and French officials. In considering the future form of German political organisation, we must always aim at an eventually united Germany. Then any German Irredentist movement for unity would come from the west, and not be a Russian-inspired movement coming from the east. Although we must consider the problem very carefully our reaction should also be quick and resolute.

The Secretary of State said that they would also have to consider the problem of security in which France was even more vitally interested than we were. There had been some idea of a three-Power treaty on the lines of the original Byrnes Treaty. He himself thought it might be better to have some treaty or understanding which also brought in Benelux and Italy. The essential task was to create confidence in western Europe that further communist inroads would be stopped. The issue must be defined and clear.

The Secretary of State then told Mr. Marshall for his private and confidential information that he had been much fortified by a decision of the Council of the T.U.C. which had just met and which had with only one dissenting voice

approved the Secretary of State’s foreign policy;
pledged T.U.C. support for the Marshall Plan; and
decided to oppose the communists resolutely if they attempted to start any trouble here.

He might be able to say more about this tomorrow after he had discussed the position with Mr. Deakin.

Summing up, the Secretary of State said that he now felt that the spiritual consolidation of western civilisation was possible, and France could then come back as a great Power. The form in which it should be done required more study and nothing would be lost if we spent a few days in discussions between our officials. He had in mind confidential Anglo-American discussions on the same lines as the recent [Page 817] talks we had had about the Middle East. But there should above all be no public pronouncements about future plans until we had our ideas clear.

Mr. Marshall said that he felt that they must distinguish between the material and spiritual aspects of this programme. He had tried to cover the former in his recent speech at the Pilgrims Dinner25 on the lines that if those concerned were reasonably sensible, material regeneration should be the outcome of the European Recovery Programme, the purpose of which was the rehabilitation of the European patient. He had no criticism of Mr. Bevin’s general ideas. But he thought there should be an understanding between the two of them as soon as possible on their immediate objectives. He felt that what was already being done on the material plane should now be given greater dignity. But it was not necessarily [necessary?] to write everything down in detail. What was needed was a clear understanding. He was very willing to have matters discussed with a view to arriving at such an understanding. Indeed there was no choice in the matter. They had to reach such an understanding. They must take events at the flood stream and produce a coordinated effort.

The Secretary of State said that he would like, with Mr. Marshall’s approval, to set up ail Anglo-French official committee to discuss matters affecting the French and ourselves. Then there could also be a wide official body, including also the Americans, which would discuss not only the Ruhr but the whole gamut of problems. This body could be directed to work out plans and policies.

Germany—Reparations Deliveries.

The Secretary of State then said that there was a difference between the British and the Americans over the question of deliveries of capital reparations to the Soviet Union.26 The matter had been discussed in Moscow between them and he thought it had been agreed that they should proceed with the agreed deliveries from the western zones to the Soviet Union and Poland as well as to the other Allies. What was to be done now was mainly a question of tactics. He had discussed the matter with the Prime Minister and his colleagues, and they all felt that it would be a mistake to break this agreement with the Soviet Union, more especially if the Soviet Union was not going to receive current reparations. Now that the level of industry had been agreed at 11.5 million tons the amounts were not so great after the I.A.R.A. countries had been satisfied. He felt it would be playing into the [Page 818] Russian hands if we failed to deliver capital reparations. He had never himself been happy when Mr. Byrnes had stopped such deliveries from the American zone. He himself had been in a difficult position. He had never refused, but he had delayed. He understood that the Americans felt strongly on this subject, but he wished them to understand the British point of view.

Mr. Marshall said that he intended to take up this question with the American Cabinet on his return to Washington on Friday, and then to go into it with the State Department. He wanted also to find out the political situation in America. He understood that there was very strong feeling in the Appropriations Committees of Congress. These were the very committees which were of vital importance for the success of the European Recovery Programme and of the programme for the rehabilitation of Germany. The present American idea was, therefore, to continue deliveries to the other I.A.R.A. powers and to collect and store the deliveries for the Soviet Union without actually handing them over. He would, however, survey the position and see what could be done.

The Secretary of State then explained that he had arrived at the Potsdam meeting when this question had already been partly discussed. It was no secret that he had disagreed with the line taken by President Roosevelt and Mr. Churchill on this and it was unfortunate that the United States had come so near to a commitment at Yalta. He had studied the matter very closely himself as a member of the Coalition Government and he had wanted to keep this capital reparations issue completely separate from the rest of the Potsdam Agreement. He and the Prime Minister felt committed to deliver what we were covenanted to deliver—that and no more. On the other hand, he was most anxious to avoid any conflict with the Americans over this. There were bigger things going on in western Europe which should surely take precedence over this question of a few million dollars.

Germany—Future Organisation of the Zones.

The Secretary of State then returned to Germany. He had only received a brief account from General Robertson of his talk with General Clay and presumed that General Clay would be reporting to Mr. Marshall.27 He would himself require time to study this report [Page 819] further. He gathered that General Robertson and General Clay were proposing action which would not be over-dramatic but evolutionary. They seemed to contemplate expanding the existing Economic Council to twice its size and to give it greater powers, for example, over taxation. But he understood that the opinion of members of the existing Council would be sought first. He was himself a little uncertain whether the necessary facilities, e.g. housing, existed for a German Administration in Frankfurt. However, he had had no time to discuss the matter yet, and suggested that he and Mr. Marshall should see General Robertson and General Clay in the morning. (A meeting was arranged accordingly for mid-day on December 18th).

Germany—Currency Reform.

Mr. Marshall said that he would like to raise the question of reforming the German currency. General Clay had planned for this and thought that it was even possible that the Russians might agree. General Robertson was, he understood, less optimistic. But we must take some risks. (The Secretary of State interjected that we must stop talking and take action.) Mr. Marshall continued that the Americans had already printed enough new notes for the whole of Germany, including the Soviet Zone. These had been printed in Washington and would soon be in Germany. The original idea had been to have the notes ready in case the Russians had tried to flood the western zones with any currency of their own. Now, however, the notes were there to be used for a genuine currency reform. Preparations had had to be made in good time because it took several months to print the notes. He emphasised that there would be no trouble this time such as they had had with the Russians before over sending plates to Leipzig or Dresden for concurrent printing in the Soviet Zone.

The Secretary of State asked whether this move would be of any help as regards the problem of current reparations and whether occupation costs could be covered in this way.

[Page 820]

Mr. Marshall said he could not answer that without further reflection. But even if the Russians did not agree and even if there were no fusion of the three zones, the move would in itself be a good one from the purely economic point of view as currency reform was badly needed. General Clay would make a proposal to the Control Council in Berlin. Meanwhile, Mr. Marshall emphasised that the above information should be regarded as very confidential.

Mr. Marshall told the Secretary of State that he had talked to M. Bidault that afternoon.28 M. Bidault, like the Secretary of State, also wanted conversations at the highest official level but seemed to be thinking on rather different lines. The Ruhr had exuded from every sentence spoken by M. Bidault. Mr. Marshall explained that he wanted the French to take such immediate steps as they could which would not compromise the desired evolution in Germany. He had suggested to M. Bidault a plan of action on the following lines:—

that the French should take the Anglo-American Bizonal Agreement as a working document and submit their comments on it;
that there should be immediate discussions between the Americans, the British and French in Berlin with a view to loosening up the boundaries between the Zones; and
although he did not press this, he offered M. Bidault every opportunity for an immediate discussion of the Saar. This problem was, however, more difficult for the Americans than for the British. If the French got their way over the Saar coal and maintained their Ruhr allocations, this might mean a loss of two million dollars a month. It would also be for M. Bidault to obtain the concurrence of E.C.O. in the deliveries of Saar coal exclusively to France. He realised that this would help France politically and especially in regard to French public opinion.

Another problem which affected France, and Italy also, was how to get trade back into its normal channels. At present, owing to hard currency difficulties, the U.S. was losing its European trade and this was making difficulties with Congress. The European Recovery Programme should, of course, help to restore trade. He wanted to see the ports of Antwerp and Rotterdam built up again and the normal flow restored with Scandinavia. Then at least the blood could begin to flow again through the arteries of Europe. Although this was not an immediate issue he wanted to discuss it soon with M. Bidault. But the first stage was for the French to see how many things in the Anglo-American Bizonal Agreement could be followed quietly by them in an evolutionary way.

The Secretary of State emphasized that he was very anxious that there should be no boundaries between the three Western Zones.

[Page 821]

Mr. Marshall said that he had a very genuine desire to settle as many details as possible. He pointed out that General Clay had had his difficulties in the past because of the limited nature of his appropriations and the constant Congressional interest. He was, however, in a better position now. Much could be done immediately but quietly.

The Secretary of State then said that on the economic side he had been turning over in his mind the possibility of raising steel production from the present four million level to six million tons a year. On the present basis of 1550 calories ration scale, and with the present level of four million tons, all the money which the Americans were ready to put into Germany, even after the Fusion Agreement, was used up without any improvement in German standards. But if coal production could be increased and steel production brought up to cover the 1550 caloric scale unaided, then further U.S. help could be used to raise standards in Germany. He was convinced that our policy must be to build up standards in our Zones far beyond those which the Russians could produce in their Zone, and that we should aim at such an improvement by next spring. We must also get the French to agree to the removal of Zonal boundaries.

Mr. Marshall said that he did not think they could expect to reach a trizonal agreement in under seven or eight months, and certainly not before the spring.

The Secretary of State then turned to Germany and said that he would like to put rather more crystallised views before Mr. Marshall after the Cabinet had considered the situation, possibly next week. After that, he would like to follow the pattern of the recent Middle East talks,29 using an official team which could either start with us and the Americans alone, or include the French from the start. Mr. Marshall said that he was quite agreeable to this.


The Secretary of State then turned to Austria. He understood that at the first meeting of the Deputies the Russians had indicated that they might be ready to put forward new proposals as early as January 1st and he felt that they might now, under the pressure of public opinion, be in a more reasonable mood. On the other hand, he understood that the American attitude was that they did not wish to discuss any new Russian proposals before February 1st. He felt himself that if the Russians were ready earlier then the western Powers should not appear to be delaying matters.

[Page 822]

Mr. Marshall said that it was just a possibility that the Russians might be more reasonable, although he would not put it higher than this. If the Russians were ready to put forward their proposals in January he would look at the problem and arrange an early meeting.

[Here follow sections of the memorandum of conversation headed “Anglo-French Military Conversations”, “Far East”, “Arab Reactions to the General Assembly’s Decision on Palestine” (included in the documentation on Palestine presented in volume V), “International Refugee Organisation”, “General Soviet Policy”, and “Arms for Latin America”. Except as noted above, none of these sections is printed.]

  1. This memorandum was presumably prepared by Frank Roberts and copies were given to Ambassador Douglas; see footnote 30, p. 822.

    In telegram 6585, December 22, from London ( Foreign Relations, 1948, vol. iii, p. 1), Chargé Gallman transmitted an “expurgated record” of this conversation between the Secretary of State and Foreign Secretary Bevin, as well as of the conversation between the two officials on December 18 (see p. 827). Bevin, who was under considerable pressure from Foreign Minister Bidault to be furnished a copy of the record of these conversations, asked for Marshall’s approval to have the “expurgated record” given to Bidault (840.00/12–2247). Telegram 5350, December 24, to London, not printed, authorized Chargé Gallman to inform Bevin that the Department had no objection to his showing Bidault the suggested record of the December 17 and 18 conversations. Gallman was instructed, however, to make it clear to the French that the U.S. record showed that Secretary Marshall indicated that he had not definitely approved any particular course of action and he hoped to receive specific British proposals before making a final commitment (840.00/12–2247).

  2. For the text of the speech which Secretary Marshall delivered before the Pilgrims Society in London on December 12, 1947, see Department of State Bulletin, December 21, 1947, pp. 1201–1203.
  3. For additional documentation regarding United States reparations policy, see pp. 1104 ff.
  4. An unsigned memorandum of conversation between General Clay and General Robertson, dated December 16, 1947, reads as follows:

    Reparations: Proceed to allocate.
    Deliver to IARA.
    Earmark and hold for Soviet Union.
    Currency: One more quadripartite effort.
    If it fails, bi or tripartite reform to be effected without delay.
    Political: Increase strength present Council.
    Add some political responsibilities looking to elections in spring or early summer—nothing dramatic now but slow progress.
    Start integration US–UK staffs below Directorate level.
    French: Wait for French proposal to join.
    Give French copy of bi-zonal agreement for their comments and suggestions—and for later conference.
    Meantime, try to get French to follow pattern in bi-zonal to fullest extent possible to make bi-zonal fusion easier when agreed.
    Start at Berlin to negotiate gradual absorption of Saar economic burden due to loss of coal revenue.”
    (CFM Files, Lot M–88, Box 104, Anglo-US-French Conversations)

  5. See the memorandum of conversation, supra.
  6. For documentation on the talks in Washington in October–November 1947 between the United States and the United Kingdom on political, military, and economic subjects concerning the Middle East and the Eastern Mediterranean, see the Pentagon Talks of 1947, in volume v .