740.00119 Control (Germany)/12–3047

British Memorandum of Conversation30

top secret

The Secretary of State saw Mr. Marshall at 14, Princes Gate at 12 noon on December 18th to hear from General Robertson and General Clay their ideas for future developments in Germany. The United States Ambassador, Mr. Douglas, Mr. Murphy, and Mr. F. K. Roberts were also present. The party stayed to lunch and were joined just before lunch by the United States Ambassador to Poland, Mr. Griffiths.

Germany

The Secretary of State said that as General Clay and General Robertson were present, he wanted to see whether they could reach a complete understanding between the two Secretaries of State, within which the two Commanders-in-Chief could work.

Mr. Marshall , after explaining that General Clay was under the War Department, said they should define their objectives.

General Clay said that the problem fell under two headings:

(1)
what America and Britain could do alone, and
(2)
what they could do with France.

[Page 823]

As regards (1). the first problem, in his view, was currency reform. German economic rehabilitation depended upon this. But as there was still no final break with the Soviet Union, and he hoped it could be avoided, he felt we should make a further effort to proceed on a quadripartite basis, however many practical difficulties this might raise. Nor did he think it absolutely impossible to secure Soviet agreement to currency reform when he proposed it at the Control Council. If, however, the Russians did not agree by the next Control Council meeting ten days later, then the Western Zones, if possible including the French, should go ahead. The money was already in Germany and action should be taken. His reasons for thinking the Russians might agree were:

(i)
the effect of the recent London breakdown;
(ii)
the Russians did not wish to appear to be responsible for dividing Germany; and
(iii)
they were confronted with a fait accompli in that the Western Powers had the money.

He knew that General Robertson was a little more worried about administrative difficulties in connection with this plan.

General Robertson explained that in his view this was largely a technical problem. He would not himself have advocated a further attempt on a quadripartite basis. Moreover, this was part and parcel of the whole economic problem, and other economic questions should not be tied up too closely with finance. Nor was he as hopeful as General Clay of securing Russian agreement. If quadripartite agreement were restricted to currency reform, he agreed that he would not like it to be connected with restrictions on wages, etc., which had hitherto been treated as part of the currency reform. He would in any case like the financial experts to spend a day or two examining the plan since it was essential to do nothing which might hamper further developments in the Western Zone.

The Secretary of State said that he was worried about the Soviet method of fixing wages and prices in connection with currency reform. He had been impressed by what Mr. Jack Jones, who had just returned from Germany, had said to the effect that under the Soviet system, Trade Unions were prevented from functioning in their normal field of fixing wages. Then one got into the realm of incentives, e.g. over coal, but these lost their effect and production then fell. The Communist method, based on Lenin, of fixing wages ruined Trade Unions, and we wanted to be sure that this would not be the effect of the proposed currency reform.

General Clay said there was no need to tie the two matters up. There was already an agreement concerning prices and wages in [Page 824] existence. But in so far as Russia had herself changed the prices, we were not bound to consult her or bring her in if we also proposed changes. He agreed therefore that our initial proposal should be based on:

(a)
devaluation;
(b)
bringing in the new currency; and
(c)
covering the internal national debt.

The Secretary of State emphasized that he did not want the Trade Unions to become an appendix to communism or any other party. He said in confidence that the British Trade Unions had yesterday come out in favour of (a) a free wages policy; (b) opposition to communist infiltration; (c) support for his foreign policy; and, most important, (d) support for Marshall Aid. If Trade Unions could not negotiate over wages, they would only make trouble politically. He had put this strongly to M. Ramadier last February, and in England we left wages to free negotiation even under nationalization. He wanted the German Trade Unions to grow on the British and American model with agreements which were executive and not resulting from political decrees. He wanted the Western zones to be an example to the rest of Germany.

General Clay was definite in maintaining that the new plan was not inconsistent with these objectives. In reply to a question, he said that the Central Bank issue was based on Berlin under quadripartite control. There was no question of retracting or expanding credit through the Central Bank, although this was a function of banks in the Western zones.

Mr. Douglas raised the question of revising the German debt, and asked whether the Soviet Government has already agreed.

General Clay said they had agreed. In fact, on this point there was more difference between the British and Americans, though these differences could be easily resolved.

General Robertson said that the external rate of exchange would be part of the proposed new agreement.

Mr. Marshall emphasized that in making a quadripartite approach we should make it clear that we really wanted Russian agreement and were not merely making a gesture, expecting their refusal. Beyond that we could not go. But he was most anxious in regard to the general international situation to avoid a “frozen front”, which was tragic to contemplate.

General Robertson confirmed that there should be no difficulty about the first approach, subject to a rapid technical examination.

Mr. Marshall said that the respective risks must be valued but one must not risk losing great opportunities through fear of taking smaller risks.

[Page 825]

General Clay said the next problem was to get a live working political organization. His idea, shared by General Robertson, was to stop short for the moment at expanding the economic council, adding slowly but surely to its political responsibilities, until it functioned as a government in all fields except those of external affairs and the export-import programme. But there should be no formal constitution. He looked eventually to the creation of an elected representative German Government, at all events in the two Zones. He proposed to take the British paper on political organization, discussed at the Council of Foreign Ministers, as a basis, subject to some changes mainly concerned with doing more through the Länder. They would work, surely but not dramatically, unless of course they had to react rapidly to some fait accompli by the Russians in the Eastern Zone.

The Secretary of State said that he thought the Russians might, for propaganda reasons, publish the proposed draft treaty. He had therefore instructed the Foreign Office to produce secretly our own draft treaty which we would show to the United States to guard against that eventuality. He wanted our basis for action to be preparation for an all-German Government so that any Irridentist German movement would be based on the west rather than on the east. General Clay’s proposals would need more thinking out and there would have to be further consultation to get them into the right shape and form and ensure that they did not conflict with the principles we had proclaimed at Moscow.

General Robertson said that the proposed expansion of the present Council would not offend against the above principles, nor hamper the eventual unification of Germany. He thought a Bizonal Government should be constituted by the summer and they must not be too slow in acting.

The Secretary of State then said that in his statement that afternoon in the House of Commons he would emphasize that there had been no cut and dried plans by the Western Powers. We had all held our hand in the hope of the London meeting of the Council of Foreign Ministers being successfully concluded. We had hoped against hope. We could not leave matters as they were. He did not, however, expect the German question to be debated until the House reassembled late in January. Then he could not leave matters nebulous. By then we must at least be able to show some sign posts. We could apply our minds to the problems over the Christmas holidays, and we should expect recommendations from the two Commanders-in-Chief early in January.

General Clay said that he and General Robertson could produce programme for submission to their Governments by January 10th.

[Page 826]

Mr. Marshall said that anything on which General Robertson and General Clay were agreed would probably be accepted by the United States Government. He said they had leant over backwards to the point of inviting criticism in doing nothing which would prevent agreement in the Council of Foreign Ministers. He had himself hoped that three or four things, including an Austrian settlement, might have emerged out of the recent meeting. The difficulty was that we had been so honest that no one would believe us, and we might well be criticized for being exceptionally naive.

The Secretary of State said that he thought that Mr. Molotov had intended to keep the meeting going for another two days. The Soviet Government must now, like us, be thinking hard.

Mr. Marshall said that the Russians had at last run up against a solid front. He was, however, most anxious that they should not be misled by any wishy-washy press articles, either here or in America. He complained of today’s Times editorial which he described as mushy. Mr. Vishinki’s tirades in America and Mr. Molotov’s statements here were all designed for propaganda effect to weaken the combined front. We should not fall for such propaganda.

General Clay said that there was a third question concerning the future of the Western Allies in Berlin. They would obviously have difficulties there but their intention was to put up with minor annoyances and to hold out in Berlin as long as possible. If things became too tough, they would have to refer to their Governments, but they would not bring the question up until it developed. In reply to a question from Mr. Marshall, he said that they had adequate resources on which to live in Berlin for some time.

General Robertson then raised the question of French participation. He and General Clay thought in the same way. The bigger questions, such as security and the Ruhr, must be dealt with on a Governmental plane and were not the business of the Commanders-in-Chief. But they must work towards Trizonal fusion. He hoped the French would send better people to Berlin, who could then be educated and worked round. After this had been done, a Three Power Conference would be necessary to conclude a settlement. He thought these Trizonal talks could only take place effectively in Berlin where they would not be dramatized. He did, however, wish to emphasize from the German point of view that it would have a very bad effect, and would affect the German economy including steel and coal production, if it were known that the future of the Ruhr, and more particularly the possible separation of the Ruhr from Germany, were being discussed. He thought this most important.

Mr. Douglas raised the question whether any notification to E.C.O. regarding the Saar coal should not be made before the end of the year, [Page 827] since E.C.O. then went out of existence and its successor would include a Soviet representative. It was agreed to consider this, although the practical difficulties would be very great.

[Here follow sections of the memorandum of conversation headed “Indonesia”, “Talks About the Far East”, and “Arms for Latin America”. None of these sections is printed. For documentation regarding the interest of the United States in the nationalist opposition to the restoration of Netherlands rule in the East Indies, see volume VI.]

  1. The source text was sent by Waldemar J. Gallman to John D. Hickerson under cover of the following letter, dated December 30, 1947:

    Frank Roberts had promised Douglas that before his departure for the States he would give him records of the talks of December 17 and 18 between Mr. Marshall and Mr. Bevin. Unfortunately, Roberts was able to give Douglas before his departure only a record of the talk of December 17. He has now sent me the record of the December 18 talk, and I am enclosing two copies, one for your use, and one for the Ambassador. Would you please see that he gets it.”

    This record, like that of the meeting of December 17, was presumably prepared by Roberts.

    See also footnote 24, p. 815.