740.00119 Control (Germany)/5–1347: Telegram

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

top secret

1141. Personal for the Secretary. Eyes Only. My 1123 May 10.29 US/UK Bipartite Board met Berlin Monday May 12 and General Clay is reporting to WD that tentative agreements reached which may resolve past differences.30

It was agreed in the field of expenditures to a controlled budgetary expenditure which would limit expenditures for the general economy to receipts from export proceeds and with a portion of the export proceeds to be added from time to time to capital account. In order to meet the British view, it was agreed that not to exceed 30 per cent of capital funds could be utilized at any given time for the purpose of financing obligations for imports for the general economy secured by anticipated export proceeds for deliveries already made but with payment still not collected. There will be retained in cash at all times 40 per cent of all capital account and the remaining 30 per cent may be retained in the inventory of approved export programs. The foregoing constitutes a definite concession to the British view and seemed to meet with their satisfaction.

It was also agreed to consolidate all bizonal agencies at Frankfurt as rapidly as facilities can be provided. As you know, these agencies [Page 921]are now scattered at Stuttgart, Frankfurt, Minden, and Bielefeld. This will involve moving approximately 8,000 Germans and their dependents to Frankfurt plus about 1,000 allied personnel. Office space and communications not too difficult but housing and household equipment extremely difficult and months will be required to make necessary provision. Robertson inquired in this connection whether Army Headquarters would remain Frankfurt making references to difficulties growing out of such relationship at Rome in 1944. Clay informed him that due to costly communications installations Army Headquarters European Command would of necessity continue at Frankfurt.

The enactment of legislation was also agreed which would provide present German bizonal agencies with authority to issue formal decisions on matters of general policy which need to be placed in effect promptly in the several laender by land implementing regulations. Thus in the economics field we agreed to give the German bizonal agency such general authority in the fields of production, allocation and distribution to include rationing of such items as may be subject to ration controls. It was also agreed to give this bizonal agency authority to control by executive order a selected small group of scarce commodities and raw materials. Under the agreed procedure it would be possible for the bizonal agency to determine how much coal each land would receive for domestic heating, for example, permitting the land itself to determine how this coal would be divided among schools, hospitals, homes, etc.

It will be clear that the foregoing represents as high a degree of centralization as was developed in the US during the war although it does not meet the higher degree of centralization apparently desired by the British. However, in accepting this compromise we reserved our position regarding the allocation of powers between central and state governments whenever a central government may be established.

On the subject of the British proposal for a German bizonal economic council the British came some distance to meet our objections to their original proposal for a council whose powers would be limited to advice. We had proposed that in addition to the economic council there should be established a single executive committee for all bizonal agencies. Each of these agencies now operates under a separate executive committee. The general executive committee we now propose would consist of one representative from each land to be designated by the land government. It would have the power to nominate the secretaries of state for confirmation by the economic council and it would have authority to issue such executive orders necessary to implement legislation in the economic field. The executive committee would be authorized also to receive from the secretaries of state and pass to [Page 922]the economic council its recommendations for legislation which would be issued by military government for both zones. The terms of this legislation would be prepared by the economic council for eventual approval by the US/UK Bipartite Board. The economic council itself would be composed of representatives from each of the landtag. The number of each land would be in proportion to its population and the composition within this number would be representative proportionately of the political parties in accordance with the last previous election returns. At the beginning the economic council and the executive committee would be accorded the powers agreed for the several executive committees now set up. The proposed executive committee would be in continuous session while the economic council would meet from time to time as necessary.

The British proposed yesterday that we agree that we would be prepared to accept any further centralization desired by the German economic council but General Clay stated that he could not so agree as in his opinion we had already gone very far in centralization and that any further relaxation would appear inconsistent with our policy enunciated on several occasions by our government for the decentralization of German government. General Clay declared that the United States might oppose proposals for further centralization even though such proposals were endorsed by a majority of the German economic council and suggested that the question need not be decided now but might better be deferred until an issue arises. This seemed to appeal to the British but they stated that they were unable to agree without consultation with their government.

Both General Clay and I feel that we have come a long way in an effort to meet British views both with respect to utilization of funds and centralization of authority. In conversation with Strang and Robertson I gathered that they are pleased with the results of yesterday’s meeting, Strang repeating several times that it was a “very good meeting indeed”. Both Strang and Robertson have now left for London where they plan to discuss Tuesday the several proposals mentioned in this telegram with Mr. Bevin and Lord Pakenham.

General Clay has pointed out to the War Department that the centralization of authority proposed can have no immediate results and that it is necessary to resort to temporary decentralization to the laender of import-export program in order to accelerate the letting of contracts. The British have agreed to this subject to our reaching an overall agreement.

I am hopeful that with the advantages gained as a result of yesterday’s meeting, the British may go along on the proposal for an economic council without insisting that we accept further recommendations [Page 923]by that council for additional centralization of powers. This, of course, may depend upon whatever formal or informal commitments might have been made by the British to the German Social Democrats. There would seem to be no great urgency certainly from our point of view to press for a decision on this point now. General Clay is proposing to the War Department that this question could not be resolved in Berlin. As matters now stand, the Social Democrats would have a majority in the economic council and probably have the support of other leftist elements. Due to the close working relation of the British with the Social Democrats it should thus be able to influence materially the deliberations of the economic council. The test, of course, of the relative strength of political parties will come later. As matters now stand the Social Democrats are not in a majority taking the population of both zones as a whole.

The foregoing is for your personal information.

Murphy
  1. Supra.
  2. General Clay’s report, the substance of which is set forth in this telegram, was sent to the War Department in telegram CC–9129, May 12, 1947, not printed (USPolAd Germany Files, Lot F–80, 1947. File – 711 Bipartite Control).