862.60/7–1647: Telegram
The Political Adviser for Germany (Murphy) to the Secretary of State
urgent
1695. For the Secretary Eyes Only. Following is the substance of revised plan for reparations and level industry in bizonal area dated 16th, July which was scheduled for announcement on that date but which is not being published in accordance with Department’s instructions (Deptel 1466, July 1518).
Preamble reviews objectives of plan for reparations and level of postwar German economy adopted by four occupying powers through ACC in March 1946, alludes to fact that plan was based upon Potsdam Agreement providing for German unity, and points out that failure to achieve unity and light of experience since plan adopted has shown unmistakeably that revision necessary.
[Page 989]Objectives of plan were to eliminate Germany’s industrial war potential, to provide reparations out of Germany’s capital equipment for victims of Nazi aggression, and yet to leave within Germany necessary plant and equipment to permit rebuilding of viable, peaceful economy.
Plan was based upon Potsdam Germany; a single economic unit whose boundaries would not be further revised to deprive Germany of important natural resources, with common policies with respect production, allocation, import and export programs, currency and banking, and transportation and communications, and with a population estimated at 66.5 millions; all restrictions and removals to be predicated upon the ability of Germans to prepare, in language Potsdam Agreement for eventual reconstruction their life on democratic and peaceful basis.
Clear that assumptions have not been fulfilled, basic changes in situation have occurred, and level industry must be increased. Return of prisoners of war and refugees coupled with natural increase will raise population; bizonal now 16% above 1939 as opposed to 3% elsewhere in Germany. Economic integration of Saar into France, with acquiescence two other occupying powers, will lose to Germany coal and steel resources that area. There is no economic unification nor adoption and implementation common policies, and levels industrial capacity which at best would have been barely adequate in united Germany cannot suffice make the several parts of disunited Germany, which has more population and less coal and steel, self-supporting and able maintain tolerable standard living.
Lapse of time has demonstrated clearly that neither bizonal area nor all Germany can regain economic health under plan as now stands, and has become increasingly apparent that under present conditions Germany cannot contribute her indispensable part to general economic rehabilitation of Europe. Has become imperative reconsider industrial capacity required for bizonal area and arrive at new policy compatible with minimum needs of area, of Germany and of all Europe.
Revised plan agreed by two Military Governments holds to same objectives as original. If capacities are fully utilized, it should permit bizonal area to develop self-sustaining peaceful economy; and should provide sufficient exports to pay for essential food and other imports, and enable German people obtain within reasonable time standard living in conformity with that envisaged in Potsdam Agreement. Revised plan appears to be within capacity of manpower and transport resources Western Germany although its attainment during next few years will require full effort German Government, labor and management. At same time, it will not permit restoration dangerous industrial war potential, and will still provide for elimination of war plants and removal surplus industrial capacity for purpose reparations.
[Page 990]A principal consideration in present revision was need of removing uncertainty under which bizonal industry now operating. It is therefore anticipated that list of plants earmarked for reparations will be made available immediate future so that bizonal industry can devote its full efforts to task of rehabilitation.
Offer to other occupying powers to join bizonal area in developing unified German economy still stands. Plan has been developed with due regard to hope offer will be accepted.
1. General. Quadripartite plan provided for retention industrial capacity sufficient approximate production of depression year 1932; which equalled 55% of 1938 and was about 70–75% 1936 production. New plan would approximate 1936 level industry, a year characterized by neither boom nor depressed conditions.
- a.
- Old plan provided very sharp cuts in production capacities in metals, machinery and chemicals industries, from which bulk of reparations were to be obtained. Impossible to provide self-sustaining economy in bizonal area without materially increasing levels these industries. Substantially entire difference between original and revised plan is in these reparations industries since original already provided maximum and in some cases unrealistic levels for non-reparations industries. New plan would provide production at levels averaging about 5 to 10% less than 1936 (a reduction of 55 to 60% from war year 1944).
- b.
- Population factor must be borne in mind. Bizonal area already has at least 6 million more than 1936 and by 1952 expected have 8 to 10 millions more than pre-war. On basis expected population in bizonal area in 1952 of 42 to 44 million, per capita production capacity provided by new plan would be approximately 75% of 1936.
- c.
- Over-riding requirement in developing bizonal plan has been to provide level industry necessary make area self-supporting. In determining levels for specific industries, for example, steel and machinery, requirements for exports, for internal needs bizonal area, and for trade with rest of Germany, have been taken into account. In devaluating requirements for trade with rest of Germany and of imports, account had to be taken of removals of capital equipment from other zones and Berlin. Required capacities of particular industries, therefore, allows for potential output to supply trade needs of rest of Germany. Bizonal area in order to be self-supporting must obtain products in which deficient either as imports from outside Germany or in trade from rest of Germany.
[The remainder of this telegram reviewed the provisions of the new level of industry plan regarding the balance of payments and restricted industries.]
-
Not printed; it stated that both the Department of State and Bevin considered it of the highest importance that no immediate announcement of the new level of industry plan be made (862.60/7–1547). Similar instructions were transmitted by the War Department to General Clay. Telegram 1689, July 16, from Berlin, not printed, reported that the announcement of the new plan had been postponed in pursuance of the instructions from Washington. The telegram added:
↩“Thus far agreement has been closely held. I might say also that we had hoped for a bold step forward. As far as Germany itself is concerned positive and courageous action is indicated.” (862.60/7–1647)