740.00119 Control (Germany)/1–348: Telegram

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


4. Personal for Saltzman and Hickerson. US/UK Bipartite Board2 met yesterday at Berlin.…

There was also a lengthy preliminary discussion regarding adjustments to be made in the German bizonal organization.

1. There was a proposal to double the EC Council3 in size. This would provide a membership of 104. US chairman stated that we do not desire a general election at this time. UK chairman suggested asking minister presidents what procedure they would suggest and in agreeing to proposal that size of EC Council be doubled; joint chairmen felt it should be done under approximately the same terms which governed council’s original composition.

2. US chairman suggested creation of an upper house for EC Council composed of two representatives from each Land to be selected by Land government. Their powers would be determined in consultation with EC Council and the several minister presidents with the proviso-that it may not initiate revenue-producing or expending legislation. This was agreed to in principle by UK with the suggestion that instead, of calling it an “upper” house it be called a “second” house. UK doubted initially there should be as many as two representatives from [Page 2] each Land, believing that one would suffice but finally stated it had no objection to two.

3. Executive committee of council as now constituted will be reformed under chairmanship of a coordinator of EC affairs to be selected by the lower and confirmed by the upper group. It would be composed of directors of the several departments who shall be nominated by the coordinator and confirmed by the upper house. The foregoing is the US proposal. This seemed to be agreeable in principle to UK. It was suggested by US and tentatively agreed that coordinator be chosen by lower house of council and confirmed by upper for a fixed term of office. Coordinator would be required to appear before council and he may or may not be a member of it. Lengthy discussion about this feature brought out difference between UK and US approach to this problem. UK representative automatically thinks in terms of Parliamentary Government whereas US side emphasized its predilection for American type equality of powers by the executive, legislative and judicial branches with fixed term of office for the executive who would have the power of removal of his appointees.

4. Agreed in principle that the directors of the several departments will be political appointments and each will be provided with deputy who is qualified civil servant. Appointments will include those now approved, those who may be added from time to time with approval of military government.

5. Branch offices of economic control. US chairman proposed that it be suggested to Germans that they might wish to establish branch offices in the several Laender instead of the present form of operation through offices of the Land governments. The example given is importance of offices dealing with food distribution. This is now handled by the Land offices, UK chairman agreed.

6. Bizonal high court. There was preliminary discussion of judicial apparatus which will be necessary to give authority to the acts of the council. It was tentatively agreed that the charter of the court would be given by military government but that council would have to provide funds, etc. British suggested Cologne be approved as seat of the court. US proposal was agreed tentatively as follows: “a high court with ultimate authority in dealing with economic legislation will be established forthwith under the charter of military government.”

7. Banking. Tentatively agreed to inform Germans that it is proposed to establish board of directors for the Land Central Bank to operate under a general charter issued by military government which council will consider prior to its final issue. Seat of board will be Frankfurt. Financial advisers were instructed to come up with a draft charter by January 15. Board would be charged with accounting for imports and exports.

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8. JEIA 4 is now called and working with intricate German machinery. US chairman stated he would like to separate agency from government machinery and have it operate as a quasi government agency but not as a department. There seemed to be no objection. JEIA would establish branch offices.

9. There was considerable discussion of powers of taxation to be granted to council. There seemed to be agreement tentatively to the principle that council should have power to tax for the requirements falling within the limits of its jurisdiction. Case of subsidies to such industries as steel and chemicals was mentioned. It would control revenues of Reichsbahn and posts.

British mentioned this connection that they desire to eliminate their zonal budgets.

US chairman did not agree to an authorization for council to tax for capital improvements at a time when the question of ownership of plants would still be undetermined.

British suggested that taxation would include such items as subsidies for coal and steel; social insurance; expenses of liquidation of Wehrmacht; displaced persons; frontier control. US chairman suggested that in addition to responsibility for customs and excise taxes council may share in income tax collections to meet its operating expenses, direct prices, subsidies and such other operations as might be approved by military government.

There was also preliminary discussion of eventual establishment of a German agency similar to Reconstruction Finance Corp.

British raised question of eventual abolition of Laenderrat now operating in US zone stating that it hoped that this organization would be abolished. US chairman stated his hope that Germans themselves would see advisability of initiating this action. UK pointed out that it has now in UK zone a minister president conference which is strictly a German initiation and could be expanded for both zones.

UK chairman stated that the pace should be forced so that Germans can do business abroad. This was agreed with a reference to the importance of establishment of an exchange rate and promise to pay for expenses of German businessmen travelling abroad.

Reference was made to the agreement on common reports and statistics office in Frankfurt but pointed out that latter cannot agree on form of reports. Agreed that economic reports should cover both zones and that there should be a common use of statistical reports. [Page 4] Narrative reports however may be different forms to meet different needs in UK and US.

10. Agreed that there should be integration of US–UK staffs below chairman level as well as integration of JEIA field staffs. Robertson said regarding latter he would need to get confirmation from his government. US chairman proposed that all operating economic functions be moved to Frankfurt and that there be created a single board of directors for both JEIA and JFEA.5 This was agreed. Board to be composed of financial and economic advisers and chairmen and deputy chairmen of JEIA and JFEA, that is, four on each side. Board will be subject to approval by two military governors and would develop its own procedures. Agreed it was essential that these two agencies operate under single direction. Board would present to bipartite board its own terms of reference by January 15.

US chairman informed the meeting that EUCOM will start vacating one floor of Farben Building, Frankfurt by January 15 and by April 1 there will be available one entire wing of Farben Building for bizonal organization. Space for Central Bank will be provided in Reichsbank Building, Frankfurt.

At end of meeting UK chairman proposed joint telegram to governments, urging prompt attention to the food crisis which bizonal authorities will face next spring. This UK chairman described as comparable to dangerous situation in spring 1947. There was lengthy discussion regarding the failure to collect food from German farmers. Clay doubted there will be possibility of obtaining from US more than the present 300,000 tons of bread grains monthly. Was also a discussion of possibility of the purchase of 100,000 tons, of Norwegian fish. US chairman agreed to draft telegram urging more liberal provision but expressing doubt that this would produce result.

Department is informed of bizonal meeting with Germans in Frankfurt scheduled for January 7–8.

  1. The Bipartite Board, composed of the American and British Military Governors for Germany, was the highest authority in the U.S.–U.K. bizonal economic administration established in 1946 and reorganized in May 1947. For previous documentation on the reorganization of bizonal agencies in 1947, see Foreign Relations, 1947, vol. ii, pp. 909 ff.
  2. In the May 1947 reorganization of U.S.–U.K. bizonal economic agencies, there was established an Economic Council composed of German representatives selected by the Landtage of the Laender in the U.S. and U.K. zones of occupation of Germany. An Executive Committee, similarly selected by the Landtage, was established at the same time. The Economic Council and its Executive Committee supervised those German economic agencies exercising authority.
  3. The Joint Export-Import Agency of Military Government (JEIA) was established at the end of 1946 as a means of promoting trade and thereby developing a German economy which could be maintained without further financial assistance from the occupying governments. The Agency, which was located in Minden, was managed by an American Director General and governed by a Board consisting of the Director General and his British Deputy, the financial advisers and economic advisers of the American and British Military Governors.
  4. Joint Foreign Exchange Agency, established in March 1947, held all international financial accounts for the U.S–U.K. bizonal area and served as fiscal agent for the Joint Export-Import Agency. Like the JEIA, the JFEA was composed of American and British personnel assisted by German technicians.