740.00119 Control (Germany)/4–248: Telegram

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

top secret

766. Personal for Saltzman and Hickerson (Eyes Only). In continuation of mytel 747, April 1,1 I am now in a position to give more detailed information respecting Berlin discussions as reports of working parties are concluded or begin to emerge in their final form. Emphasize that none of such reports are final as yet as they have not been submitted to the three military governors.

Close association between military governors and Benelux, US, UK, and France have agreed upon a report submitted today to Benelux representatives which will be discussed with them April 5. This report recommends that recommendations of three military governors of direct interest to Benelux will be made available to Benelux representatives at conclusion of present Berlin meetings in order to enable Benelux governments to be adequately informed of Berlin discussions before talks are resumed in London. With respect to future cooperation, items pending before the Bipartite Board of interest to Benelux would, so far as possible, be given to their representatives before board meeting in order that Benelux representatives could submit comments which would normally be considered by board in its meeting. Furthermore, Benelux representatives would be informed of decisions taken by Bipartite Board and would be given minutes which are not exclusively of interest to the board. Similar arrangement would be put into effect with respect to the French zone. For information provided in Frankfurt and Baden-Baden, this should be transmitted through the consular representatives of Benelux countries in those cities. For purpose of assuring regular contact and providing information both on developments in Bipartite Board and French zone, meetings will be held at stated intervals between respective political advisers of three military governors and Benelux representatives; upon request each political adviser would arrange interviews between Benelux [Page 161] representatives and other officials of respective military governments, both in Berlin, Frankfurt, and Baden-Baden.2
Measures to improve economic cooperation between Bizonia and French zones, particularly in regard to circulation of persons and trade and foreign trade. This working party was broken down into six subcommittees, all of whose reports are not yet prepared. The report will probably be very detailed but we hope to submit summary next week.3
Study of administrative arrangements for Bizonia with a view to exploring the possibilities of fusion. Preliminary report states that the task of the working party was not to determine when or how trizone fusion should be reached, but merely to study the administrative arrangements already existing in Bizonia with view to examining the necessary adjustments required if French zone were to be included in bizonal economic administration. This problem was examined under two headings: (a) German bizonal administration, and (b) allied control of German administration. On (a) report states that no administrative difficulties arose over the composition and choice of members of Bizonal Economic Council and Laenderrat as these were composed and chosen in manner agreed by French for future federal legislature, provided that agreement should be reached on competence of these bodies. It is stated that a suitable formula could be found on the composition of the executive committee and of the bizonal high court. French representatives could not accept all powers included in competence of bizonal economic administration nor powers of taxation given to Bizonal Economic Council and Laenderrat. Furthermore, French representatives disapproved of Laenderrat being given only power of suspensory veto. French representatives also objected to creation of special federal agencies and in particular to Article III, paragraph 10, of Proclamation No. 7.4 On (b) French representatives will submit paper with their views.5
Practical implications of possible fusion as affecting allied partners fusion arrangement. Working party report concluded this [Page 162] morning. Report reviews the economic and financial aspects of eventual fusion which relate primarily to the following:
The US/UK fusions agreements of 2 December 1946 and 17 December 1947 were put forward by bizone representatives as providing the principle for fusion.
General agreement will be necessary for requirements of occupation forces to be met from indigenous sources.
The question of delegation of authority to German agencies and methods of control were considered.
The need for common economic policy and common decisions regarding prices and wages was agreed.
Other aspects discussed were voting procedure, integration of allied staff, budget, German staff, and representation in ERP. It became clear in working party that there are political difficulties to immediate fusion. With respect to timing, US representatives expressed view that trizonal fusion should be fully effective with the establishment of a provisional or constitutional government for the three zones but that announcement to this effect be made as soon as type of government has been definitely determined and date set on which the government is to be established. In effect, there is a question of whether or not before the establishment of a provisional government the gains of fusion would outweigh the cost and disturbance of administrative reorganization. It was therefore suggested by US and UK representatives that following steps be considered as a program for fusion:
Fusion will be announced at time when there is agreement on character and date of a provisional and constitutional government and that fusion will become fully effective at time such government is established. (French representatives stated not in position to comment on this.)
Meanwhile, the following steps could be undertaken (French representatives agreed to recommend that these steps could be undertaken):
French zone should immediately enter and participate in Bank Deutsche Laenderrat and Allied Bank Commission.
Trizonal plans should be agreed immediately for early implementation of financial reform.
Common customs and frontier control policy in western Germany would be established.
French zone might participate in JEIA or alternatively adopt parallel policies and procedures.

Foreign trade is recognized as keystone and it is recalled that both French zone and bizone would be members of multilateral agreement established under ERP. Administrator of ERP will probably require bizonal and French zone develop programs in closest harmony. It is believed that practical results of pooling of foreign trade can be largely realized by requiring Germans of French zone and Bizonia to develop common import and export program. By common plan practical steps can be taken immediately to anticipate fusion which will become effective politically when provisional government is established. On the general economic side the essence of fusion in next 12 [Page 163] months likewise in common fiscal and financial policies and in development of common production program with corresponding import and export programs. If immediate steps are taken along these lines, the two areas will have developed basic elements of integration about as rapidly as practical results could be obtained under any circumstances.6

Continuation of London discussions on future political organization of western Germany. Report is now emerging as statement of principle on form and scope of future German government which presumably will eventually be given to Germans as minimum requirements of western allies for German constitution. It covers federal legislative bodies, federal executive bodies, chief of state, division of powers between federal and Land governments, federal judiciary, civil rights, execution of federal law, citizenship, Land boundaries, composition of constituent assembly, and ratification of constitution. The report at present is studded with brackets and represents no appreciable progress over London. However, the committee will continue next week to explore possibilities of reconciliation of views and therefore shall not include details of position taken in this telegram.7
Safeguarding the rights of foreign owners of coal and steel industries in Ruhr and elsewhere in Germany. Nothing to report as yet.8
French request re-examination of machine tool stock in Germany. No working party established as yet but anticipated question will be examined next week.9

Sent to Department as 766; repeated to London, personal for Douglas, as 101; to Paris, personal for Caffery, as 126.

  1. Ante, p. 156.
  2. The Final Report of Working Party No. 1, document MGC/P(48)7, April 6, 1948, “Proposal for Close Association Between the Military Governors and the Representatives of the Benelux Countries in Germany”, is included as Appendix “B” to document MGC/P(48)16, April 14, the Final Report of the Military Governors, p. 181.
  3. The Final Report of Working Party No. 2, together with the final reports of the six sub-committees, was circulated as document MGC/P(48)11, April 7, 1948, not printed. The entire document comprised 33 pages. For a summary of the significant subjects discussed by Working Party No. 2, see telegram 797, April 5, from Berlin, p. 166.
  4. See the editorial note, p. 59.
  5. The Final Report of Working Party No. 3, document MGC/P(48)10, April 9, 1948, is not printed. The views of the French Delegation were set forth in an Appendix to that document.
  6. The Final Report of Working Party No. 4, document MGC/P(48)6, April 6, 1948, is not printed.
  7. For the text of the Final Report of Working Party No. 5, see document MGC/P(48) 8, April 9, p. 170.
  8. The Final Report of Working Party No. 6, document MGC/P(48) 12, April 10, 1948, is not printed; for a summary of the Report, see telegram 845, April 13, from Berlin, p. 177.
  9. A Working Party on Machine Tool Holdings was subsequently established. Its Final Report, document MGC/P(48) 15, April 11, 1948, is not printed.