Foreign Relations of the United States, 1948, Germany and Austria, Volume II

711.00/8–2648

Department of State Policy Statement ¹

secret

[ Washington ,] August 26, 1948.

Germany

Note: This statement was prepared early in the summer of 1948, at a time when European developments had forced a reconsideration of earlier policies to meet the exigencies of the existing situation. The failure of the CFM conferences on Germany, the inauguration of the European Recovery Program, the virtual suspension of quadripartite machinery for the control of Germany, the initiation of measures for implementing the London agreements of the western powers relative to the three western zones, and the Berlin crisis have been factors in this situation. The present statement attempts to present US German policy in the light of these developments and to clarify the present status of policies that may be the subject of re-examination and negotiation. Because of the fluid nature of the German situation this statement cannot be entirely up-to-date at the time of issue.

a. objectives

The fundamental objective of the United States with respect to Germany is to insure that Germany does not again menace the peace of the world and makes a vital contribution to the economic rehabilitation and political security of Europe. It is desirous, in the words of Secretary Marshall, that “a peaceful Germany, with strong democratic roots, take its place in the European and world community of nations.” To achieve this objective, policies have had a twofold aspect, restrictive and constructive, at once designed to prevent the revival of a war potential and the will to war and to promote the rebuilding of Germany as an essential constituent of a peaceful and prosperous Europe. These policies are conceived not as contradictory but as complementary and vitally related.

It has been the purpose of the United States to achieve this major objective in close collaboration with the other Allied powers, in particular with the UK, France, and the USSR. But because of the obstructiveness and recalcitrance of the USSR, the Allied Control Authority has now reached a stage of virtual paralysis. Our present objective is, together with the UK and France, to reconstitute western Germany as a political entity capable of participating in and contributing to the reconstruction of Europe in respect to economic life and the general security, pending the time when a comprehensive settlement of the German problem becomes a possibility. Current emphasis is being placed upon the immediate problem of integrating western Germany into the European Recovery Program and the western European system and, to this end, obtaining inter-Allied agreement and greater uniformity in the treatment of western Germany.

b. policy issues

[Here follows a brief review of the principal initial international agreements constituting the basis of U.S. German policy from 1945.]

Major US policies with respect to Germany, in conformity with existing international agreements, official statements, and directives, may be summarized as: (1) disarmament, demilitarization and reduction and lasting control over Germany’s capacity to make war, including security against renewed German or other aggression to be sought in closer US association with western Europe; (2) completion of punishment of war criminals and major Nazi offenders as concluding stage in penal and denazification procedure; (3) early completion of programs of reparation and restitution in a manner which will not interfere with ERP; (4) revival of German economic life so that Germany may make maximum contribution to European recovery but without restoration of dangerous German concentration of economic power or control over vital war potential; (5) full support for bizonal participation in ERP and closer coordination of the French zone with the bizonal area; (6) early establishment of a constitutional government for Germany, with effective jurisdiction over the three western zones, but open to accession of eastern Germany. Such government should be based upon a constitution of German origin but in conformity with Allied requirements insuring its federal and democratic character; (7) the democratization of German political and public life, resting upon regional and local self-government, and a uniform guarantee of democratic procedures and fundamental freedoms; (8) such assistance to German education, cultural, and informational activity as may be essential to the elimination of National Socialist and militarist doctrines and to the development of democratic ideas and the peaceful orientation of German thinking; (9) continued occupation of Berlin and participation in the ACA for such coordination of quadripartite policies as still can be obtained; (10) an ultimate settlement of German frontiers which will do justice to victims of German aggression, yet not create lasting sources of enmity and irredentism, nor discredit the democratic forces of Germany, nor constitute a continuing political problem and barrier to trade and human intercourse; and (11) ultimate preparation of a peace treaty for Germany with adequate participation of all Allied governments in its consideration and ratification, such treaty to be binding upon a future German government and its nationals.

The implementation of policy has necessarily, in the absence of a German government, involved the military occupation and control of all of Germany by the major Allied powers. For the US, the Army has been assigned the task of occupation and military government in conformity with policies determined by the Department of State together with other interested governmental agencies.

The Allied Control Authority (ACA) for Germany, originally designed to coordinate policy in matters affecting Germany as a whole, has reached a state of almost complete stagnation. The Control Council, even prior to recent developments, had failed to become an effective governing body for Germany or even an adequate coordinating agency, despite the adoption of more than a hundred laws and directives relating to German affairs. The action of the Soviet representative in withdrawing from the Council session on March 20, 1948, without agreeing to a date for subsequent meeting has virtually suspended this organ. Certain subordinate bodies of the ACA, and the Berlin Kommandatura continued to function but with little effect. On June 16 the Soviet representative withdrew from the Kommandatura, and on July 1 all Soviet participation in that body was terminated. The US is ready to continue participation in the ACA for such coordination of quadripartite policies as can still be obtained.²

The Council of Foreign Ministers has devoted two meetings mainly to a consideration of the German problem (March 10 to April 26 and November 25 to December 16, 1947³). In neither meeting was substantial progress made toward a resolution of problems involved in quadripartite administration nor toward agreement on a procedure for preparation of a peace treaty for Germany. Negotiations were finally suspended (London, December 16, 1947) because it was made clear that the price to be exacted of the western powers for an agreed solution of the German problem was Soviet-Communist control over the economic and political life of all Germany.

The US has attempted persistently to implement the Potsdam Agreement relative to the economic unity of Germany and the effective coordination of policy in matters affecting the whole of Germany. It has opposed the drift toward unilateral control of the respective zones which has resulted from Allied disagreement. When French and Soviet opposition thwarted all efforts to create central economic agencies, the US proposed on July 20, 1946 that such agencies be set up for the US zone and any other zones willing to join in such an arrangement. Only the British accepted and accordingly an economic merger of the US and UK zones was effected in the fall of 1946 and regulated by inter-governmental agreement on December 2, 1946.⁴ A Bizonal Economic Administration was created, and subsequently reorganized by arrangements made effective in June 1947 and February 1948.⁵ With the increasing paralysis of quadripartite agencies the US has come to rely heavily upon the bizonal organization for the application of economic policy, particularly with respect to economic rehabilitation and the participation of western Germany in the European Recovery Program.

Since the breakdown of the CFM and the virtual suspension of the ACA, we have endeavored to collaborate more closely with the UK and France in working out common policies for western Germany. Such action has been made more urgent by the passage of the ECA and inauguration of the recovery program, in which Germany is vitally involved. Tripartite conversations were held in London, in association with the Benelux governments, February 23 to March 6, 1948 and April 20 to June 1, 1948.⁶ These talks resulted in agreements which establish a basis for coordinated action with respect to setting up a German constitutional government, control of the Ruhr, integration of western Germany into ERP, and security matters. For the foreseeable future the application of US policy toward Germany will of necessity be mainly within a tripartite framework, but there is no intent to depart from the principle of quadripartite control or to act inconsistently with existing international agreements governing Germany. The US stands ready to engage once again in four-power negotiations looking to a final settlement whenever Soviet obstructionism and recalcitrance are replaced by a genuine readiness to seek joint agreement by a rational adjustment of differences.

1. Political

(a) Demilitarization and Security.—The broad demilitarization policy of the US is to enforce complete disarmament of Germany, to achieve the elimination of or effective control over any remaining capacity to make war, and to eradicate militaristic ideas from German cultural life. Disarmament and demilitarization are virtually complete with respect to dissolution of the armed forces and paramilitary organizations, disposal of war material, and dismantling of first priority military installations. Work was complete on liquidation of Category I war plants (especially constructed for production of war materials) by June 30, 1948. There has been no agreement on quadripartite inspection of the progress of demilitarization in the various zones, due to Soviet unwillingness to allow a free hand to inspection teams.

The US insists that there be adequate safeguards that the economic resources of a revived Germany shall not be used by a future German government to further exclusively German policies. This principle is embodied in the six power agreement concluded on June 1, 1948, on an international authority for the Ruhr.⁷

The US has proposed a 40-year four-power treaty for the disarmament and demilitarization of Germany;⁸ this was accepted in principle by the UK and France but rejected in substance by the USSR. The US does not consider a treaty of this type applicable to western Germany only but, in the absence of four-power agreement, has approved proposals formulated jointly by US, UK, French, and Benelux representatives which envisage demilitarization controls to be applied by the three western powers so long as may be necessary. These controls would provide for the continuation of existing prohibitions, consultation in the event of a danger of German military resurgence, restrictions upon war potential industries, a system of inspection and enforcement of demilitarization regulation, and continued occupation of Germany, or key areas thereof, until the peace is secured in Europe.

The US is favorably disposed toward arrangements, such as the Brussels five-power pact of March 17, 1948,⁹ which are directed toward regional and collective security. It is ready to associate itself by constitutional process with such arrangements as are based on mutual aid and which affect the national security of the US.

(b) War Crimes and Denazification.—The US has insisted upon the apprehension and punishment by legal process of all persons who have committed war crimes or crimes against peace or humanity. The trial of major Nazi war criminals by the International Military Tribunal at Nürnberg, November 1945 to October 1946, in accordance with quadripartite agreement, resulted not only in the punishment of the chief offenders but also in the establishment of a precedent of great significance for the future codification and enforcement of international criminal law. Further trials have been undertaken in Nürnberg by occupation tribunals. Eight cases had been completed and four were still pending in May 1948. It is expected to bring the Nürnberg trials to completion during the summer of 1948. Other trials of lesser war criminals and other offenders both by military government and German tribunals have been in progress, and it is our policy to expedite their early completion.

The US seeks to eliminate Nazi influence completely in Germany. Denazification procedures, undertaken initially by military government and later by the respective Land governments have been in operation since the beginning of the occupation. Since mid-1946 the process has been expedited by amnesties for youth and certain categories of lesser Nazis. A CFM directive to the Control Council (April 1947) called for appropriate measures to hasten denazification of principal Nazis and Nazi supporters and the trial of war criminals without requiring the indiscriminate trial of the mass of nominal or lesser Nazis and removal of Nazis and militarists from posts of responsibility. Amendments to the law authorized in March 1948 have greatly expedited procedures by allowing German prosecutors to reclassify or exonerate most of the Nazis awaiting trial except persons in the category of major offenders land others heavily incriminated. An expedited form of denazification without formal trial has also been authorized for minor categories.

The net result of denazification in the US zone will be that, of some 3 million persons found chargeable under the law, about 15 percent will have been subjected to penalties or placed on probationary status, and the remainder restored to normal German life. While experience has reaffirmed both the necessity and soundness of the US denazification policy, it cannot be claimed that there has been entire success in debarring Nazi activists from important posts in public and economic life, especially the latter where technical competence has been a factor to be considered. Only some two percent of all persons tried drew the more serious sanctions, and the procedure now accelerated with a view to early termination, will undoubtedly mean that some active Nazis will escape serious penalties. Such elements may for a time constitute a threat to the development of democratic processes in Germany. But it has become apparent, not only in the US zone but elsewhere in Germany, that indefinite prolongation of formal denazification procedures would be incompatible with the US aim to create an environment favorable to democratic political revival. Emphasis is now being placed upon the summary trial and punishment of “hard core” Nazis with criminal records, and the rehabilitation of the great body of former Nazis and their integration into a democratic German society.

(c) Movement of Persons.—There are some 500,000 United Nations displaced persons in the US zone. We delegated to the Preparatory Commission of the International Refugee Organization (PCIRO) operational responsibility for their repatriation or resettlement, and/or the care and maintenance of those in displaced persons camps (approximately 350,000). While the US seeks to facilitate the voluntary repatriation of displaced persons, it is recognized that the great majority are unwilling to return to their country of origin, and it is our policy to oppose their involuntary repatriation. Therefore, major emphasis is being devoted to the PCIRO resettlement program through which it is hoped to find new homes in other countries for a majority of the displaced persons. A substantial beginning has been made in this program.

A new problem has arisen recently in connection with the influx of Czech refugees who fled to our zone as a result of the Communist coup in Czechoslovakia in February 1948.

In addition to United Nations displaced persons, there are in the US zone approximately 3,000,000 displaced or uprooted persons of German origin. This group consists chiefly of Volksdeutsche transferred to Germany from Czechoslovakia, Hungary, Poland, and Austria through inter-Allied agreements, but also includes sizable numbers of German refugees from the Soviet zone and from east of the Oder-Neisse line. A total of some 10,000,000 persons of German extraction have been expelled or have fled from eastern European and former German areas. There remain about 500,000 Germans in (the above-mentioned countries and some 60,000 Germans in Denmark whose repatriation to Germany has not yet been arranged.

US policy favors the complete assimilation of all German expellees and refugees into the German community and their ultimate enjoyment of equal civil and political rights with other Germans. The addition of so great a number of persons to the indigenous population to the US zone (the UK zone has received an even greater number) has given rise to grave economic difficulties and adds to the urgency of the ERP in its relation to Germany. Their political assimilation presents a challenge to a democratic German society.

It has been US policy to repatriate to Germany those Germans whose presence abroad it deemed contrary to the national interest. Voluntary repatriation of other Germans is permitted but with priority for those persons able and willing to contribute to the peaceful construction of Germany. The movement of Germans out of Germany, formerly restricted, in general, to compassionate cases or to movements calculated to further the economic and cultural reconstruction of Germany, has lately been liberalized in accordance with the Displaced Persons Act of 1948.

The US favors the early repatriation of all German prisoners of war. It has discharged all prisoners in its own custody and desires the return of all those held by other Allied powers in the interest of civil tranquillity and economic recovery. It was agreed by the CFM at Moscow in 1947 that repatriation of all prisoners of war should be completed by December 31, 1948. At present it seems unlikely that the repatriaron of prisoners still held by the USSR and France will be completed by that date.

(d) Administrative Organization and Government.—The US has favored the earliest possible reorganization of German administration on a decentralized basis. Since the inception of the occupation German administrative units have been progressively reactivated, beginning with local communities (Gemeinden), rural and city counties (Landkreise, Stadtkreise), and ultimately the four states (Laender) of Bavaria, Württemberg–Baden, Hesse, and Bremen. The Land governments have been given a permanent basis through the adoption of Land constitutions, drafted by popularly elected assemblies in the summer of 1946 and ratified by the electorates later in the year. These constitutions provide for the traditional type of German parliamentary regime and conform to military government requirements that each government be genuinely democratic and guarantee fundamental civil rights to all persons.

A basic principle has been that administrative authority and responsibility be transferred to the Germans at all levels, with military government retaining only the right of general surveillance to insure the achievement of occupation objectives. It is at present our policy to refrain from direct interference in governmental affairs except in case of palpable violations of directives by German authorities. Responsibility for direct implementation of military government policy has increasingly been delegated to German state and local authorities, a conspicuous instance being in the field of denazification.

A zonal coordinating body, the Council of Ministers President (Laenderrat) was set up in November 1945, and has been an important factor in harmonizing policy and legislation throughout the zone. The reorganization of the bizonal administration has made it posible to eliminate this organ, whose functions are now assumed by the bizonal Laenderrat.

The US, since mid-1946, has favored the early establishment of a central German provisional government with adequate power to deal with matters pertaining to Germany as a whole, particularly in the economic field. This has become increasingly urgent since the failure of the four powers to set up central economic agencies as agreed at Potsdam. We made proposals at the last Moscow meeting of the CFM for a provisional government of federal character and the eventual establishment of a permanent constitutional regime. These met with strong opposition by the French and Soviet representatives. At the subsequent London CFM meeting the US was prepared to urge speedy steps toward creation of a German government but held that the indispensable basis of such a government must be German economic unity and the safeguarding of fundamental freedoms throughout Germany, without which such a government would be a mere sham and deception. The USSR was not prepared to meet these conditions and was clearly interested only in setting up a highly centralized mechanism which would serve as an instrument of indirect Soviet control throughout Germany.

The bizonal administration, which is described later, represents a substantial move toward a coordinated German economic administration for most of western Germany. The recent tripartite conversations in London considered the matter of a provisional German government for the three western zones and reached agreement on measures to be undertaken for the creation of such a government on a constitutional basis.

(e) Democratization.—The US favors the reconstruction of German political life on a democratic basis. Accordingly it has sought to develop democratic responsibility and practices from local to state levels. It has authorized the organization and activities of political parties which conform to established democratic criteria, and nonpreferential treatment of such parties. The US also encourages the activity of other free organizations and associations, such as religious societies, trade unions and youth groups, calculated to assist in fostering the development of a democratic political and social life in Germany.

Formal democratization in the US zone has been achieved through popular elections at local and Land levels and the establishment of popularly-based constitutional regimes. Basic human rights are constitutionally guaranteed. The courts have been reorganized on the basis of an independent judiciary and the reign of law applicable without favor to all persons regardless of race, creed, or political conviction. The civil service has been reconstituted with a view to eradication of the caste system which has traditionally characterized the German bureaucracy.

At the 1947 Moscow meeting of the CFM, Secretary of State Marshall set forth the basic principles for the democratization of Germany as: (1) a uniformly effective guarantee of basic human rights in all parts of Germany; (2) freedom of political action for recognized political parties, whose leaders shall be elected by and responsible to their members, to operate in all parts of Germany without discrimination; (3) freedom of action in all parts of Germany for free democratic trade unions subject to the basic authority of their membership; (4) free circulation throughout Germany of information and ideas by all media of information, subject only to the needs of military security and prevention of Nazi or militarist resurgence; (5) freedom of movement for persons and goods throughout Germany, subject only to the requirements of military security.

At present the democratization of Germany is proceeding slowly against formidable obstacles. There exists an inherent dilemma in any attempt to foster democracy under military government. The failure of the occupying powers to agree upon workable methods has prevented democratic political activity on a nation-wide scale. Soviet “democracy” has little in common with the liberal concepts of the western powers, inasmuch as it obviously seeks to impose a specific economic and social system and a predetermined political structure upon the Germans by totalitarian methods. The continuing economic crisis and the political apathy of the majority of the population make progress difficult. There has been, especially within the last year, a substantial increase in nationalistic thinking (as recently evidenced in the unexpected strength of the National Democratic Party in local elections in Hesse) and in vocal opposition to military government policies. Anti-democratic tendencies have become manifest in the restored bureaucracy, which has by tradition been habituated to authoritarian practices. The major political parties reflect traditional attitudes and social cleavages, and have not become vigorous exponents of the democratic idea.

Significant progress toward the realization of democratic principles in Germany can only accompany stabilization of the present extremely precarious economic and political situation, the establishment of a German government of indigenous and responsible character, and the success of a long-term program of German cultural reorientation.

(f) Reorientation.—US policies issued in furtherance of the political and cultural reorientation of the German people have stressed from the very beginning that we wish democratization to be understood in its broadest possible sense. They have pointed out that political reform and economic recovery can be effective only if they are accompanied by a systematic effort to regenerate public opinion and to reorient the German population toward democracy and peace. In order to achieve these broad objectives the reorientation program of military government has never been confined to reform of formal education but has encompassed the whole field of public information and such media and institutions as are essential for the democratic development of a free people. Policies and programs developed by the US Government in an attempt to effect these changes emphasize the elimination of Nazism and militarism and the permanent exclusion of objectionable personnel from posts of influence and particularly from schools, information media, and cultural institutions; the reestablishment of universally valid principles of justice; the protection, through constitutions, of basic individual rights such as free speech, freedom of religion, freedom of assembly and association; the responsibility of the states for all matters pertaining to information, education, religion, and cultural affairs, without prejudice, however, to the cultural unity of Germany; exchange of information and educational interchange of persons and materials throughout Germany and between Germany and the outside world; increasing use of native resources which offer promise of peaceful development of new ideas and institutions; German initiative and responsibility in participating in the work of cultural reconstruction, and establishment of international cultural relations to overcome the spiritual isolation imposed by National Socialism on Germany and to further assimilation of the German people into the world community of nations.

In the course of the three years of occupation, emphasis in policies has shifted increasingly away from measures implying control of indigenous institutions and operations to others favoring restoration of German responsibility in the fields of information and education. At the same time new problems have arisen which require continued attention and treatment by military government. There is increasing reluctance on the part of the German population to accept the policies and general principles of the occupation powers. Such antagonism as is evident ranges, in its manifestations, from political apathy to outright rejection of occupation policies and hostility toward the occupation powers. Public opinion surveys have indicated no substantial progress in the political thinking of large segments of the population and the existence of strong residues of National Socialist influence. Friction among the occupation powers, economic shortages, and the slow progress of general recovery are major contributing factors in this development. Conflict between the western powers and Soviet Russia, in particular, has split the German population, for all practical purposes, in two camps, the eastern part of which is, at this point hardly accessible for reorientation purposes by the western powers. Furthermore, Soviet propaganda which is carried on by Soviet or Soviet-controlled media has created a new problem for the US which is compelled to use its own instruments of information in and to Germany to counter, systematically, the influence of Soviet propaganda on German audiences.

2. Economic

(a) Participation in Western European Recovery.¹⁰—Failure of the Council of Foreign Ministers and the Allied Control Council to implement the treatment of Germany as an economic unit resulted from the refusal of the Soviet Union to agree to the implementation of common policies with respect to foreign trade and reparation removals. With the enactment of the economic recovery program for western Europe, emphasis in US policy with regard to Germany has necessarily shifted from active concentration upon the achievement of economic unity of the four zones to participation in and contribution to the recovery of western Europe.

It is therefore US policy that the bizonal economy make a considerable contribution to European recovery by increasing its present low production to approximately the levels of 1936. This will require that production in most industries be more than doubled. If adequate supplies of food and raw materials are available and a sounder financial system is instituted, it is believed that this goal can be substantially achieved in 1952. It is estimated that under a recovery program coal production can be increased from the present level of 133,000,000 tons per year to about 198,000,000 tons; crude-steel production can rise from less than 3,000,000 tons to 10,000,000 tons; nitrogen production from 300,000 tons to 450,000 tons. Similar or greater increases are possible throughout the economy, particularly in industries producing machinery, industrial equipment and consumer goods which are now at extremely depressed levels.

It will be essential for the German administration to function with maximum efficiency if the recovery program is to be successful. More specifically the economy will have to be directed so as to bring about the required magnitude of exports, provide for an efficient and economic use of available resources, and improve present collection of farm produce. In all three fields continuing efforts by the occupying powers to bring about a substantial improvement have been something less than successful but it is hoped that new conditions resulting from the currency reform will be a great aid in that respect.

With a recovery program, the principal contribution of the bizonal area to general European recovery will, in the first year or so, take the form of exports of coal and coke, timber and scrap, while exports of manufactured goods will be relatively small and confined principally to spare parts and replacements urgently needed in other European countries. As bizonal production of manufactured goods rises and the replacement needs of the bizonal economy are more adequately met, there will be sharp increases in exports of manufactured goods until they resume their prewar place in bizonal exports. At the same time, exports of coal should continue to rise and retain an important, but not their present dominating, place in German exports.

As production revives and the standard of living increases, the bizonal economy will contribute to the solution of important European marketing problems and to the more economic use of European resources. For example, it will become possible to use the Low Country ports for trade to and from Germany which will result in more efficient and economic use of the Rhine River as well as a direct benefit in Belgium and the Netherlands. Likewise, it will become possible to import European surpluses of fresh fruits and vegetables which at present Germany is unable to afford in quantity.

While careful study of the economic potential of the bizonal area has led to the conclusion that a recovery program such as that outlined above is feasible, it can only be achieved if large quantities of imports are available. Accordingly, US policy requires that the bizonal economy import foodstuffs and industrial raw materials with which to initiate a recovery program. The largest single import requirement is food. In addition, there must be substantial imports of fertilizer, cotton, wool, and other textile fibers and industrial raw materials ranging from rubber to nonferrous metals, including copper, zinc, lead, and tin. Until the bizonal industry is once more capable of producing its own requirements, there must be imports of special types of industrial equipment in order to maintain the increased production in such key industries as coal mining and electrical power and to improve the dangerously weak situation of the transportation system. Due to the lack of available supplies in other areas, a large part of these imports will have to come from the Western Hemisphere. US technicians, after studying bizonal requirements in the light of estimated availabilities, have estimated that the bizonal area will in the period July 1, 1948 to June 30, 1949 have to import $756,700,000 more from the Western Hemisphere than it will be able to export to that area; freight and other invisible payments will result in a net deficit with that area of $898,700,000 for the same period. The net deficit with other non-participating areas will be approximately $233,800,000. If imports at this rate are available and general European recovery progresses, requirements should taper off in later years and it is believed that by 1952, the bizonal area should be in a position of virtual self-support, or at least the deficit would be of a size that could be managed without special outside aid.

(b) German Trade Policy.—US policy in connection with German trade is (1) to achieve a proper balance between its occupation interest in Germany and its interest in Germany’s relation to the European recovery program and (2) to resolve any real conflicts in the light of broad US interests. As an occupying power, we are anxious to minimize the financial burdens of the occupation which, already large, were greatly increased last December when a large share of British financial responsibility in Germany was assumed by the US. These burdens arise in the first instance from the necessity of providing foodstuffs and other supplies essential for preventing disease and unrest in Germany. Such necessity will continue to exist until Germany is able to export enough to pay for her essential imports. In order to export sufficiently, however, Germany requires large amounts of other imports such as raw materials and plant equipment, most of which must be paid for in dollars. Presently these imports are financed mainly from the proceeds of exports, primarily coal and timber, which provide dollar proceeds to the extent that they are exported to ERP countries. An additional means of financing will now be provided by ECA funds. The addition of these funds, however, does not make any less compelling the emphasis which US policy must place on the maximization of export proceeds.

Our interest in Germany’s relation to ERP arises from the importance of Germany’s economic position in Europe. Germany is potentially one of the most important European suppliers of such acutely needed commodities as coal, mining machinery, and industrial equipment. At the same time she is potentially an important market for European goods. German economic recovery is therefore vital to general European economic recovery. On the other hand, German economic recovery is largely dependent on the economic recovery of other European countries since they are the chief markets for her goods. It is US policy that the fullest possible recognition be given this interdependence in order to achieve the greatest over-all benefits for the European Recovery Program.

The problem is complicated, however, by many factors. Foremost is the fact that Germany is a competitor with European countries for both scarce goods and scarce foreign exchange with which to procure essential goods. Thus these countries, while conscious of the importance of German recovery to themselves, are nevertheless subject to the natural tendency to view problems of their economic relations with Germany in the light of their immediate self-interest. There also exists the difficulty that goods available for export to Germany by her neighbors are unacceptable to military government authorities as not yielding maximum values (e.g., caloric value in case of foodstuffs) in return for Germany’s limited sources of payment. It is difficult for the occupying authorities to avoid approaching these problems from a “German” as opposed to a “European” point of view, since they are daily concerned with the great difficulties of rehabilitating German economic life and since they are likely to be judged by Congress and the public on the basis of the short-term results in alleviating the financial burden of occupation. These opposing tendencies should be offset by developing the closest possible cooperation between the occupying authorities and the governments of other European countries with a view to finding the best possible solutions to outstanding problems. Such cooperation should, whenever possible, be carried out within the framework of existing economic cooperation organizations such as OEEC and ECE.

In this connection the problem is further complicated by the joint responsibilities of the Departments of State and Army as well as the Economic Cooperation Administration. In the past the issues which have arisen, as mentioned above, involved the rather narrow view of German interests taken by the Army Department, restricted as it is by the specific purposes for which its funds are appropriated, as against the Department of State’s interest in over-all western European recovery. It remains to be seen what influence the ECA may have and what steps it will take to insure the coordinated effort which is necessary if recovery is to take place. Although it is not to be expected that conflicts of interest will disappear, the mission assigned to ECA and its control over ECA funds available to OEEC countries, including western Germany, should help to diminish the unfavorable effects on the US position in European countries resulting from the overly aggressive manner in which German interests are stated by the Bizonal authorities and the identification of US and German interests to the exclusion of our interests in Germany’s neighbors.

In addition to the policy objectives connected with German and European recovery, there are certain other considerations involved with respect to US policy toward German trade. These arise mainly from general US commercial policy and from occupation programs dealing with decartelization and reparations. One problem which must continuously be dealt with is the dual role we undertake in endeavoring to facilitate German exports while at the same time facilitating US exports. This role prompts criticism from two directions—from US exporters who are concerned that German exports are being “subsidized” by American funds and from foreign governments which believe the US is using the occupation for its own commercial interests. US policy is to avoid using the occupation for commercial advantage, to foster German exports in fair competition with US and other exports, and to give the greatest possible recognition to the importance other countries attach to Germany as a market for their goods.

US policy is to bring Germany into the ITO and GATT or, as a minimum, to obtain most-favored-nation treatment for Germany. Efforts to achieve these objectives at the Geneva and Habana conferences failed but most-favored-nation treatment for Germany has been obtained in connection with bilateral agreements with OEEC participants for ECA assistance. In the meantime, it is our policy to conduct German trade along lines as fully in accord with ITO policies as possible.

[Here follow Sections 2(c) Financial Policy, 2(d) Economic Institutions, 2(e) Reparations, 2(f) Restitution, and 3. The London Agreements. Documentation on financial policy and the currency reform in Western Germany is included in Chapter VI, while detailed documentation on the reparations problem and restitution is presented in Chapter III, Part A. Documentation on the London Conference on Germany appears in Chapter I.]

c. relations with other states

The policy of the US with respect to Germany is vitally affected by the policies and behavior of the other occupying powers, both individually and collectively, and by broad considerations of general international policy, to which purely German questions are necessarily subordinated. The present orientation of US policy with respect to Germany is largely due to long-continued and persistent Soviet obstruction and unilateralism. The original intent of the US to implement faithfully the cardinal features of an agreed quadripartite policy has been thwarted by the clear Soviet purpose to incorporate Germany within the Soviet economic and political sphere. Soviet opposition both in the CFM and the ACA to virtually every proposition put forward by the US, UK and France on basic German problems has, for the time, blocked further progress toward a general settlement. The US by necessity and not by choice is for the present seeking to achieve its objectives in close collaboration with the UK, France and other western states which have a peculiar interest in German affairs, rather than through the established quadripartite agencies.

(a) Soviet Policy. —Soviet policy with respect to Germany is directed toward a maximum objective, namely the complete inclusion of Germany within the Soviet sphere of influence. The minimum objective is the retention of firm control over the eastern zone, including Berlin if possible, and extension of political influence in western Germany. To these purposes may be added the short-term but pressing need to exploit German resources so as to relieve the urgent requirements of the Soviet economy. The constant element in a policy which has had to consider Soviet needs, a strong if latent German hostility, and Anglo-American opposition, is the fear of a revived German state which would combine formidable economic strength with a hostile political orientation.

Politically the USSR has sought to insure that the Soviet military administration should operate through a carefully selected German bureaucracy strongly oriented toward Soviet policy and Communist ideology. The (Communist-dominated) Socialist Unity Party (SED) is the chief agent of political control, assisted by the so-called mass organizations (peasants, women, trade unions, youth), also Communist-controlled. Denazification, now virtually completed in the Soviet zone, has been conceived not as a formal device for eliminating the influence of former Nazis but as a means for the liquidation of social elements hostile to Soviet-Communist policy. Land constitutions have been adopted which provide uniformly for highly centralized governments easily controlled by the SED and its affiliates. The SMA maintains an effective stranglehold on all political activity by its constant threat of coercion and infringement upon civil rights. More recently the Soviet authorities have sponsored the People’s Congress movement, ostensibly representing all Germans and devoted to the exploitation of the popular issue of German unity. It has recently circulated petitions preparatory to a plebiscite on this question. OMGUS has forbidden the Congress or its organ, the People’s Council, to operate in US-controlled areas on the ground that it is entirely unrepresentative of the German people and, in fact, merely a vehicle for popular agitation by a highly vocal minority. OMGUS has also refused the request of the Communist Party in the US zone to change its name to the Socialist People’s Party, a request having the obvious intent of obscuring the true character of the organization.

The USSR claims to be the sole protagonist of German unity, decrying western “federal” proposals as attempts to split the German nation and thwart the national will. The US desires a politically unified Germany based upon democratic assent and avoidance of a dangerous and anti-democratic degree of centralization. But it has become clear that as long as the USSR remains in occupation of eastern Germany and continues its present tactics of Communist penetration, the western nations cannot obtain a unified Germany on any terms which would not facilitate an extension of Communist control.

Soviet authorities set up an Economic Commission in June, 1947 for the Soviet zone, which was reorganized and expanded in February, 1948. This may be viewed as a necessary device for economic coordination, but may also be considered as a counter-move to the establishment of the bizonal Economic Council. Together with the People’s Council, created in March, 1948, it may point to a Soviet intent to create a German government in the eastern zone in the near future, perhaps as a reply to the establishment of a provisional German government in western Germany. Such a government would doubtless claim rightful jurisdiction over all Germany, and would constitute a highly centralized mechanism of authoritarian control. It would be utilized to expand Soviet influence so far as possible in western Germany, where the USSR is deeply concerned with extending its political and economic control. Soviet-Communist propaganda incessantly stresses the theme that western projects such as the bizonal organization, ERP and plans for interzonal coordination are based upon intention to divide and exploit Germany while German salvation depends solely upon cooperation with the USSR.

In regard to the German economy as a whole, the Soviet Union has consistently obstructed all measures for economic unity, while posing as the champion of German political unity. While permitting a limited amount of essential trade with the Western zones, it has fallen far short of the provision of the Potsdam Agreement “to ensure … the equitable distribution of commodities between the several zones so as to produce a balanced economy throughout Germany and reduce the need for imports.” Loss of the Eastern agricultural regions of Germany has made it impossible for the German population of the Western zones to obtain even a fraction of their normal food supply from the normal sources and has made the ration level in those areas heavily dependent on imports financed by the United States. The Soviet Union furthermore has refused to allow access to the area either to Germans or to representatives of the other occupying powers. Over the past two years, it has treated its zone to all intents and purposes as an annexed territory, separated from the rest of Germany, and has gradually integrated its economy into the economy of the Soviet orbit.

The German question has, within the past year, become deeply involved in the “cold war” between the east and the west; Soviet behavior in quadripartite negotiations has become more intransigent. The Allied Control Council, virtually moribund since early in 1947, has resolved no major disagreements since that date. The Council of Foreign Ministers has likewise been brought to an impasse by the behavior of the Soviet representatives. Since March 20, 1948 the USSR seems to have embarked upon a course of action designed to drive the western powers from Berlin and to abrogate by unilateral action the basic agreements for four-power control of Germany. Beginning on March 30, the USSR began to impose a series of crippling restrictions upon the western zone communications with Berlin in complete disregard of quadripartite agreements for the joint occupation of the city and arrangements entered into by the military commanders for access to Berlin from the western zones. The US has expressed its firm intention to remain in Berlin in accordance with existing quadripartite agreements and to maintain the ACA. Berlin has become an important symbol of the determination of the US and the other western powers to contest the Soviet claim to mastery of Germany and of Europe; withdrawal would be a great blow to western prestige in Europe and to the strategic position of the US and its associates vis-à-vis the USSR. In the present tense situation the continued occupation of western Germany and of Berlin by military forces of the western powers is a matter of vital importance and may entail serious political and military decisions in the near future.

Soviet intentions as to the future are not entirely clear, but it seems probable that the USSR has decided that: (1) there is no hope of interfering seriously with the operation of the ERP in western Germany, or political measures for the consolidation of western Germany, through quadripartite means; (2) the Soviet zone must be placed under permanent control of a well organized German group, loyal to the USSR, and supported by police state measures; (3) the People’s Congress and People’s Council should be the main instruments in the formation, at an appropriate moment, of a provisional German government with pretensions to authority over all of Germany; and (4) in order to prevent Allied interference with this process of political consolidation, the ACA should be abolished or nullified by boycott and pressure should be exerted upon the western powers either to force them out of Berlin or to cause them to relinquish their plans for a German government in the west.

At the present time the USSR seems definitely to have embarked upon a struggle with the western powers for the control of Germany and the shaping of its future. A Soviet-dominated Germany is considered of crucial importance in the broad Soviet scheme for a Communist-controlled Europe subject to Soviet influence. Soviet unilateralism and intransigence have thus confirmed the de facto partition of Germany and made this area a major theatre in the “cold war” with the western powers. To attain its ends the USSR has not hesitated, of late, to appeal to the reviving forces of German nationalism. The Soviet authorities have authorized a new National Democratic Party, embracing many former Nazis, and may be building up the cadres of a new German army on Soviet territory. Soviet-Communist propaganda depicts the USSR as the sole friend of the German people in anticipation that a Soviet-sponsored government at Berlin will exercise a powerful attraction upon western Germany and reduce the status of a western regime to that of a rump or secessionist government.

[Here follow sub-sections (b) The United Kingdom, (c) France, and (d) Relations With International Organizations.]

d. policy evaluation

The US has endeavored since 1946 to inaugurate procedures leading to negotiation of a general peace settlement for Germany. Proposals which had, in all essentials, been agreed upon by the three western powers were rejected in both the 1947 Moscow and London meetings of the CFM by the USSR. The main issue between the USSR and the western powers, particularly the US, was the role to be assigned the other Allied governments in the preparation of a German peace treaty. The US held that all of the Allied countries, large and small, were entitled to participate at appropriate stages in the preparation of the treaty, a view in which the other western powers concurred. The USSR wished to confine the drafting and final formulation of the treaty to the four CFM powers concerned, while closely restricting the rights of consultation and participation to a limited number of the other Allied governments. Prolonged attempts to arrive at an agreed procedure, both at Moscow and London, met with failure.

Another major difficulty was the definitive settlement of German frontiers. The US has always held and still maintains that decisions on frontiers must await the peace settlement. It has proposed the creation of international boundary commissions to examine all boundary claims and problems and make recommendations to the CFM. The USSR has repeatedly insisted that the present administrative boundary between Germany and Poland, as fixed at Potsdam, must be considered as final and is not open to review. The US, while recognizing Poland’s right to territorial compensation from Germany, stands upon the Potsdam provision that “the final delimitation of the western frontier of Poland should await the peace settlement.” It is concerned that the frontiers of Germany should not become “impenetrable barriers” to trade, nor dangerously exacerbate irredentist sentiment. In particular the US believes that a revision of the present Oder–Neisse line to Germany’s advantage is essential in view of the present economic-demographic situation of Germany. We have agreed to support the claim of the USSR to northern East Prussia in the peace settlement. In the west the US believes that, with the exception of the Saar, only minor border rectifications to eliminate existing anomalies with respect to trade or communications should be considered; it is opposed to territorial cessions as compensation for war damage or loss. The US has approved the detachment of the Saar district from Germany and its economic integration with France.

There is little likelihood of a definitive German settlement in the immediate future. The London Agreements, if and when implemented, might be considered in the nature of a provisional settlement governing western Germany. The US maintains that responsibility for failure to reach a final German settlement must rest at the door of the USSR, which has consistently obstructed agreement by insisting upon conditions unacceptable to the three western powers. These powers are proceeding with measures which they consider indispensable for the areas of Germany under their control. The US holds that all such measures are of a tentative and provisional character pending the time when a general settlement can be agreed upon by all the powers which at present exercise sovereign rights over Germany.

After three years of occupation the chief premise upon which US policy with respect to Germany was originally based has broken down. This was the assumption that German problems, both immediate and long-term, were susceptible to solution on the basis of four power agreement. It has become clear that such agreement is unlikely in the early or foreseeble future in view of the obstructive and intransigent attitude of the USSR with regard to German and European problems. The US has been confronted with two alternatives. It could accept stalemate without action and thus permit Germany to sink deeper into political and economic chaos, with the attendant threat to the general welfare and security, or it could concert a provisional settlement of German problems together with those governments which were willing to reach agreement in the common interest. The US has chosen this second alternative.

US policy must be judged in the light of present realities. No ideal solution embracing the whole of Germany is at present possible, German policy is of necessity influenced by over-riding policy with respect to western Europe. Such policy dictates that Germany must not be drawn into the Soviet orbit or reconstructed as a political instrument of Soviet policy. It requires that Germany be brought into close association with the democratic states of western Europe and that it be enabled to contribute to and participate in European economic recovery. These objectives clearly cannot be achieved through quadripartite action. Hence it has become necessary to embark on an extensive program of reconstruction in association with the UK, France and the Benelux countries which have a special and immediate concern with western Germany. The London agreements mark the first broad, constructive step toward a resolution of the German problem since Potsdam. They are of necessity provisional and in no way preclude ultimate Allied agreement on a final settlement. But it is believed that the London program, when effectuated, will mean substantial progress toward such a settlement.

Despite all efforts since the end of the war Germany remains a major unresolved problem of US foreign policy. Such objectives as demilitarization, denazification and punishment of war criminals have been in the main achieved. But in matters of basic reconstruction there have been only beginnings, or tentative and provisional measures. Germany still lacks political or economic unity, or any vestige of a national government. The German economy operates at a dangerously low level and the bizonal area survives only through subsidies furnished mainly by the US. Democratization of political and cultural life has proceeded at a painfully slow pace. The determination of frontiers and of long-range controls upon German economic and political life still awaits a peace treaty. The re-integration of the German economy into that of Europe will only be achieved with the working out of the European Recovery Program. The end of the occupation is not in sight, and Germany will continue as a major concern and responsibility of the US for a period as yet unforeseen.

Serious difficulties have arisen in the determination and application of US policies because of the division of major responsibility between the State and Army Departments. The Army, through EUCOM and OMGUS, is entrusted with full control and administrative authority in Germany; the State Department seeks to discharge the duty assigned to it by Presidential directive of shaping US policy with respect both to the internal evolution of Germany and its relations with other countries. OMGUS is inclined to view the occupation as a local operation and is conscious of its immediate responsibilities. It is inclined to resent the intrusion of the State Department or its representatives in military government operations within Germany to the extent that it becomes difficult for the Department to exercise its proper function of policy guidance. The Department is chiefly concerned with the emergence and evolution of a German commonwealth and economy along lines of peaceful achievement and service to a democratic Europe and the fitting of Germany into the broader framework of policy. The two concepts are not incompatible but give rise to different approaches to identical situations. Awareness of this difficulty, necessarily inherent in a prolonged military occupation, was responsible for the earlier decision that the State Department should assume the civil administration of the US area in Germany, but the exigencies of US–USSR relations caused a reversal of this decision. The problem, however, remains and becomes more acute as German revival becomes increasingly a matter of concern to neighboring countries. The situation requires more effective Army–State cooperation both at the Washington policy-making level and at the point of day-to-day implementation of policy in the field.

Failure to achieve a definitive solution of the German problem which is central to a general European settlement has given rise to a critical situation. Germany has become an area of strategic importance in the East-West conflict over the shaping of Europe’s future. The significance of current developments rests primarily in the fact that the US, with its associates, has seized the initiative in Germany. This has resulted in vigorous Soviet counter-measures. The rights and prerogatives of the western powers in Berlin are being challenged and every effort is being made to make their position there untenable. The evolution of the London program for western Germany can be expected to meet with Soviet protest and opposition at every stage. The success of the program will depend upon other uncertain factors—the rapidity of economic recovery, the cooperativeness of the Germans and the support of the French who have not been won over to whole-hearted approval of the agreements and may seek to modify them in further negotiation. There is a definite risk that implementation of the program will widen and confirm the cleavage between the western powers and the USSR and effect a virtual partition of Germany for the time being. The decision of the US to embark upon a program entailing these risks and uncertainties has been reached with full realization of the difficulties involved but with the conviction that even greater risks and dangers would result from failure to act promptly and effectively in dealing with urgent German problems.

Future developments in Germany cannot be predicted with any degree of assurance. There will doubtless be continued tension in US–USSR relations which would reach a critical stage if the USSR should resort to coercive measures to expel the western powers from Berlin. The US is now completely committed to a far-reaching program of political and economic reconstruction for western Germany, with the door always open to Soviet collaboration in such a program if extended to all Germany. The next few years will be of critical importance in the working out of the London agreements and the ERP in Germany, with Soviet antagonism a constant factor, even if a major crisis is avoided. Unless there develops a totally unanticipated change in the Soviet attitude toward the west, and unless Soviet designs in Germany are drastically modified, there seems to be little prospect of a general German settlement in the near future. Germany will probably remain divided. The Soviet zone and the west will then continue to develop, economically and constitutionally, in divergent directions, although the forces of economic interdependence and German national sentiment will operate in some measure to counteract disunion. Germany will remain an important, perhaps the most important area of conflict in the struggle between east and west for the shaping of the new Europe.

1. The Department of State’s Policy Statements were concise summaries of current United States policy toward a country or region, the relations of that country or region with the principal powers, and the issues and trends in that country or region. These Statements were generally prepared by ad hoc working groups in the responsible geographic and functional offices of the Department of State and were referred to appropriate diplomatic posts abroad for comment and criticism. The Statements were periodically revised.
2. For documentation on the breakdown of quadripartite control in Germany during the first six months of 1948, see pp. 867 ff.
3. Documentation on the Fourth Session of the Council of Foreign Ministers in Moscow, March 10–April 26, 1947 and the Fifth Session of the Council in London, November 25–December 16, 1947 is included in Foreign Relations, 1947, volume ii .
4. Regarding the agreement under reference here and other documentation on the economic unification of the British and American Zones of Occupation in Germany in 1946, see Foreign Relations, 1946, volume v .
5. Documentation on the revision of U.S.–U.K. Bizonal Economic Organizations in February 1948 is included in Chapter I, Part A.
6. Documentation on the London Conference on Germany under reference here is presented in Chapter I.
7. The reference is to document TRI/16 (Final), May 26, p. 285, subsequently included as Annex C to the Report on the London Conference on Germany, June 1 (p. 309).
8. First formally circulated at the Second Session of the Council of Foreign Ministers at Paris in 1946 as document CFM (46) 21, April 30, 1946, Foreign Relations, 1946, vol. ii, p. 190.
9. Documentation on the attitude of the United States toward the Brussels Pact and the interest of the United States in a North Atlantic Treaty Organization is included in volume iii .
10. Documentation on the European Recovery Program, including materials on the role of Western Germany in that Program, is presented in volume iii .