740.00119 Control (Germany)/1–349: Telegram

The Acting Secretary of State to the Embassy in the United Kingdom

top secret
us urgent

41.1 For Holmes. It will undoubtedly be necessary for you to take leading part with Knapp in discussions with Brit and Fr on general approach to be adopted in Western reply to UN Technical Committee and you are requested to lend Knapp full support as needed.

Following are firm views and instructions agreed by State and Army to which you should closely adhere and which if necessary should be brought to attention of Bevin and Schuman:

After carefully considering Brit and Fr comments on experts’ recommendations we still believe approach outlined in Niact 47922 is preferable one, namely, that Western experts’ reply should indicate that basis for applicability of draft recommendations is lacking. Plan formulated by Tech Com is not designed to fit current situation in Berlin caused by Sov illegal actions. As a result of Soy steps in splitting city administration we do not consider that conditions recognized by Tech Com as necessary preliminaries exist. In particular with reference to para 6 of covering letter3 there is little possibility of a resumption of more direct responsibility by four occupying powers or that under present political developments of Sov creation functions can be transferred to bodies composed of German residents in several sectors of Berlin.
You are requested to urge these considerations on Brit and Fr once again as representing only realistic attitude toward experts’ report. Reply of this kind need not constitute outright rejection since it could be stated that once conditions are restored by Sovs making possible unified city administration and sincere quadripartite control, we would be willing to discuss a currency proposal related to these assumptions.
We cannot accept basis assumed in Tech Com report or agree to offer comments implying recognition of this basis, since to do so might commit us to dangerous concessions which could later be used to disadvantage our economic position in Berlin. It must be remembered [Page 650] that as far as we know Sovs are totally uncommitted re Tech Com functions and its draft proposal.
If approach in para 1 fails with Brit and Fr we are prepared to agree to submission of comments and recommendations substantially along lines outlined signal referring this cable sent you through military attaché4 which envisages possible acceptance Sov zone mark on basis of its autonomous use in three Western sectors.
We can only agree to reply and counter-proposal of this character on one important condition. This is that Brit and Fr give formal agreement to establishment of a western B mark with full legal tender status in Western zones by Jan 30 as legal tender Western sectors if by that date there has been no Soviet agreement on basis of our counterproposal. We are convinced this step is long over-due and is urgently necessary for protection Western sector economy. Brit and Fr suggestions re increasing present ratio B mark to Sov zone mark would be a mere palliative which would accentuate already dangerous currency drain.
Further condition is that reply to Tech Com state that proposal mentioned in para 3 (a) above constitutes only basis for possible use Sov zone mark and that if agreement is not obtained soonest Western Govts because of deteriorating financial situation in Berlin will be compelled at a very early date to resort to complete Western B mark changeover, making full use of our reservation to protect our position in Berlin.
We would prefer that Western experts confine themselves to written reply but have no objection to brief oral presentation being made to Tech Com on clear understanding that Com will not attempt negotiation (re your Niact 14 Jan 35).

  1. Repeated to Paris as 28 and Berlin as 21.
  2. Not printed.
  3. Not printed; paragraph 6 stated that the implementation of the Technical Committee’s report would necessitate the resumption of responsibility by the four occupying powers in Berlin. The full text of the covering letter is printed in Department of State, Documents and State Papers, vol. i, May 1949 pp. 771–772.
  4. Transmitted in WAR 82237, supra.
  5. Not printed.