Foreign Relations of the United States, 1949, Council of Foreign Ministers; Germany and Austria, Volume III

740.00119 Control (Germany)/3–1749: Telegram

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

top secret
us urgent
niact

Berlin, March 17, 1949—noon.

390. Military Governors at meeting Frankfurt yesterday agreed on joint press release re Berlin currency changeover. Copy will be sent Soviet Headquarters to arrive just before it is made public. It was subsequently agreed that release of statement would be made at 1800 hours 20 March, Berlin time. Text of release as follows:

• “1. The US, the UK and French Military Governors, after consulting with the responsible German authorities in Frankfurt and in Berlin, and in response to the unanimous resolution of the city assembly on the 4th November, 1948, have today decided that as from March 20 the East mark shall cease to be legal tender in the Western sectors of Berlin.
• 2. The currency reform in the Western zones in June ’48 did not disturb the position in Berlin. The reform in the Soviet zone was, however, made applicable to Berlin as well and the East mark was declared to be the sole legal currency in Berlin. It was in these circumstances that the Western powers were obliged to introduce the West mark into their sectors. However, in their desire to facilitate four-power agreement on the problem of Berlin the Western powers adopted arrangements under which both the West mark and the East mark were legal currency in their sectors.
• 3. These arrangements were designed as a temporary expedient in the hope that agreement for a single currency under four-power control in Berlin would quickly be achieved. Failure to reach this agreement coupled with the splitting of the city administration and continuance of the blockade have meant that these arrangements have become inconsistent with the smooth ordering of economic and financial life in Western sectors, and grave economic and social injustices have resulted. Neither the Western powers nor the Magistrat have any control over the supply of East marks and the currency situation in the Western sectors has to that extent been dependent on the Soviet authorities. At times there has been a great shortage of East marks, and the payment of wages and salaries has been delayed for considerable periods. In addition, the unequal distribution of the two currencies among the population has caused considerable hardship. Some firms, especially those dealing in essential commodities, have been obliged to deal in East marks only, whereas others have sold their products almost exclusively for West marks. With the West mark as the more valuable currency, exchanging for about 4 East marks, real wages have no longer depended on a workers ability or energy, but on the accident of whether his employer has been in a position to include a substantial proportion of West marks in his wage packet. These inequalities have thrown increasing strain upon the economic and social structure of the city which is in no position to bear them easily.
• 4. The passage of time has increased these inequalities. The Western powers would long ago have taken action to correct them, but for their desire not to prejudice the efforts of the SC, to work out a satisfactory solution to the Berlin currency and trade problems. They have, however, during the period since October ’48, when this problem has been before the SC, consistently reserved their right to take such measures as might be necessary to maintain their position in Berlin. Now that the Committee of Neutral Experts, which was set up by Dr. Bramuglia to examine the problem of currency and trade, has reported the failure of its efforts,¹ the Western powers cannot delay putting into effect measures which the economic and financial situation in Berlin has rendered long overdue”.

Riddleberger

1. In telegram 400, March 18, from Berlin, not printed, Riddleberger reported that the words “the failure of its efforts” had been omitted from the press release. In its place was substituted the phrase “that further work by it at this stage does not appear useful.” (740.00119 Control (Germany)/3–1849)