740.00119 Control (Germany)/3–2349

Paper Prepared by the Acting Director of the Office of German and Austrian Affairs (Murphy)1

top secret

US Policy Respecting Germany

basic requirements in germany

Since the cessation of hostilities in 1945 the US has sought, and will continue to seek, the establishment in Germany of conditions conducive to a peaceful development of that country and its association [Page 119] with the community of free nations. From the US standpoint the basic requirements for the attainment of these conditions remain essentially the same whether the program is susceptible of application of [to?] all of Germany or whether, by reason of forces beyond US control, the program must be restricted to western Germany.
In summary, these basic requirements are as follows:
Germany will not be permitted again to become a threat to the peace and security of the world.
The US will actively oppose the revival in Germany of Nazism, obnoxious German nationalism, and the development of communist totalitarianism. Without according support to any individual party, the US will encourage activity by all political parties subscribing to the principles of political democracy. It will also encourage free trades unions.
The US will promote the extension throughout as much of Germany as is possible of a governmental system derived from the people and subject to their control, operating in accordance with democratic electoral procedures and dedicated to upholding the basic civil and human rights of the individual. While opposed in principle to an excessively centralized government, the US does not regard as of major importance the degree of centralization or decentralization adopted at the present juncture in the organization of German political life as long as the decision is made freely by the German people in accordance with democratic processes.
Recognizing that a prosperous Europe requires economic contributions from a productive Germany, the US regards economic recovery in Germany as necessary for recovery throughout all of Europe if a general European community can be created, or, if this cannot be achieved, at least for the recovery of the European nations operating under ERP.
The US favors speedy termination of reparations from Germany through removal of capital equipment, in order to make possible prompt return to normal economic relations. The US will press for the adoption to the greatest extent possible of a policy to eliminate only industries which constitute a security hazard and in particular will resist prohibitions and restrictions proposed primarily for reasons of economic competition. In the economic field it will approve security guarantees which are simple and workable and at the same time will have a minimum impact on the normal German economy.
As a general principle, the US has advocated the reconstitution of Germany as a free and independent entity and its eventual participation on an equitable basis in the community of nations. To that end, the US has consistently urged the prompt conclusion of a peace settlement for Germany.

Germany Within Europe

The US Government recognizes that no approach to the German problem can be adequate which deals only with Germany itself and ignores the question of its relationship to other European nations. In the long run it will not be satisfactory merely to restore Germany as a [Page 120] sovereign entity among similar sovereign entities in Europe, even though Germany may be saddled with special obligations concerning demilitarization. Some new relationship must be found between Germany and her European neighbors other than that which prevailed before the recent war. The US Government therefore considers that any promising approach to the problem of Germany’s future status must address itself not only to the arrangements which are to be made within Germany but also to the conditions which are to govern Germany’s relationship to the remainder of the European community.
Plainly, Germany cannot be fitted into the European community in a satisfactory manner until there is an adequate framework of general European union into which Germany can be absorbed. The other countries of Europe cannot be expected to cope with the problem of Germany until there is a closer relationship among them than the existing one. If this closer association of the other European countries were not called for by other requirements, it would be called for by their common interests in the handling of the German problem, alone. While the United States considers that the form and pace of the movement toward European union are predominantly matters for the Europeans themselves, it will, as a matter of principle, support and encourage such a movement wherever it can.
The tempo and method of the relinquishment of present external governmental authority in Germany and the realization of this objective must be geared to the development of such a structure and such integration. It would be against the interest and the policy of the United States, and an obstacle to this objective, to recreate the prewar completely segregated type of political and economic unity of the German people, ready for use—as it was twice used during the brief seventy-five years of existence—in another devastating attempt by itself to dominate Europe and the world, or in an attempt through its central position and potential strength to regain its 1939 frontiers and position of dominance by playing off the East and West against each other.
The United States recognizes from the experience of the past that once such a segregated political and economic unity were recreated, paper limitations on armaments and industry, no matter how necessary it seems now to adopt them, might well once more prove to be ropes of sand and create merely a delusive sense of security. The only enduring security in the future, so far as the German people are a factor in it, must lie in the renewed vitality of certain of their great cultural traditions of the long period prior to their segregated economic and political unity, together with a radically new reciprocal approach by the German people and the other peoples of Europe on a meeting ground of the mutual benefits of a strong common structure of free Europeanism.
With regard to the eventual inclusion of Germany into a system of European states, the United States Government considers that the terms of such inclusion should not, in the final analysis, be unequal ones which would impose unilateral handicaps and restrictions upon Germany. This could easily be reconciled with the security interests of other European powers if the general terms of European union are such as would automatically make it impossible or extremely difficult for any member, not only Germany, to embark on a path of unilateral aggression. However, the US Government recognizes that progress toward this end must be gradual and must be governed both by the degree to which the German people themselves take a constructive and cooperative view of their responsibilities as a member of the family of European nations, and by the framework and conditions of association offered by the other European governments.

Franco-German Rapprochement

A most important step in the direction toward European Unionism is the relationship between France and Germany. Stability in Western Europe will be furthered by confident and practical cooperation between Germany, or at least Western Germany if Soviet restraint on Eastern Germany makes this limitation necessary, and France. The efforts to effect Franco-German rapprochement after the First World War failed although sincere elements on both sides made the attempt. Bitterness and chauvinism sabotaged those enlightened efforts. That failure should not deter the United States from fostering in every practicable way the idea of close Franco-German collaboration. Many elements in both countries eagerly desire it and it is often asserted that without it there will be no possibility of peace in Europe.
Therefore the US should work for reasonable solutions of problems which if handled on a vindictive basis will only create a climate where distrust and resentment militate against friendly Franco-German relations. It should be realized that if this objective is to be accomplished, it will require an extended period of time during which the chances of success will often fluctuate with public reactions to the treatment of current issues.

German Recovery and Security

The United States Government regards the problem of economic recovery in Germany as part arid parcel of the problem of general Western European recovery. It will continue to judge problems of aid to Germany and to other European countries solely from the standpoint of that overall objective. It has no intention of favoring any one country over another or of trying to make recovery more rapid in one country than in another through the allocation of aid. On the other hand, it notes that foreign aid is only a marginal factor in the recovery process, and that the main factor is the will and energy with which the [Page 122] people apply themselves to the task of recovery. The rate of recovery in Germany must therefore rest primarily on the efforts of the Germans themselves. To the extent that they bring about recovery through their own efforts, the United States has no intention of attempting to deny to them the fruits of their effort by attempting to slow down the pace of their recovery. Europe needs production everywhere, and the United States cannot use its influence to delay or hamper the process of recovery.
On the other hand the United States Government recognizes and is prepared to accept and face the consequences of this attitude upon the security of Germany’s neighboring states. It has no intention of permitting Germany, or any nation, to become again a threat to peace-loving neighbors. Accordingly, it does not propose to accept any arrangement, provisional or permanent, which would permit Germany to become a threat to collective security in violation of the principles enunciated in the United Nations charter. Until the present tense and insecure situation in Europe has been replaced by a satisfactory measure of international confidence and balanced normal relationship, the United States Government does not propose to withdraw from Germany.
An additional consideration relating to the security of Germany’s neighbors is the possible utilization of Germany by another power for the purposes of aggression. In this respect the United States clearly recognizes the security threat inherent in the industrial potential of an economically recovered Germany. The United States was confronted with a similar consideration, on a much broader scale, when it was in the process of reaching a decision to make the tremendous outlay required from its natural resources to implement the European Recovery Plan. Although the United States recognized at that time that one or more nations affiliated with OEEC were, and for some time to come would continue to be, subject to possible aggression, the United States did not withhold economic aid because of such security consideration. A similar attitude has been adopted by the United States with respect to the possibility that the military potential of the German economy might fall into the hands of an aggressor. From a short-range viewpoint, the vulnerability of Germany to aggression is considered by the United States to be no greater than the vulnerability of the other continental nations of Western Europe. From the long-range viewpoint, the ultimate establishment of a satisfactory military posture by the nations of Western Europe, coupled with economic recovery, will, in the opinion of the United States, diminish materially the possibilities of aggression throughout all Europe, including Germany. Therefore, the United States must adopt the point of view that in general the reestablishment of a viable German economy along [Page 123] the lines previously stated should not be impeded by restrictions in specific fields of industry, which are based primarily upon the thesis that Germany might be used by another power for purposes of aggression.
It is the considered view of the United States Government, however, that provision must be made for the external security of Germany and that the German state, whether unified to include all zones of occupation or composed of only the Western zones, must eventually be considered as a part of the general European security system. The extent of participation in this system would, of course, be limited to those countries who are free of foreign domination and who have evidenced a desire to participate with neighboring states to further the common interest of the group. It is inherent in any such system that the members thereof bear a common, joint responsibility for the security of members within the system. It is not the intention of the United States Government to force upon the members of the European defense system, a proposal that Germany should be permitted to rebuild her war potential or to re-create her armed forces. Bearing in mind the responsibility of the members of a European Defense system, it is the view of the United States Government that a decision on such a proposal must result from the considered judgment of the group. In general, the United States would be against forcing or even permitting any rearmament of Germany unless the principal members of the Western European Defense system should, under some changed conditions not now predictable, reach the conclusion that some degree of rearmament of Germany would promote rather than impede the security of Western Europe as a whole. However, in making this determination, the group must bear in mind that the security interests of the United States are involved. The United States Government will carefully consider the implications on the security interests of the United States of the group’s judgment as to Germany’s participation.

Obstacles to Four-Power Agreement

In quadripartite negotiations the US has consistently sought to reach agreement for the fulfillment of its basic requirements discussed in the opening sections of this paper. It was believed that the Potsdam Agreement represented a first step in this direction. However, the Soviets quickly proceeded to nullify this program in ACC deliberations and by their unilateral policy in the Soviet zone. They continued with mass reparations removals and the seizure of current output, thus frustrating the attainment of economic unity. They obstructed the adoption for all of Germany of measures necessary to stem economic and financial chaos; they applied ruthlessly communist techniques to their zone ultimately succeeding in establishing a police state and in [Page 124] fundamentally altering the whole pattern of industrial ownership and land tenure. The US sought repeatedly to redress the situation and bring about observance, of the basic principles above through prolonged negotiations at the Council of Foreign Ministers.
The chief obstacles which led to failure were:
Soviet insistence on uncontrolled exaction of reparations from the eastern zone both by removals of capital equipment as well as deliveries from current production; Soviet failure to adopt a joint export-import program for all of Germany; thus realization of economic unity in Germany was made impossible.
Soviet unwillingness to agree to quadripartite supervision of political activities and of elections throughout Germany as a whole and their endeavor to create a highly centralized state susceptible of control by a single party.
Soviet virtual rejection of the Byrnes treaty2 by insistence on prior agreement on extraneous and controversial issues, such as reparations, denazification, land reform, and four power control of the Ruhr.
Soviet refusal to examine the question of Germany’s eastern frontiers.

The London Program

As a result of Soviet obstruction in the ACC and the CFM an intolerable situation developed whereby Germany, lacking unity or a coordinated control, was rapidly being reduced to a state of economic chaos, distress and despair. The US and UK had already taken a first corrective step through the nominal economic fusion of their zones in January 1947, but it was their opinion that a comprehensive constructive program was required in the zones for which the Western nations were responsible in order to commence in the West the fulfillment of the basic principles which could not be applied to all of Germany due to Soviet obstruction. While there were certain differences in French views on methods of proceeding, the French appeared to share the same general objectives as the US and UK. After the breakdown of the London CFM in December 1947 it was decided by the three Foreign Ministers of the Western powers to hold talks in London in order to formulate a constructive and unified program for Western Germany. The talks which were held, with participation of Benelux representatives, from February until June 1948 resulted in six-power agreement on a broad program, the elements of which at present are in various stages of implementation. The major points of the London Agreements are contained in Annex “A.”3
[Page 125]

present position


Having sought to no avail a settlement for all of Germany in accordance with basic US principles, the US, in concert with five Western European nations, has proceeded with a constructive program for the economic and political rehabilitation of Western Germany. This program has met with a substantial measure of success, which has been particularly manifest in increased economic production since currency reform. If not squandered through disagreement among the Western allies, the opportunity exists for the establishment of a stable democratic government in Western Germany. Under such circumstances there would be a real prospect for the successful assimilation of Western Germany into Western Europe, first economically and in due course perhaps politically as well. The resistance of the Western European countries to such a development is in fact likely to be less in the case of a manageable portion of Germany rather than with a united Germany of preponderant magnitude and uncertain orientation. As a result of the London program, Western Germany has already been included in the area benefiting from the European Recovery Program and potentially under the protection of the North Atlantic Pact.
Because of the split of Germany, for which the Western allies were in no way responsible, they have been obliged to take and retain the initiative with respect to by far the larger part of Germany. Even though the division of Germany may prevent an all-German settlement, developments in Western Germany will continue to exercise an influence on Eastern Germany. It may be expected that the establishment of a stable and orderly democratic political organization in Western Germany with a reasonably prosperous economy, will exert an inevitable magnetic force on Eastern Germany and make even more difficult Soviet control of that area. Furthermore, the attachment of the Western German population to a free and orderly system of government is already causing many Western Germans to question the value of German unity on uncertain terms. In as much as the Western German arrangements embody basic principles of US policy toward Germany, the development of Western Germany does not foreclose possible agreement on all of Germany which, to be acceptable to the US, must incorporate the same essential requirements. As long as the Western German system continues to move forward, the bargaining position of the Western allies is correspondingly strengthened in any negotiations with the Soviets. Successful fruition of our basic principles in Western Germany is the best guarantee that Germany, if it is to be reunited, will be restored along lines compatible with US policy. [Page 126]

Execution of Western German Arrangements

The Western German arrangements which at present are in various stages of implementation are the result of a Six-Power Agreement concluded June 1948. Unless the other parties are convinced that there are cogent reasons for a modification or deferment of the program, the US must regard itself as formally and publicly committed. Although considerable disagreements, particularly with the French, have arisen on matters with respect to the implementation of the London program, there is no indication that the French Government or any of the other parties desire to disassociate themselves from the London Agreement. In the case of the French, the difficulties appear to result primarily from the desire of the French Government to obtain at this stage all possible advantages and benefits prior to the establishment of a Western German government and full entry into effect of the program.
The main obstacles with respect to the Western German arrangements concern at present the occupation statute, the principles of trizonal fusion, the military government organization, approval of the draft German provisional constitution, Kehl, territorial reorganization of the German states and occupation zones, reparations, and prohibited and limited industries.
Agreement on the draft occupation statute, with respect to which there are outstanding only a few minor points, has not been reached through failure to agree on collateral issues, e.g., principles of trizonal fusion and Kehl.
With respect to the trizonal fusion principles, a satisfactory formula has not yet been found to ensure the predominant voice of the US in German foreign trade and related matters affecting US financial aid. Moreover, disagreement has developed with respect to the voting procedure for the exercise of reserved powers under the occupation statute, particularly because of the French desire to maintain unanimity as a prerequisite in certain fields. Also, negotiations on military government organization have been obstructed by French endeavors to obtain a prior decision on the reconstitution of the original states of Baden and Wuerttemberg and alteration of the occupation zones accordingly so that the French would occupy North Baden instead of South Wuerttemberg. This would involve, however, US abandonment of its important military installations in North Baden.
The draft German provisional constitution has not yet been submitted for formal approval. However, the three Military Governors several weeks ago transmitted a statement to the German Parliamentary Council pointing out deviations in the present draft from the [Page 127] stipulations of the London principles.4 The German reaction has not yet been received.
With respect to reparations and prohibited and restricted industries, at present there appears to be a good prospect of a satisfactory settlement.
In view of US support of Western Europe, particularly of the British and French, through US security commitments and US major financial contributions, the US should be prepared to use its negotiating power to seek the resolution of these important matters of principle which will so greatly affect not only the establishment, but the effective operation of the Western German government. It must carefully weigh the undesirability of forcing an unwilling agreement at this critical period in European recovery and cooperation against the fact that at present the French, and to a lesser extent the British, are endeavoring to pursue courses which may undermine our basic objectives in Germany. No fixed rules can be established which can provide a mathematical guide to the degree of pressure that should be applied at any point in our negotiations on these subjects, since this must be judged at the time and under the circumstances. The United States must proceed, however, with resolution to use the full extent of its influence to ensure that the London agreements are carried through in such a manner as to provide a workable and effective organization in Western Germany and at the same time in a manner which will necessitate the minimum of US appropriated funds.

The Berlin Situation5

As was made clear when Marshal Sokolovsky walked out of the Allied Control Council on March 20, 1948 after reading a prepared statement denouncing the tripartite London talks, the ensuing Berlin crisis has arisen as a result of Soviet endeavors to thwart a constructive program for Western Germany. The immediate cause of the Soviet blockade measures against Berlin was the currency reform program instituted in Western Germany on June 18, 1948. By these blockade measures the Soviets have endeavored to exert pressure on the Western allies in Berlin in order to bring about if possible their withdrawal from Berlin and also through intimidation to force a reconsideration of London program. By maintaining their position in Berlin through the airlift the Western allies have greatly enhanced their political position and prestige in Germany and have succeeded in creating tension [Page 128] and pressure in the Soviet zone through their counter-blockade. For the present the airlift continues to be a signal success, since the political, morale of the Berlin population is high and it furthermore places the Soviets in the position of being forced to take overt action to drive the Western allies from Berlin. On the other hand it is an irrational and costly enterprise; it would have to be further expanded to restore the Berlin economy to its previous level; it is certainly doubtful that the high morale of the Berlin populace can be indefinitely maintained in the face of serious privations and unemployment. Whatever means must be employed to remain in Berlin, the allies cannot afford to abandon the city under present conditions. Besides the serious setback to the position of the Western powers in Europe that would result from such an abandonment, the fact cannot be overlooked that the courageous attitude of the Berlin population and its voluntary association with the Western allies has reenforced the moral commitment to protect them against unwanted Soviet domination. The Soviets have made it clear in their attitude respecting currency and by their establishment of a hand-picked communist government in their sector what the fate of the city would be should the allies withdraw.
There is considerable evidence to support the view that the present situation as regards Berlin is more to the disadvantage of the Soviets than to the US. In addition to the psychological detriment to the Soviet cause throughout Europe, there is no doubt that the Allied counter-blockade is seriously affecting the economic welfare of the Soviet zone and obstructing economic and political absorption of Eastern Germany into the Soviet bloc. The Soviets are now also faced with a humiliating and effective contrast of currency values within Berlin.
Regardless of these factors, however, the continuation of the blockade with its attendant airlift represents a continued hazard in terms of the risks of serious incidents and possible resulting crises as well as a dangerous over-extension of air force resources susceptible to destruction in event of a surprise Soviet move. The airlift is as well an extremely costly exercise in terms of deterioration of air force material and, of course, in direct financial outlay. In summary, therefore, it may be stated that the lifting of the blockade still represents a major objective of the United States Government.
Assuming that the motives of the Soviets in imposing the blockade were to force the US out of Berlin and to attempt by duress to force a deferment of the Western German program, the question therefore arises whether the US can pay the price of deferment of that program. Deferment of the Western German government is fraught with dangers as it would be difficult to undertake without the danger that the confusion and surrender of initiative accompanying such a course would in actual practice lead to the abandonment of the establishment [Page 129] of such a government. While the United States could possibly afford to accept a deferment of the Western German government for a short and specific period in exchange for the lifting of the blockade, it should not, due to the dangers involved, sponsor such a course.
The United States can and should sponsor the position that since the actual establishment of the Western German government is still several months in the future, ample time remains for a CFM meeting on Germany as a whole prior to the establishment of such a government, provided the blockade is lifted. A possible quid pro quo, of greater importance now than formerly would be the lifting of the Western countermeasures.
If the Soviets are still unwilling to accept the above quid pro quo, the US should be ready to consider abandoning its position of refusal “to negotiate under duress,” at least to the extent of being willing to discuss immediate Berlin problems, although the US could not agree to a Council of Foreign Ministers being held while the blockade continued. This change in position could be justified through utilizing the good offices of the President of the Security Council, since the US has already operated on the principle that discussions through this medium do not violate our principle. The US should also be ready to act in accordance with a Security Council resolution calling upon the Western powers and the Soviet Union to resume direct negotiations, possibly under continuing Security Council auspices. The US could explain publicly, if this was considered desirable, the changed conditions which made entering into such discussions acceptable while the blockade remained. This argument could follow the line that the Soviet blockade had failed in its purpose to drive the Western nations from Berlin due to the success of the airlift, etc., and that their position was such in Berlin that the feeling of duress was no longer upon them.
The Western Allies have not exhausted the full possibilities of their efforts to solve the Berlin Crisis in the United Nations. These possibilities should be fully and resolutely exploited, but in such a manner as not to give any indication of undue eagerness for a solution which would only tend to tighten the Soviet position, which otherwise seems to be one of increasing eagerness. In event of continued failure to arrive at a settlement, the United States should consider ways and means of decreasing the importance of Berlin with a view of possible withdrawal at some later date under conditions which would fulfill, to the greatest extent possible, our obligations to the population of Western Berlin.

Position Regarding Possible Meeting of the Council of Foreign Ministers

In their zone the Soviets have kept approximately equal pace with the Western German program by laying the groundwork through [Page 130] a communist-dominated “People’s Council” for the eventual setting up of an Eastern German government claiming to have authority over all of Germany.6 Both the Western nations and the Soviets respectively have declared their programs to be applicable to all of Germany. As is well known, the London agreement envisaged that the Eastern zone states would be free to subscribe to the Western German constitution as soon as circumstances permit it.
The Western allies are faced with a difficult choice. There is little hope of obtaining Soviet agreement to the type of program which in the US view is the only one that could be safely applied throughout Germany. While the announced Soviet program as contained principally in the Warsaw communiqué of June 19487 is disarmingly innocuous in its advocacy of a “democratic” government, the conclusion of a peace treaty to be followed by the withdrawal of occupation forces, it is patently suspect in its ambiguity. It is difficult to believe, given the differences which have developed between the Eastern and Western zones, that agreement could be reached on such vital specific matters as the following: a unified currency, property relationships including land reform, reparations, Ruhr control, the supply of foreign aid necessary for German’s recovery, etc. Even if compromise solutions were obtained, they would be open to the risk of forcing the Western powers to abandon the initiative they have acquired with respect to by far the larger part of Germany. Furthermore, in view of French views respecting a unified Germany, it is questionable whether the French would agree to according a future all-German government the powers and authority it would have to possess to combat economic deterioration and to resist communist assaults from within and without.
From the US standpoint the following appears to be the preferable course of action:
To proceed with the implementation of the Western German program, recognizing it will not be completed for several months, during which period the Soviets at any time can arrange for a CFM through a lifting of the Berlin blockade;
To offer in a CFM the appropriate essentials of the Western German program as a pattern for all of Germany;
In the event of non-agreement, to seek in the CFM a modus vivendi with the Soviets under which the separate parts of Germany can co-exist and profit from mutual exchange, Berlin being included in such an arrangement which would make possible the continued four-power [Page 131] occupation of the city, the reciprocal lifting of transport restrictions, and trade between Berlin and the different parts of Germany.8

Paper Prepared in the Department of State9

top secret

the problem

To analyze the possibilities and implications of German and Western European integration.


The natural and necessary development of Germany, particularly with the establishment of a provisional German government, is toward the revival of a political entity with increasing attributes of sovereignty. It would be neither desirable nor practicable to base long-run policy upon suppression and continuing detailed control of Germany. Our policy should be toward developing a Germany which could be trusted to be a democratic, responsible but not dominating member of society. A revived Germany could take one of three courses: alignment with the Eastern bloc, a segregated self-contained unit, or alignment with Western Europe. It is not necessary to argue the disadvantages of a Germany which was a member of the Eastern Soviet-dominated bloc.

Dangers of a Segregated Germany:

A segregated Germany, which developed in a manner unrelated to Western Europe would constitute a danger to Western Europe and our objectives. Economically, the interrelationship of Germany and the rest of Western Europe is so close and Germany’s economic potential so great that if it were again to pursue a policy of seeking only its own economic well-being and the greatest degree of autarchy, it might well dominate Western Europe. Further, the maintenance of a recovered Western European economy would be much more difficult and perhaps even impossible. Politically, a segregated Germany would [Page 132] be under irresistible temptation to seek, through its central geographic position and potential strength, to achieve dominance in Europe, playing off the East against the West. Furthermore, a segregated Germany would have a great tendency to revert to extreme authoritarian rule, due not only to the historically proved vulnerability of Germans to such a rule but also to the persuasiveness of the argument that, caught, between East and West, a high degree of government power would be required to steer the course necessary to achieve the greatest good for Germany.

Experience has shown that if a segregated, centrally organized Germany were created, imposed limitations on armaments, industrial production and the use of resources might well prove to be impractical and create merely a delusive sense of security. Although the permanent, enforced suppression of Germany is not practicable and could only result in encouraging the most undesirable forces and motivations, a segregated Germany would provide a fertile field for the rebirth of aggressive German nationalism and permit a rapprochement with the Soviet bloc. The fear of these developments constitutes the heart of the German problem.

Close Association With Western Europe:

Since a Germany separate from Western Europe and with freedom of action presents the dangers described above, the most fruitful long-run approach seems to be to try so to integrate the economic and strategic interests of Germany with those of its Western neighbors as to diminish the incentives and opportunities for separate disruptive action. The economic interdependence of these countries, both as suppliers and purchasers of goods lays a basis for such a close economic association. Further, such a close association would bring advantages both to Germany and to the other Western nations quite aside from promoting a solution of the German problem. (See Appendix A.) The grouping would, however, have to be large enough to contain adequate counterbalances to German potential power, otherwise such a grouping would be dominated by Germany.

To the extent that German interests are merged into the larger interests of Western Europe, there will be less tendency for Germany to make an accommodation with the East or to develop a segregated independent position of power in which to play off West against East. A greater contact with the theory and practice of free Western democracy will encourage the development of that political, social and personal philosophy in Germany. A Germany that is a part of the Western European community, though in a context which would not result in German dominance of the group, would decrease the security pre-occupations of the Western powers, including the U.S., and promote the safety of our troops in Germany. Any decrease in the possibility [Page 133] that Germany will align itself with the Soviet bloc benefits the strategic position of the North Atlantic Pact powers.

Institutional Requirements:

If Germany is to fit into a Western European community, such a community must exist, and must be adequate to handle the German problem. The development of collective action and a joint approach to regional and world problems has been an important aspect of American policy in recent years. This has been particularly true in relation to Europe, where we have fostered various institutions and arrangements based on the concept of the necessity for mutual aid and a common approach to common problems. The two most important steps in this direction have been ERP, including the formation of the OEEC, and the North Atlantic Treaty. The ECE represents an earlier attempt to act through a constituent part of UN.

It is doubtful whether the OEEC is an adequate framework within which to achieve really close integration. It is not yet clear whether it will survive in any significant form after American ERP aid ends. To date it has been principally a forum for negotiation between members and while, as recovery proceeds, OEEC may develop effective power of its own in the economic field, that development cannot be assumed. Furthermore, the membership is probably broader than would be necessary to deal with the German problem. A smaller grouping which would nevertheless continue in the framework of OEEC, as does Benelux would seem more practicable.

The Brussels Pact (except in the military field) and the Council of Europe seem also to be developing along the lines of creating mechanics for consultation rather than providing a means for a more binding association.

Without the creation of the institutions necessary to ensure that separate national interests are subordinated to the best interests of the community, an adequate means for incorporating Germany will not exist and the objectives with respect to Germany outlined above cannot be attained. It is also doubtful whether our other objectives in Western Europe, apart from those arising out of the German problem, can be obtained in the absence of the creation of adequate community institutions.

Opening Approach:

The most practicable approach toward establishing a community into which Germany will fit seems to be along the line of fostering the development of close economic interrelationship. Not only has the idea of closer economic association developed further than other forms, but the economic interdependence of Germany and Western Europe is more widely recognized. It seems politically unfeasible and unrealistic [Page 134] to start along the line of including Germany in the framework of the Brussels or North Atlantic Pacts, whose principal significance is military—unfeasible because of the strong and justified Western European fears of German rearmament, unrealistic in view of our declared policy of preventing German rearmament.


What is the minimum area which it is essential to include in a community which would achieve the economic and political ends sought? This cannot be approached purely in economic terms. Adequate counterbalances to German potential power are necessary, politically as well as economically. Aside from necessary security controls, Germany must be treated as a coordinate responsible member of such a grouping. France, Benelux, Italy, Austria and as many as possible of the Scandinavian countries seem the very minimum to counterbalance Germany. Iceland, Greece, Turkey, Portugal and Ireland are of considerably lesser importance in an economic sense. Switzerland cannot be expected to abandon neutrality; Spain is now politically unacceptable, as are the satellites.

The U.K. presents the most difficult problem. The U.K. and Commonwealth and the sterling area are of major economic importance to the European community as a source of raw materials and food. Also the sterling area might play an important role as the basis of an expanded currency area. The U.K. might well be needed to counterbalance Germany in any community. The U.K., however, has wider affiliations with the rest of the world than do the continental countries. Its full merger into a larger area set-up with power might be possible and desirable only if that larger area included all the North Atlantic Treaty powers—a distant objective but one which the Roberts Committee advocates. It might be necessary to work out a special relationship between the British Commonwealth and a closely-knit European community.

The U.S. role in this matter should not be one of passive encouragement. So long as we are occupying Germany, and particularly in view of our insistence on a controlling voice in German foreign economic matters, we have a direct responsibility for action in Europe. Furthermore, any movement toward strengthening Europe and resolving the German problem would further the objectives of the North Atlantic Pact. Such a movement will need all the impetus that can be given it, including also the administering of our part of ERP toward that end.

general problems

Geographical Area of Germany:

In the above discussion, reference has been made to “Germany.” It is necessary to consider what is meant by this. If we mean all Germany, [Page 135] including the Soviet Zone, a pre-requisite is a settlement with the Soviets which would result in a unified Germany free to move towards very close relations with the West. Is it realistic to believe that such a settlement could be soon achieved, since such a solution would in fact mean a retreat of the Soviets to the Polish border? Is not the most that could be expected of a unified Germany a situation in which Germany was segregated in theory from both East and West, but would be in fact a field of contention between East and West?

If we proceed with the Western Zones alone on the assumption that Germany will be split indefinitely, would the natural attraction between the two parts counteract the orientation of Western Germany to the West? Or would the gravitational pull on the Eastern Zone of a reviving Western Germany be so strong as to be to our net advantage? What would be the effect of the closer association of Western Germany with Western Europe on our remaining in Berlin? And if we remained, what would be the relation of Berlin to the Western Community?

Specific Techniques:

Among the specific techniques which would have to be explored as means for achieving closer economic association are currency arrangements (including common currency, complete or partial interconvertibility, pooling of foreign exchange earnings), customs union (total or limited), coordination or integration of trade negotiations with other countries, abolition or relaxation of barriers to movement of people, coordinated investment policy, et cetera. The examination of these techniques will necessarily require consideration of the degree to which it would be necessary for members of the group to adopt coordinated or a single policy on prices and wages, social services, taxation, banking and credit, subsidies, rationing, allocations, foreign exchange and trade controls, exchange rates, cartel policy, et cetera. These matters would inevitably bring to the fore divergencies in economic, social and political philosophy, e.g., private ownership vs. nationalization, the controlled economy vs. the economy regulated by the price mechanism and private initiative. It is probable that any realistic analysis of these problems would lead to the conclusion that the delegation of very considerable powers to a central authority would be necessary. This raises the most difficult matter of timetable. It is far from clear, however, that progress could not be made gradually and that immediate steps could not be taken which would start on the road.

suggested action

Even such a sketchy analysis of the various economic adjustments which might lead towards the establishment of a closely-knit Western economic community indicates that they would require a number of changes in internal policies and practices in all countries concerned. [Page 136] The experience of working out the Benelux union shows this. If one approaches the problem through trying to resolve the difficulties before agreeing that the community is to be established, it is doubtful if the basic decision would ever be made. It is probable that Benelux would never have come into being if it had not first been decided that the union should be created, and then the means for carrying out that decision worked out. In other words, it seems that the decision in principle has to be made first, and that it is essentially a political decision, with the economic implementation following. This does not mean that the decision can be made blindly; it should be made only after preliminary study of its implications. It does mean, however, that unless the end is postulated and agreed, there will not be the impetus and necessity essential for working out the means.

It is, therefore, suggested that the matter of approaching the Ger man problem by the route of Western European integration be approached first on the broad political, defense and economic fronts. If the desirability of proceeding along that line is agreed, there should be established working groups, both national and international, to study and make recommendations on:

The economic arrangements necessary to implement such a program, and their probable positive and negative results;
The political arrangements implied by the economic steps;
The minimum number of countries which would have to be included to make the program workable (with a particular study of the British and sterling area relationship);
The feasibility of developing the necessary political support for such a program;
The tactics and possible time schedules appropriate to working out the program.

[Appendix A]

Paper Prepared in the Department of State

top secret

Economic Benefits of Western European Integration

Close association of the Western European countries would be of economic benefit not only to Germany but to those countries. This principle is one of the recognized bases of ERP. The Western European economy is dependent on exporting manufactured goods and services in order to pay for necessary imports of raw materials and food. The loss of overseas investments, the impediments to the recovery and development of trade with Eastern Europe, and the increased industrialization of non-European areas make the competitive position of Western Europe more difficult and have produced an abnormal dependence on supplies from dollar sources.

[Page 137]

The solution of this problem could be approached through seeking protected markets, restrictive trade agreements or by increasing competitive position by greatly improved productivity. Protected markets in overseas dependencies or affiliates are diminishing as the centrifugal force of the desire for political independence grows. Restrictive agreements are inconsistent with expanding world trade, economic development and rising standards of living. In many cases, the national units in Western Europe are too small to provide markets big enough to permit those production techniques necessary for highest productivity. Separate national interests and autarchic policies cause or threaten protectionist actions which inhibit the development of European industry in the places and on the scale which would apply if there were guaranteed free movement of goods, capital, earnings and people in a larger European area. In such a free movement area, Western Europe could not only raise its own standard of living but also achieve the essential improvement of its competitive status in world trade. Germany’s inclusion in such an area would aid materially in achieving these economic ends for Germany and for the rest of Western Europe.

A close coordination and perhaps an integration of Western European economic relations with Eastern Europe may become necessary for wholly different reasons. If, as appears not unlikely, the Soviet bloc will, either through the mechanism of the CMEA or otherwise, tend to develop unification of economic relations with the West, no European country will be alone in a strong enough bargaining position to deal with such a bloc. Thus a degree of economic unification in the West may be forced.

  1. The source text was attached to a memorandum of transmission from Murphy to Acheson and Webb, March 23, not printed, in which he stated that the paper was still under discussion by the Steering Group of the National Security Council (740.00119 Control (Germany)/3–2349). The first draft of the paper, not printed, was sent to Acheson on March 18 and to Webb on March 19. A copy of it is in file 740.00119 Control (Germany)/3–1949.
  2. Under reference here is the draft German Peace Treaty submitted by Secretary Byrnes to the Second Session of the Council of Foreign Ministers, April 29, 1946. For the text of the draft treaty, see Foreign Relations, 1946, vol. ii, p. 190 ff.
  3. Not printed; the text of the report of the London Conference on Germany is printed in Foreign Relations, 1948, vol. ii, p. 191.
  4. For documentation relating to the deliberations of the Bonn Parliamentary Council, including the text of the Military Governors’ comments on the draft Basic Law, March 2, see pp. 187 ff.
  5. For documentation on the diplomacy of the Berlin crisis, see pp. 643 ff. and Foreign Relations, 1948, vol. ii, pp. 867 ff.
  6. For documentation relating to the establishment of the East German Government, see pp. 505 ff.
  7. For the text of the Warsaw Communiqué of the Foreign Ministers of the Soviet Union, Albania, Bulgaria, Czechoslovakia, Yugoslavia, Poland, Rumania, and Hungary, June 24, 1948, see Ruhm von Oppen, Documents on Germany, pp. 300–307.
  8. The comments of three officers of the Department of State on this paper have been found. Jessup and the Acting Director of the Policy Planning Staff, George Butler, each submitted memoranda, March 24, neither printed, that suggested minor clarifications and revisions in specific paragraphs. (740.00119 Control (Germany)/3–2349 and 2449) Wayne Jackson submitted his comments to Hickerson, March 25, not printed, stating that the idea of German integration in Europe, presented in the section “Germany Within Europe,” was ignored in the other parts of the paper. (740.00119 Control (Germany)/3–2549)
  9. The source text was not attached to the copy of the policy paper which Murphy sent to Acheson and Webb on March 23, but appeared as Annex B to another copy of that paper among the United States position papers used in preparation for the discussions with Bevin and Schuman.