Foreign Relations of the United States, 1950, Central and Eastern Europe; The Soviet Union, Volume IV

862A.10/3–950: Telegram

The Acting Secretary of State to the Office of the United States High Commissioner for Germany, at Frankfort¹

confidential

Washington, March 15, 1950—7 p. m.

1702. Re Berlin 401, rptd to Dept 341² Reappearance acute financial crisis Berlin Magistrat few months after aid agreement concluded with FedRep indicates current budgetary problems not settled last Nov notwithstanding HICOM permission for FedRep using BDL credit. Whether cause for present crisis is Berlin’s increased expenditures or FedRep inadequate appropriation, believe immediate need to support Berlin’s recovery takes temporary precedence over basic desire to keep Berlin’s expenditures within appropriate limits. Suggest you take energetic steps to assure Berlin treas able to pay current expenditures in Mar and subsequently until new aid agreement effective.

As for future, believe periodic recurrence financial crisis wld undermine our efforts to revive Berlin econ and cause great political damage. To forestall repetition consider desirable when aid agreement for period fol Mar 1950 negotiated you demand specific and binding assurances (a) from Magistrat to effect that expenditures can and will be kept within limits permitted by expected revenues and promised aid, (b) from FedRep that they consider Berlin’s budget justified and will not cut down actual aid below promised amts. Monthly amt of FedRep aid cld be related to Berlin’s current expenditures for unemployment relief so that econ improvement wld automatically reduce current aid payments. Outlined procedure might make more difficult conclusion new aid agreement but believe preferable to tackle issue at once rather than facing repeated Berlin’s financial crises.

You have our full support in negots with FedRep and Berlin necessary to implement above suggestions. Keep us advised on progress.³

Webb

1. Repeated to Berlin as 67.
2. Not printed; it reported that Federal Finance Minister Schaeffer was “only willing provide DM 45 million assistance Berlin budget in March.” This might force the city to make further cuts in personnel and it would probably be unable to meet its payrolls throughout the month. The Berlin Element of the United States High Commission regarded either possibility “as extremely unfortunate in this period.” (862A.10/3–950)
3. In telegram 390, March 20, from Berlin, not printed, the Berlin Element agreed that Bonn financial assistance should be planned for the whole fiscal year, but stated that the amount should be a flat sum per month rather than being related to the city’s expenditures for unemployment (762A.00/3–2050).