ECA message files, lot 53 A 278, box 27, Frankfurt Toeca: Telegram
The United States High Commissioner for Germany ( McCloy ) to the Administrator for Economic Cooperation ( Foster )1
Toeca 208. Meeting with Bluecher, Cattier and staffs held February 21 at Bluecher’s request. German’s unquestionably very concerned future status their dollar aid as direct outcome last weeks discussion among Foster, Wood, McCloy, Cattier, Adenauer and other leading Federal Republic officials. Bluecher did not address himself to question of dollar aid remainder fiscal year 1951 but pointed to aid plus assurance of deliveries in first half of fiscal year 1952 as immediate problem. Bluecher submitted memorandum showing Federal Republic estimate of dollar aid requirements first and second quarters fiscal year 1952 summarized as follows: (following in million dollars).
First quarter: Dollar imports, minus 160; second quarter, minus 172; dollar exports, first quarter, 90; second quarter, 90; increase foreign exchange reserve; first quarter, minus 30; second quarter, minus 30; deficit (dollar aid required); first quarter, minus 100; second quarter, minus 112.
[Page 1621]Cattier first stated no possibility exists Germans receiving dollar aid fiscal year 1951 in excess $341 million (original Snoy–Marjolin formula) and no assurance even this sum forthcoming. He then took opportunity to give Bluecher and staff straight forward presentation speaking off record as US taxpayer rather than mission chief. Remarks summarized as follows:
“Future appropriation foreign assistance by US Congress will doubtless be guided almost exclusively by tangible evidence defense cooperation by recipient nations. Since Germany’s role in western defense not expected to be clarified before Congressional appropriations for foreign aid made, indispensible that Germany take action to create climate whereby Congress and American people willing continue give Germany dollar aid. Such action would be of both direct and indirect nature. Direct action would be based on German capacity to pay in DM’s and encompass payment occupation costs in amount required, support own military units, and provision of goods free to NATO countries. Not mentioned in meeting but would also include Federal Republic aid to Berlin. Indirect action would be limitation production of consumption goods and utilizing saved resources to expand production in sectors certain to be needed in western defense effort as well as accepting and insuring delivering against western defense orders now”.
Bluecher obviously anticipated substance Cattier’s remarks and outlined series of measures contemplated by Federal Republic. He stressed tax measures currently debated in Parliament and new tax and fiscal measures being prepared. Economic control law recently passed provides possibility issuance implementing ordinances prohibit use raw materials and semi-finished goods nonessential purposes and to establish priorities for essential orders.
Bluecher requested guidance in developing specific German program based on actual defense requirements which would create type of climate referred to by Cattier and stressed desire to initiate discussions immediately. Cattier agreed to appoint mission representatives to make joint study this situation. We can, of course, only give broadest kind of guidance. In this connection mission needs to point out to State/ECA/Washington we are rapidly moving out of phase where hypotheses concerning potential resources contribution, general political willingness, and gestures in field of administrative controls are especially useful. We will now continually be faced with requests for specific defense requirements which can be satisfied by specific orders with priority assistance where necessary. US policy based on withholding dollar aid for necessary imports until defense role clarified both by Federal Republic regulation and action will be an embarrassing and self-defeating policy unless we are provided now with guides concerning magnitude and type of anticipated requirements plus some concept of time periods during which the Germans are expected to satisfy these requirements. Otherwise there can be no basis [Page 1622] for defense investment decisions, defense allocation, priority and price control decisions respecting materials flow and use. It would be dramatic action, for example, if Federal Republic cut back consumer durable production as a defense gesture. But how would facilities and manpower thus released be used for satisfying defense demand? Mission fully aware future dollar appropriations will be carefully scrutinized to ensure funds make direct contribution to defense potential of west. At same time we face dilemma here of helping Germans impress Congress with need and desirability continue provision dollar aid to Germany, without at same time being able give Germans responsible advice on action Germany could take. Your comments this paragraph requested soonest.
Germans were handed draft letter on step 2 approval DM 1,350 million (being air pouched OSR and ECA/Washington). Anticipate no alterations or very minor ones in signed copy to be despatched in few days. Although letter contained numerous conditions no strong reaction voiced by Bluecher. Implementing discussions to be held soon with Germans on program details.
Bluecher reported Cabinet decision to suspend liberalized free list for limited period in view of new EPU crisis but reiterated Federal Republic intention to continue liberalization and fulfill trade agreement obligations.
- Repeated to Paris and to London for Spofford.↩