ECA message files, lot 53 A 278, box 78, Frankfurt Ecato: Telegram
The Acting Administrator for Economic Cooperation ( Bissell ) to the Office of the United States High Commissioner for Germany, at Frankfurt 1
Ecato 380. Reference Frankfurt Toeca 244 rptd Torep 240.2
1. Appreciate analysis present and prospective Ger economic situation and its relation to broader political and defense objectives. There appears to be agreement on necessity coordinating action on aid and specific economic and financial issues with general U.S. foreign policy objectives during negotiations now being carried forward with Gers. This cable represents our thinking on ends we wld like to see achieved in Ger during coming year and means necessary to ensure accomplishment these ends with minimum disruption to economy and with equitable distribution burden among Gers. Approach also represents basis on which we preparing aid estimates and on which they will be justified Congress.
2. We start from assumption that shortly after 1 July 1951 Gers and HICOM will have agreed on contractual arrangements to replace occupation statute and Gers will have voluntarily associated themselves in European defense.3 Further that all U.S. funds available for foreign aid will be incorporated in single bill and directed toward single purpose, i.e., increasing defensive strength of free world.
3. Our principal economic objectives in Ger in the coming year are the following in order of priority:
- a.
- Expansion of defense contribution to neighborhood of DM 9 billion, including (1) costs of raising, equipping and maintaining Ger forces, (2) goods and services supplied to NATO forces stationed in Ger, and (3) value of Ger exports of mil equipment or other [Page 1633] defense supplies made available without costs to NATO members. In spite of anticipated Ger insistence, we shld maintain position that defense contribution not include such expenditures as aid to Berlin, refugees and rehabilitation of housing. In presentation to Congress, important that concept of “defense” not be adulterated by considerations peculiar individual countries since this wld result in unmanageable and largely meaningless concept. This does not, of course, mean that such problems will be ignored either in use internal resources or distribution of aid.
- b.
- Expansion in real terms of GNP by 9% and exports by one-third over 1950/51 level to permit Germany to aid in rearming NATO members and at same time achieve greater payments equilibrium. Ger can and shld manufacture and export far more than she herself can finance without permanently restricting imports. Production and export for defense shld be facilitated, and civilian consumption scarce materials restricted.
- c.
- Expansion of GNP in Berlin by 18% to absorb unemployed and reduce necessity outside aid.
4. Program this magnitude cannot be carried out without economic changes, and general outlines of action required by Ger goverment are clear. Increase in defense contribution requires heavy tax increases and perhaps some reduction in other gov’t expenditures. Expansion GNP requires continued high rate and greater selectivity in investment, and increase exports implies containing internal demand while channelling production to foreign markets. Support Berlin will necessitate diversion resources otherwise available to Western Ger. As a whole, program will involve some reduction in relative ability satisfy immediate consumption demands.
5. For its part, U.S. ready grant dollar aid indicated on B/P grounds if program objectives to be achieved. As reported previous cables, $382.8 million tentatively programmed for FY 1951, including provision for dollar payments to EPU. Although FY 1952 request not yet fixed, we are tentatively figuring on deficit with dollar area in neighborhood of $170 million not including special provisions necessary to finance greatly reduced EPU deficit. Although dollar aid this magnitude will not and is not intended to buy Ger cooperation, it provides evidence that U.S. willing assume its share of responsibility for impact defense participation on B/P.
6. While defense program has over-riding priority, steps taken by Gers shld not be such as to jeopardize legitimate hopes of some sectors of population to improved economic status. We wld expect, for example, new tax measures to reverse regressive tax tendency in Ger. Also, though general increase production shld provide employment and housing for additional refugees, special attention shld be reserved for this group.
7. Our feeling is that negotiations with Gers over next few months shld proceed on broadest possible basis, avoiding arguments over issues [Page 1634] unrelated to central theme outlined preceding paras. Grers shld be reminded on every occasion that U.S. interested in certain specific objectives which require definite action program, that measures we believe they shld take are designed to meet their own needs as part of Western world and that in recommending aid we will take into account their performance and drains on their resources.4
- This telegram was cleared by Bissell, Porter, and George R. Jacobs of the Office of German Affairs and was repeated to Paris. It was transmitted in two parts: the first, Ecato 380, consisted of numbered paragraphs 1–3; the second, Ecato 381, consisted of the remainder of the text.↩
- Dated March 7, p. 1623.↩
- For documentation on the negotiations between the three Western powers and the Federal Republic concerning contractual arrangements, see pp. 1446 ff.↩
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At this point in the source text the following paragraph was deleted before transmission to Frankfurt:
“There are a whole series of pressures and types of pressures we can apply and we shld continue to choose course of action most appropriate in circumstances without losing sight of general course. We must use threats and promises with greatest caution keeping our approach to a given problem in proportion to problem.”
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