ECA message files, lot 53 A 278, box 27, Frankfurt Toeca: Telegram
The Office of the United States High Commissioner for Germany to the Administrator for Economic Cooperation (Foster)1
Toeca 793. Re: (a) Washington Ecato 799/800 July 26 rptd Torep 5276/5277;2 (b) Frankfort Toeca 759, July 28 rptd Torep 745, London for NATO 67.3
All aspects reftel (a) now under study for comments soonest. Our immediate concern problem raised reftel (b). In taking into consideration general nature of FedRep political position, as outlined in reftel (b), it should be borne in mind that FedRep has by no means been fully cooperative. Frequently evidence of willingness to take advantage of bargaining position has been apparent on many issues which are equally difficult for Allies. We are, therefore, weighing advisability of HICOM (1) continuing to adhere to position FinCom has consistently taken in discussions with Germans that payment of occupation costs in full have priority over all other FedRep expenditures; (2) making no concessions in present Ger status toward occupation costs; and (3) leaving financing entirely up to FedRep. To insure this priority the least we cld insist wld be to condition contractual agreements upon a guarantee from FedRep that the 51/52 occupation costs, or whatever nomenclature will be attached to indigenous cost of stationing US, UK and Fr forces in FedRep, will be covered in full and will continue to be first charge upon FedRep expenditures hereafter until FedRep has defense contingent of its own, at which time cost of latter takes priority over Allied indigenous costs. The disadvantage of this tactic is possible delay which might result in concluding contractual agreements and unrealistic time period to which this problem probably confined; namely, last quarter of this calendar year or possibly first quarter 1952, by which time FedRep’s own defense expenditures [Page 1642] probably under way. Question is how far are we willing to go to assure payment of occupation costs under our present reserved powers. In order to take a strong and hopefully persuasive position with FedRep following courses appear to us to be feasible:
- (a)
- Insist on full payment based on reserved powers not yet relinquished, indicating that relinquishment will be predicated on degree of cooperation FedRep displays in taking effective measures to cover occupation costs in full.
- (b)
- State that ECA and similar aid will be conditioned on satisfactory defense performance which, at present juncture, means full payment occupation costs.
- (c)
- Threaten use Allied powers direct and indirect to foreclose FedRep access to materials in scarce world supply which can then be made more readily available to countries which demonstrate greater willingness than FedRep to cooperate in mutual defence of which occupation and its attendant costs are an integral part.
While we appreciate possible and very probable repercussions of having to support this position with action in event FedRep fails to meet occupation costs, nonetheless we think time has come for us to be authorized to indicate in forthcoming discussions with Germans—first we hope UK and Fr, too, are prepared to take positive action. Basis this viewpoint is that our efforts at mere insistence on unchanged occupation costs status have thus far been unavailing. We take dim view of FedRep business and factions as usual attitude and complete failure of Bundestag to take realistic view of serious situation and adopt forceful measures to alleviate it. Short sighted partisan political considerations continue to play important and unconstructive role when fiscal situation urgently requires cooperation and courageous leadership. We think latter will only be forthcoming if Allies indicate united firm stand.
We think FedRep cld be convinced in principle of validity of our position but would probably claim with truth that implementing legislative program cld not be enacted under present political climate unless Allies give assurances in tangible form. At this point, HICOM will have to grant some concessions to be understood primarily as symbols of good intentions. As first-step, HICOM should announce decision to eliminate so-called “frills” or non-essentials from occupation costs on understanding FedRep wld make similar cut in its own administrative expenditures. We were prepared in any case to recommend elimination of these expenditures. While true that non-essentials make up no more than 5 to 10 percent of total occupation costs, they have been made a political issue. Public reaction to such defense nonessentials is currently damaging to us and to FedRep’s chances of carrying out policy favorable to us.
Second, HICOM could recognize difficulty of FedRep’s current political-fiscal situation and offer joint study and effort toward meeting [Page 1643] serious interim period during which FedRep would secure enactment of fiscal and economic measures requisite to full payment of occupation costs and of a future defense contribution which FedRep would understand will be not only as high as present occupation costs level but even higher, witness DM 9 billion figure of FedRep capacity to pay tripartitely provisionally agreed at FinCom mtg July 13.
Your prompt reaction to foregoing would be advantageous in view FinCom above noted Aug 9 mtg and probable HICOM–Chancellor mtg reasonably soon thereafter. While we find UK–Fr inclining increasingly toward our analysis of seriousness of FedRep fiscal situation, we think considerable further change in their viewpoint must be obtained to formulate tripartite approach along lines recommended herein and reftel (b).