ECA message files, lot 53 A 278, box 31, Paris Repto: Telegram
The United States Special Representative in Europe (Katz) to the Administrator for Economic Cooperation (Foster)1
priority
Repto 3895. Toisa. Re: (a) Frankfort Torep 778 sent Wash Toeca 7932 rptd info London 87; (b) Wash Torep 5276, 5277 sent Frankfort Ecato 799, 800;3 (c) Frankfort Torep 745 Wash Toeca 759 rptd London 67.4
1. OSR not informed fully as to relation between occupation costs–defense contribution issues and negotiations re future status of Germany. However, assuming reftels (a) and (b) are consistent with relevant US policies and intentions, OSR wld recommend fol modification of Frankfort’s proposals in reftel (a):
- (a)
- Maintaining level of defense cost (at present consisting entirely of occupation costs) at a minimum of approx DM 9 billion.
- (b)
- Until defense status clarified insisting on full payment occupation costs based on reserved power not yet relinquished, which gives occupation costs priority over all other expenditures.
- (c)
- Leaving responsibility for dealing with problem of financing occupation costs and other FedRep Govt expenditures squarely on the FedRep, letting it solve problem of financing in noninflationary fashion (but, of course, using influence to guide FedRep in right direction). Believe German fear of inflation will be effective incentive introduce measures necessary offset serious inflationary effect.
2. Believe hopefully persuasive attitude mentioned reftel (a) desirable and can be achieved by telling Germans relinquishment reserved [Page 1644] power, US active support Germany’s objectives of restored sovereignty, and occupation statute, NATO partnership, and better political and mil position will depend on degree cooperation FedRep displays in taking effective measures to meet responsibilities of independent govt, including in this case impact occupation costs.
If Germans convinced validity our position but claim with truth that implementing legislative program cld not be enacted under present political climate, then OSR favors the concessions as symbols of good intentions mentioned in reftel (a).
3. Believe ECA aid ineffective bargaining weapon because of uncertainties as to its eventual amount (e.g. uncertainties Congressional action, and dependence at present on balance payments considerations which will be affected by mil procurement in Germany as well as further developments in offshore procurement for end-item program), and smallness of aid in comparison occupation costs. Use of aid as bargaining weapon implies commitment to give aid if bargain struck and it is possible that for foregoing reasons less aid than now provided by illustrative figure will be appropriated for Germany this year.
4. Believe threats foreclose Germany access raw materials wld be self-defeating. Minimum scarce materials necessary essential civilian use plus those needed defense effort will be basis for allocations by IMC of which Germany a member. Germans know we can’t afford let German economy collapse by cutting raw materials below minimum essential level, and we injure Western defense as well as Germans if we cut off materials for defense production. Important to realize such materials not necessarily destined for German use.
5. Believe negotiations German defense contribution shld be based on principles stated para 2 reftel (b) but there will be no NATO decision in immediate future. Ad hoc formula of 10 percent GNP is probably best.
6. Urge HICOM, State, take all possible steps develop agreed firm tripartite position re German occupation costs—defense contribution which Frankfort cables consistently point out as essential for an effective approach to the FedRep.