740.5/10–1451: Telegram

The United States Delegation at the Tripartite Talks on German Financial Contribution to Defense to the Secretary of State 1


1826. From USDel Ger fin. At mtg Oct 12, tripartite comite on Ger fin contribution to defense, Fr presented statement on current state negots re fin aspect European Defense Community (EDC).

1. EDC Budget.

Common defense budget for EDC countries will be effective from inception EDC. (Throughout presentation Fr stressed fin arrangements wld go into force as soon as EDC treaty becomes effective). Budget will not however correspond to totals current national defence budgets of member countries. Certain expenses will be outside EDC budget and those included will be calculated on different basis than under present NAT systems. For example, something will have to be done to equalize scale troop pay. EDC will have its own admin org distinct from NAT govts and there will have to be common procedures for obtaining supplies from various member countries. EDC budget will include in addition to expenses in current budgets costs raising new units, both Ger and Fr, and new infrastructure costs.

There will be excluded from EDC costs defense costs relating to extra-European areas including cost attributable to such responsibilities in metropolitan areas; costs of internal security troops (gendarmerie), costs of recruiting to be supplied to EDF.

In case of Ger, relationship will have to be estab between EDC costs and costs of support with other forces; in case of infrastructure costs, it will be difficult to determine whether use will be primarily by EDF or other forces and Rome decision by higher auth on allocation of costs will be necessary. When allocations made, costs will then be allocated on EDC or NATO basis.

2. Raising of Funds.

Contributions to budget will have to be based on ability to pay, perhaps modified by political considerations, rather than on basis of direct benefits to participating countries or on number troops. This will probably be done by percentage allocation of total budget based upon respective income. Therefore Ger contribution wld be very different in character and amount from what it wld be if Ger were responsible for raising and equipping its own forces. This wld be responsibility EDC. It was for this reason that Fr reluctant discuss “Ger costs” in present discussion.

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3. Payment arrangements.

From fiscal viewpoint, payments by participants to EDF wld be made in periodic installments, probably quarterly. Problem transfer of currencies has not been solved and still being discussed in Paris. It is obvious NAT contributions to EDC wld be greater or less than demand for those currencies under EPU.

Three possible ways are envisaged for dealing with this problem.

By extension supplementary credits to those provided through EPU;
By use external aid furnished in equipping EDF;
By placing orders for equipment in countries where there are not heavy costs for the support of troops.

In response to question from UK, Fr said this was not all firmly agreed but represented stage which discussions in Paris had reached.

UKDel then made fol statement. While problem involves consideration of wide econ polit and strategic importance, they considered discussions shld be primarily from econ viewpoint. UK defense program is all UK can bear without going on to full war basis. UK cannot undertake any fon exchange obligations as result of these arrangements. This does not mean UK is less anxious than other countries to carry out program which has been agreed. Its attitude is not negative or passive. UK govt has given much thought how to achieve results sought in Ger without prejudice to UK fin position. It believes if negots are carried out properly this can be done.

UK rep said Brit people wld not tolerate any agreement which wld not call on Ger to carry burden comparable to that of UK. This is not too much to ask of defeated enemy whose territory we wld be prepared to defend. If allies work together to get fullest reasonable Ger contribution, no problem of gap need arise. If Allies do not succeed, UK position will still be based on circumstances referred to above.

Since situation required rigorous economies in Allied expenditures in Ger, one of problems is how to control Allied expenditures for which Gers are responsible and to provide incentive to Gers to economize for such expenditures. UK will propose specific measures designed to have this effect in current discussions. UK rep stated if there were “marginal excesses” resulting from excesses in actual expenditures over estimates, UK wld be prepared undertake additional changes on its budget and balance of payments.

Re Ger costs UKDel recognizes relationship to EDF. It had assumed fin arrangements in EDC wld take some time and believed that meanwhile, Ger fin contributions, except as needed to support essential Allied expenditures in Ger, shld be used to cover actual expenditures in Ger for raising and maintaining Ger units.

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UK had calculated probable costs of Ger units, taking into account econ and practical considerations which might not have been considered by SG comparing military estimates. Even assuming end-item assistance from US, UK doubted that FedRep wld be able to build up forces sufficiently rapidly to spend more than two and half billion DM in NATO FY 1952/53. (To this UK adds 200 million DM for mobile police force and 300 million DM for wehrmacht pensions.) UK calculated cost Allied forces in Ger, which cld be reduced by economies, at 9.75 billion DM and fair Ger contribution at 13 billion DM (referred to tel 1814, Oct 13, rptd Frankfort 220, Paris 7072). Copies Brit statement (TGG (FD) P–53) being pouched.

US rep reserved comment on Fr and UK statements until they had been studied. He made two points re gen attitude USDel re negots.

FonMin’s instructions call for copies negots completion with FedRep by time Rome mtg. To meet this sched, discussions with Gers must begin at very early date.
The whole purpose of these discussions was to secure a Ger military contribution to aid in defending west and fin arrangements must be such that building up of Ger force is not obstructed. It had been agreed by Mins in Wash to obtain comparable fin contribution from Ger. This contribution to be effective must not be frittered away on expenditures not really part of defense costs.

As conclusion mtg, UKDel asked Fr info on time sched of EDF discussions and fin and extent to which they had been worked out with Gers. Fr replied evasively.

  1. Repeated to Frankfurt and to Paris for Harriman and OSR.
  2. Supra.
  3. Not printed.