CFM files, lot M–88, box 205, TGG(FD)P vol. II

Report of the Tripartite Group on Germany to the Foreign Ministers of the United States, the United Kingdom, and France

top secret


[1.] The Terms of Reference for the Tripartite Group on Germany were formulated by the Foreign Ministers in Washington and are attached at Annex A.1 In accordance with the instructions given by the Foreign Ministers, the Tripartite Group commenced its meetings in London on 11th October. It has carried on its studies in collaboration with the Allied High Commission and has submitted the preliminary results of certain of its studies to the Temporary Council Committee of the North Atlantic Treaty Organization.

2. There are three elements in the problem referred to the Tripartite Group by the Foreign Ministers:

(a) The total contribution to defence costs which should be made by the Federal Republic.

The Group believes that a German defence expenditure in the N.A.T.O. fiscal year 1952/53 of D.M. 13 thousand million at assumed [Page 1671] current prices would represent a use of German resources for defence comparable with that of the principal Western countries (including their expenditure outside Europe) and would not impose an unbearable strain on the German economy. In 1953–54 the comparable figure would be D.M. 15–15½ thousand million plus an adjustment for any price changes between October 1951 and 1953/54. This estimate was prepared on the basis of the existing rulings on the security control over German industry which are at present under revision. Some adjustment of the figures may be needed to take account of any new decisions on this subject. It will not be easy to induce the Federal Government to shoulder burdens of this magnitude.

(b) Local costs of support of Allied Forces in Germany.

Estimates have been submitted by the three Delegations of the costs of the support of the forces of their respective governments in Germany, and information has also been obtained regarding the estimated costs of forces in Germany of other N.A.T.O. countries. These estimates have been prepared on the basis of the existing practices in regard to meeting occupation costs, and do not take into account the liabilities which might be outstanding at the date of the changeover. For the German fiscal year April 1952/March 1953 they total some D.M. 7.4 thousand million (see Annex B attached2). This figure includes certain non-defence costs for which no claim would in future be made on the German budget viz. Embassy type expenditure.

The Group has examined the Allied estimates with a view to determining to what extent they could be reduced, in order to accord with the new political situation which will prevail when the contractual arrangements enter into force, as well as to insure that German resources can be made available to the maximum extent possible for meeting the additional expenses which will arise in connection with Germany’s participation in defence. Because of the different practices by the various Allied forces, the Group has found difficulty in reaching any agreed recommendations on this subject, except that costs appropriate to representation through Embassies should not be borne by Germany. All three Delegations are agreed that, in future, the Allied forces in Germany must reduce their expenditure chargeable to the German economy to the minimum compatible with military efficiency. They agree that on this basis the sum that is to be demanded from the Federal Government as estimated above, could be substantially reduced. It will be necessary to insure that reductions on the same basis are applied to the forces of Belgium, Luxembourg, Denmark and Norway.

(c) Costs of German Contribution to European Defence Force.

In the negotiations taking place in Paris regarding the establishment of the European Defence Force, it is envisaged that there will be a common defence budget for all the member states of E.D.C. Such budget would cover the defence expenditure of the Community, including the cost of raising German units, and would be financed by contributions [Page 1672] from the member states related on some basis to their national income with due allowance for certain other factors. This budget will have to be prepared on the basis of a common time-phased programme of strengths and equipment and will have to be approved by the Community. This budget will take some time to develop and no estimates of expenditures and contributions are available.

The Group has limited its studies of figures to the cost of raising German units which has been made the subject of an enquiry to the Screening and Costing Staff of N.A.T.O. on the basis of force requirements proposed by the Paris Conference in the light of recommendations of SHAPE. Preliminary figures developed by the S.C.S. have only recently been made available and give an estimate of the cost of building up by mid-1954 a German contribution to the European Defence Community to a target of 12 “Groupements” of ground forces, a front-line of 1,158 aircraft and a small naval contingent. This estimate (contained in SCS/16 Final3) indicates a total cost of $11,874 million (D.M. 49,871 million), of which $3,757 million (D.M. 15,779 million) would fall in the period April 1, 1952 through June 30, 1953, and $8,117 million (D.M. 34,091 million) in the 1953/54 period. Out of this total cost $7.7 thousand million (D.M. 32.3 thousand million) represents major matériel and equipment costs. These estimates are being revised by the Screening and Costing Staff. Furthermore, studies are being made as to the possibilities which exist of meeting major matériel requirements in the Federal Republic, and infrastructure requirements in Germany are being reviewed. (See Annex C.4) Results of these studies will probably not be available for some weeks.

3. In addition to the foregoing costs there are certain costs borne by the German budget which would qualify under NATO criteria as defence costs. These include military pensions, mobile police force costs and expenditures arising from the presence of military forces in Germany but not hitherto included as occupation costs. These will total about D.M. one thousand million in 1952/53.

4. Two major problems arise out of the creation of German units;

(a) the source of their equipment and (b) the meeting of their costs. The Federal Republic will be unable to produce by mid-1954 sufficient materiel to meet the additional requirements resulting from the establishment of German units. The size of this materiel gap cannot even be estimated until decisions have been made regarding the security control of German industry and until further information is available about German industrial and constructional capacity on which enquiries are being made. It is however clear that the materiel gap during this period cannot be filled either by Germany alone or through the combined effort of the E.D.C. countries. The uncertainties about availabilities and sources of equipment required necessarily involve equivalent uncertainties as to the ultimate cost to be met in Germany.

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5. A gap will also emerge between the totality of the defence burdens to be met from the German economy and the financial resources of the Federal Republic available for defence. The size of this financial gap and the time at which it will develop will depend in part on the volume of production of armaments to be undertaken by the Federal Republic and on the method by which the German contribution to the European Defence Community is assessed at the outset. It is however clear that even if the three Governments are able to convince the German Federal Government that a total contribution of the order of magnitude set out in paragraph 2(a) above should be made, and if the present plans are proceeded with in regard to the maintenance of Allied forces in Germany and the building up of a German military force within the European Defence Community, the total of the contribution to the European Defence Community and the costs of the support of other Allied forces in Germany will exceed the total German contribution. Whether the gap will occur by June, 1953, is still uncertain, but there can be absolutely no doubt that such a gap will occur during 1953–54.

6. The difficulties of the matériel gap described in paragraph 4 above pose a particular problem for the E.D.C. budget. The French delegation has stated that the size of this budget cannot be fixed until further progress has been made by the Temporary Council Committee which is examining the whole question of military requirements and economic possibilities and until decisions have been made regarding the availabilities of US aid. It is the intention of the member states of E.D.C. to work out arrangements which will enable the Community to fulfill its mission as soon as the treaty has been ratified, and until the budgetary institutions are in full operation.

7. In these circumstances the problem arises of whether and on what basis negotiations with Germany on a financial contribution to defence should begin before decisions have been reached on:

the policy to be adopted for removing or bridging the gap between the total financial contribution which Germany can be called upon to make and the estimated costs of supporting Allied forces in Germany and the costs of German rearmament.
the assessment of a German financial contribution to the E.D.C. budget.

In this connection it should be noted that it will not be until the negotiations with the German Federal Government have been started that German views and capabilities will be known; these will naturally be of great importance in assessing the extent of the problem and in the working out of solutions.

8. Conclusions

It was agreed by the three Delegations that:—

(i) Negotiations with the Federal Republic should begin as soon as possible.

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(ii) A main object of these negotiations will be to secure from the Federal Republic a total contribution to the costs of defence which will represent a use of German resources for defence to an extent comparable to the use by the other principal Western countries of their resources for defence (including expenditures outside Europe). This is estimated at D.M. 13 thousand million for the N.A.T.O. fiscal year 1952/53 on the basis indicated in paragraph 2 above.

(iii) All Allied expenditure in Germany to be borne by the Federal Republic should be confined to defence costs and henceforth be reduced to the minimum compatible with military efficiency.

(iv) The opportunity should be taken at the forthcoming meeting with the Benelux Foreign Ministers in Rome to explain to them that reductions will have to be made in the costs of their forces in Germany on the same basis as those made by the Three Powers.

Solutions to the following problems have not been reached:—

(v) The manner in which the German contribution to the European Defence Community should be assessed.

[It is necessary to make some interim arrangement covering the period of the first year of operation of the contractual arrangements and the European Defence Treaty. If the German contribution is to be worked out on the basis described in paragraphs 2(c) and 6, there will be considerable delay before any discussions can take place with the Germans on the composition of the German defence contribution. Furthermore, if the German contribution to the European Defence Community budget in the first year should exceed the cost involved in raising and equipping German contingents and the cost of supporting the forces in Germany of other European Defence Community countries, the problem of the financial gap in Germany would be considerably aggravated. In these circumstances, the only practical course appears to be to relate the German financial contribution to the European Defence Community in this initial period to the actual costs referred to above, together with an appropriate contribution to the overhead expenses of the European Defence Community (i.e. the support of the administrative services of the European Defence Commissioner and his staff). U.S./U.K.]5

[The German contribution to the European Defence Community should be determined according to the provisions of the Treaty establishing the Community and on the basis of the total budget resulting from the common defence programme. As explained in paragraph 6, transitional arrangements will be made to ensure that the Community will be in a position to fulfill its mission as soon as the Treaty has been ratified, but these arrangements should be of such a nature as not to prejudge the principles which will govern the organization of the Community and the operation of the common budget. French.]

(vi) The method of dealing with a situation in which the total German contribution is exceeded by the sum of the Allied and European Defence Community requirements.

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[No priority should be established in favour of either category of expenditure (viz. Allied and European Defence Community) and a suitable method should be worked out either of reducing the total expenditure so as to bring it within the limits of available German financial resources, or of utilising other financial resources which may become available to meet the situation. Such a method should be devised while negotiations with the Federal Republic progress. (French/U.K.)] [His Majesty’s Government cannot contemplate any additional burden on the U.K. defence budget or balance of payments in the first fiscal year or subsequently. (U.K.)]

[It is essential that a method be found which will permit German resources to be used for the purpose of creating additional military strength for the West in the form of combat-worthy German units. While certain Allied expenses in Germany should continue to be met by the Federal Government, other expenses should be assumed by the Allied Governments concerned, if necessary, to permit this objective to be achieved. It will not be feasible to obtain German agreement in the contractual arrangements to meet all types of Allied military expenditure which have hitherto been covered by occupation costs simply by the device of reducing the total expenditure to be borne by the Federal Republic. (U.S.)]

(vii) The manner in which reductions in Allied costs should be effected.

[Reductions in Allied costs should be achieved by a programme of economies by which the maintenance expenditure of each Ally in the German fiscal year 1952/53 is to be cut by at least ———6 per cent, of the total of 1951/52 figures, after these have been adjusted to take account of the increases in average strengths between 1951/52 and 1952/53. (French/U.K.)]

[The proposed French/U.K. formula for reductions in Allied costs is not adequately related to essential military expenditure. It does not profess to be adequate to meet the gap and the question of reductions cannot be considered apart from the question of meeting the gap. (U.S.)]

9. Recommendations

The Tripartite Group recommend that the agreements set out in (i) to (iv) of paragraph 8 above should be approved and that the Foreign Ministers should consider the problems described in (v) to (vii).

  1. Not printed; for the text of the terms of reference, see WFM T–5a, p. 1197.
  2. Not printed.
  3. Not found in Department of State files.
  4. The text of the memorandum appended as Annex C is that transmitted in Repto 5697, November 14, p. 1668.
  5. Brackets throughout this document appear in the source text.
  6. Omission in source text.