740.5/12–2251: Telegram

The United States High Commissioner for Germany (McCloy) to the Secretary of State 1

secret   niact

849. Second mtg rapporteur group Ger defense contribution held yesterday with Schaeffer as Ger rapporteur, since Blank attending [Page 1696] Paris EDC conferences. Schaeffer said govt recognized defense contribution will be subj of convention negotiated in Bonn.2 However, convention will be affected by the Paris negots on the EDC common budget which Schaeffer hopes will be resolved by Dec 30, and its scope determined by the success or failure of those negots. Schaeffer then outlined his ideas of the outstanding issues.

He said the main item of expenditure wld be for troop support. He assumed there wld be complete standardization for all troops, EDC and non-EDC in respect to barracks and the whole range of items included in infrastructure. He assumed EDC wld bear the entire costs of infrastructure and there wld be no separate Ger contribution thereto. For example, the Ger transportation system wld be placed at the disposal of all forces, irrespective of nationality or membership in EDC. However, reimbursement for transportation wld be in accordance with EDC criteria. He expected that the Paris negots wld result in setting a figure for Gers contribution to EDC which wld fully exhaust Gers capacity to pay and thus completely acquit her of her responsibilities for a defense contribution.

Having made this statement he then asked us for a detailed synopsis of the data and thinking that led to our request for a 13 billion DM contribution. He assumed that the reasons were similar to those which led to Buttenwiesser’s statement that Gers GNP for FY 1952/53 wld be 127 billion DMs and that Gers contribution to defense shld be 10 percent of that figure or roughly 13 billion DM.3 He said under no circumstances could Ger consider a contribution in the magnitude of 10 percent of her GNP because this wld represent a gross injustice in the light of the contributions of other countries and an exhaustive financial burden which he, as Fin Min, deemed disastrous.

He dwelled at length on the dangers of inflation and came to the conclusion that a contribution even remotely approaching the magnitude of 13 billion wld result in run-away inflation and the immed spread of Communism throughout Ger. He made much of the refugee problem and claimed that it was of international origin and, consequently, an international responsibility to be recognized as such and considered an offset to Ger’s defense obligations. Schaeffer assumed the TCC wld continue negotiating with each of the NATO countries on their capacity to contribute. He believed that EDC, after a common budget was established, wld then negotiate with TCC on behalf of the EDC countries.

We informed Schaeffer that the TCC negotiations were concluded in that a report had been made and TCC’s remaining function was [Page 1697] to obtain action on its report.4 We said that since Ger was not a member of NATO, the negots with the rapporteur group were in effect similar to the negots which FEB and TCC have concluded (altho not an actual delegation of responsibility). We disabused him of any notion of a Ger appearance before TCC. We reiterated our previous statement that we expected a convention to be negotiated in Bonn fixing the amt of Ger’s total contribution, logistic support and the composition of their contribution. We asserted that Schaeffer was starting negots on the wrong basis, i.e., he concerned himself solely with the Ger burden and seemed not at all concerned about the problem of sharing the total costs of the common effort. We suggested that he discard traditional Fin Ministry conceptions of an acceptable budget and accept immed the necessity for sacrifice in view of the common need. We pointed out that Ger was by far the greatest benefactor of an association with the western world and that this association in itself lightened the load which Ger wld otherwise have to meet. We said that if the polit sitn were such that Ger had to defend herself alone he, as Fin Min, wld immed find ways and means of meeting a bill far in excess of the contribution asked of him, and that this had been adequately demonstrated by Ger’s previous record.

Because we were unable to divulge the basis on which the other countries contributions had been set, we did not believe it feasible to inform Schaeffer of the specific method used to arrive at the 13 billion DM figure. We justified the figure on other grounds, pointing out that Ger alone of all Eur nations could substantially expand her economy by utilizing presently un-utilized resources in the form of unemployed labor and industrial capacity. We said Ger wld see a substantial increase in GNP under the stimulus of demand created by the defense contribution and that refugees, far from being a burden, wld be a strength in that they wld be a decisive factor in increasing Ger’s GNP. The mtg concluded with an agreement that the Allied rapporteur groups wld go to Paris and meet with Schaeffer there on the 29th or 30th. We will exchange data and, in the light of the EDC conference decisions, determine further procedure. Schaeffer seems to have given up all ideas for a vacation and now appears to be agreeable to negotiate after the EDC mtg on a daily basis until a contract is completed.

Altho Schaeffer did not bring out his ideas that Ger’s contribution shld be financed in part by an international loan we believed we should step hard on this suggestion at once. Consequently we told him Ger must meet her rightful obligations out of her own resources and not attempt to transfer them to her partners. Thus she should not think in terms of an international loan to finance her contribution. Schaeffer did not relish our ref to this point and found it necessary [Page 1698] to explain his ideas in this respect. He said the loan wld be floated in Ger but since there was no capital market here, it could not be successful unless it were guaranteed by other countries. We objected most strenuously to this proposal because it constituted a failure to recognize the fact that Ger must find ways and means of meeting her obligations out of her own resources in an amt comparable to that of the other principal western countries.

Comment: Schaeffer’s strategy is now quite clear. He believes Ger membership in EDC and the common budget mean the foll:

Ger’s total contribution will be fixed by EDC.
EDC as a defense entity will assume all responsibility for all defense obligations of the member nations. EDC will determine common standards re support of all forces (EDC and non-EDC) in EDC countries. There can be no differences between the support accorded to and rights of EDC and non-EDC forces in an EDC country. Thus UK and US forces must accept the same conditions in Ger which are applicable to EDC forces.
Since EDC will set standards for logistic support there is no need for contractual convention this subj.
EDC will negotiate for and be the recipient of US aid and not the individual member countries.
Schaeffer undoubtedly hopes to finalize Ger’s contribution to EDC during Paris mtgs. He will then claim this represents Ger’s maximum defense contribution and has been accepted as such by EDC.

We are definitely handicapped because of our inability to divulge the contribution of other countries and the basis upon which they were set up. We shall again broach this subj in Paris and hope to obtain TCC’s consent to make known the results of those deliberations. In the interim period we must present him with some figures and believe we should give him the submissions of the UK, Br and US to the TCC. Each element is unilaterally requesting authority from its own govt. If agreeable to you, pls cable soonest your consent to turn over US submission.

We are further handicapped by a difference between the Fr on the one hand and the UK and ourselves on the other on interpretation of the Fon Mins Rome instructions. We believe the instructions clearly indicate we are to negotiate Ger’s contribution for the first year and her continuing obligation thereafter. The Fr assessor seems personally to agree with us but is uncertain of his country’s position. He thinks it probable that Fr’s reps in EDC have taken and will continue to take the position that Ger’s obligations are to EDC, that there can be no differences in treatment between EDC and non-EDC forces in any country, and that Ger’s primary obligation will be affirmed in tihe EDC treaty and not the convention to be negotiated in Bonn. The immed [Page 1699] following tripartite cable sets out some of the differences and requests further instructions.5

  1. Repeated to Paris and London.
  2. Apparently this change in Schaeffer’s position was the result of a conversation between McCloy and Adenauer on December 19 during which the Chancellor agreed to center at Bonn all negotiations on the German financial contribution. This was reported in telegram 832 from Bonn, December 20 (740.5/12–2051).
  3. The statement under reference here has not been identified further.
  4. For a summary of the Temporary Council Committee report, see p. 389.
  5. Telegram 850, infra.