396.1–ISG/3–2251: Telegram
The United States Delegation at the Intergovernmental Study Group on Germany to the Secretary of State 1
Sigto 571. Ref Tosig 409 Feb 9 rptd Frankfort 55002 and Tosig 483 Mar 13 rptd Frankfort 6175.3 We have reported separately in Sigto 560,4 discussion on claims for postwar econ assistance in steering comite Mar 15. Subj did not come up for discussion earlier owing to preoccupation of str comite with PLI and fact that it was not pressed by USDel. Mar 1 memo referred to in Tosig 483 was only internal paper and does not represent considered views of USDel.
In our view, first point which requires settlement in terms of reaching US policy decision is relationship of these claims with def expenditures. We are inclined believe it wld be great mistake to attempt to secure payment of these claims as means of financing def expenditures or occ costs in Ger. Problem can be divided into two time periods. When Ger participation in def is agreed, it seems to us that arrangements respecting Ger shld be on same basis as that of NATO member countries. Burdens which Ger shld bear must be related to burdens borne by other countries participating in western def and shld be worked out on same principles as those applied in NATO burden-sharing exercise. It seems to us neces from polit viewpoint that Ger be on same footing as NATO member countries. Negots must be aimed at determining what is reasonable contribution for Ger to make. Relating payments to settlement of debts will obscure basic considerations involved, i.e., Ger contribution to def of her own territory in common with other west countries and place entire question on false basis. Furthermore, it will introduce an additional set of considerations which will make the negots more difficult and perhaps set an unfortunate precedent for negots with other countries.
We recognize that the sitn until Ger contribution to def as agreed presents a problem of somewhat different character. We understand from Tosig 483 that dollar problem envisaged in last para is not immed one. During this period, therefore, question seems to be whether to seek [Page 1392] DM payment on postwar claims to cover part of cost of support of US troops in Ger. It is our understanding that these costs will continue to be borne through occ costs and mandatory requirements until Ger agreement of def is reached. We wld suppose that other occ powers wld object strongly at this stage to shifting part of occ costs to some other basis. From US viewpoint, providing Allied requirements are within Ger ability to pay not much is likely to be gained by doing so. If requirements are in excess of Ger ability to pay, which seems unlikely in short run, Ger will not be able to increase her fin contribution by labeling additional payments as repayment of debt.
In any event, assuming agreement on Ger participation in def is reached within reasonable period of time, we believe it highly unlikely that any settlement of postwar claims cld be reached in time to provide significant amt of funds in interim period.
For these reasons we are opposed to making any direct relation between settlement of postwar claims and occ costs or def financing. This does not mean that effect of def expenditure upon Ger balance of payments position shld not be taken into acct in determining what kind of settlement shld be made on postwar claims, along with all other claims which must be dealt with under settlement plan. Payments on debts, whether prewar or postwar, and transfer of earnings from investments in Ger, cld in longer run provide invisible item which wld facilitate financing Ger exports of def arts to Eur countries and means of preventing excessive accumulation of dollars, if, as suggested in Tosig 483 thus becomes a problem.
As between prewar and postwar debt, we believe US interest lies in favoring former. This has been gone over at great length in past and we see no need to spell out reasons in this tel.
We do not believe Gers expect to be called upon to make any substantial payments on these postwar debts. If we press them it wld greatly complicate and perhaps even jeopardize possibility of working out settlement for prewar debts, which we regard as being important in normalizing Ger relations with other countries.
We believe there is much to be said for wiping out postwar claims completely. We think this wld be too extreme a position however. We cld not get Brit to agree to such a position and it wld undoubtedly create difficulties in our relations with other Eur countries. We can also see some advantage in having access to DM payments for US Govtl purposes other than def. We wld like to go as far as we cld in direction of wiping out these claims. Our tentative view is that they shld be cut down to something in order of 10 to 15 per cent of nominal claims.
We recognize there is problem of determining how to relate settlement of these claims to other debt negots and to other negots with Gers. [Page 1393] We believe value of using claims as bargaining counter in def financing negots has been exaggerated. As stated above, we have serious question whether Gers really expect us to demand substantial repayment. Value of claims seems to us to be primarily preferential creditor position which they give US in debt negots, i.e., potential veto of debt settlement. Attempt to use claims in def discussions wld tend to depreciate their value in debt discussions and may in end confuse both sets of negots. We do not mean to imply that drastic reduction of claims wld be without value. Such action wld be valuable in relation to securing Ger acceptance of debt settlement and other fin arrangements with Ger if they can all be brought into relationship with one another and concluded more or less simultaneously.
Problem of timing and handling of negots on postwar claims is subj we are anxious to discuss in detail during forthcoming consultations in Washington.
We are suggesting USDep comment on this msg and wld appreciate HICOM doing same.5
- Repeated to Frankfurt and Paris.↩
- Not printed, but see footnote 3, p. 1354.↩
- Not printed; in it the U.S. Delegation was asked to indicate the status of postwar economic claims in the ISG negotiations. (396.1–ISG/3–1351)↩
- Dated March 18, p. 1388.↩
- On March 28 and April 16, respectively, McCloy and Spofford transmitted their concurrences with the conclusions and supporting arguments advanced in this telegram. (Telegram 7770 from Frankfurt, March 28 and Sigto 600 from London, April 16, neither printed; 862A.10/3–2851 and 396.1–ISG/4–1651)↩