396.1–ISG/2–1851: Telegram

The United States Delegation at the Intergovernmental Study Group on Germany to the Secretary of State 1

secret   priority

Sigto 453. Text of letter on German debts contained in Bonn’s 549, February 17 to Department, repeated London 142, Frankfort 655, Paris 1482 seems to us to go long distance toward meeting Allied requests. While it does not give us an explicit immediate recognition of postwar claims, it accepts principle of preferred status and, from US point of view, we think it is acceptable when taken in conjunction with explicit clauses in ECA bilateral. Clause re arbitration, which is now couched terms unilateral Federal Republic statement, is considerably less troublesome than earlier text.

We believe, however, that sentence on private commercial debts in third paragraph of part III is unacceptable and would be wholly inconsistent with concept of settlement plan which US has urged for many months and which was accepted by Ministers at New York. This sentence provides for preferential settlement of private commercial debts, fact which is emphasized by omission from letter of statement taken from New York agreement that settlement arrangements should assure fair and equitable treatment of interests affected. Preferred position of these claims is also emphasized by contrast between this provision and provisions on postwar claims. To accept it would mean [Page 1421] complete surrender to pressures from New York and British and Swiss banks. Preference would work particularly to the benefit of British.

We believe that we should make determined effort to eliminate this sentence completely from the draft, or failing that, to reword it in such a way as to deprive it of effect. Latter could be done, for example, by providing merely that consideration shall be given to the problems of private commercial creditors and debtors.

Aside from this point, we believe that text of letter is acceptable. We agree there are several points which require clarification, but feel that these should be handled by way of interpretation. Interpretations could be contained either in an agreed memorandum of understanding with Germany, or letter from HICOM or in statement to Germany, copy of which could be given them for the record. Points we believe should be so dealt with are those raised in paragraphs (1) and (3) Deptel 5575, February 13 to Frankfort repeated London Tosig 418, Paris 426.3 We do not think that point in paragraph 2 of reftel is sufficiently serious to be worth raising. We are far more concerned with possibility that Germany will seek arbitration regarding amount and terms of payment. This seems to us to be quite unworkable, but we think that least said about subject at this state the better. Since German statement re arbitration is unilateral it does not bind us to accept arbitration clause, but merely to consider it. We should be prepared to consider arbitration on any matter with respect to which it is appropriate, but should be free to argue later as to what is appropriate.

British propose coordination of government position on letter be through ISG. We believe French will probably accept this proposal. Please advise urgently Department’s view. If you desire discussion in ISG, request instruction on points listed above.

  1. Repeated to Frankfurt and Paris.
  2. Supra.
  3. Not printed; it stated that the Department of State was prepared to accept the draft letter but was concerned about the following ambiguities:

    • “1) Provisions in II re recognition and settlement post-war econ assistance debts do not carry implication that those debts must be handled outside context of settlement in III.
    • 2) Provision in II for arbitration does not mean present ECA bilateral must be revised to include such provision or that arbitration clause will be included in any agreement covering future econ assistance.
    • 3) Participation of all interested countries provided in III in practice must be qualified in some manner re Soviet orbit nations. In same paragraph statement all interested countries ‘shall participate’ shld be phrased ‘shall have the right to participate’ or similar phrase. There is the further point that govt participation does not necessarily exclude participation by representatives of the private debtors and creditors.
    • 4) Statement in III that plan shld provide for possibility immed settlement of private commercial obligations does not imply any requirement of immed discharge of such obligations in fon exchange.” (396.1–ISG/2–1051)