262.84A41/4–1051
Memorandum of Conversation, by Alexander F. Kiefer of the Office of German Economic Affairs
Subject: Israeli Reparation Claim Against Germany.
| Participants: | Mr. Abba Eban, Israeli Ambassador |
| Mr. Horowitz, Israeli Minister of Finance | |
| GER—Henry A. Byroade | |
| GEA—Alexander F. Kiefer |
The Ambassador and Mr. Horowitz stated that they had come to discuss in greater detail with Mr. Byroade the Israeli reparation claim against Germany, which had been the subject of a note from the Israeli Ambassador on March 12, 1951. Mr. Horowitz stated that the German balance of payments was now greatly improved, and while it was realized that it was still short of equilibrium, it seemed to him that it was sound enough to bear the burden of the Israeli claim. He compared the German balance of payments with that of Israel, having exports of 13 million pounds sterling and imports of 103 million pounds sterling, the latter much larger figure being due entirely to the costs of resettlement which, it was recalled, had entered into the Israeli reparation claim. Mr. Horowitz noted that many restrictions on German production had been removed and that Germany had many exportable commodities in a seller’s market; the Israeli Government realized that payment of the reparation claim by Germany would have to take several years and that it probably would have to be in unrequited exports, rather than foreign exchange. This was no problem for Israel because Germany was producing precisely the things which Israel needed most urgently.
The Israelis felt that Germany was actually ready to do something along the lines which the Israeli Government had in mind and Mr. Eban added that the influence of the Occupying Powers under the circumstances might make the difference between readiness to do something and action itself. Mr. Horowitz expressed his conviction that the Israeli claim was entirely feasible from the economic point of view. What was needed was Allied pressure on the Germans to perform. The Israeli claim was not a purely legal one, and possibly there were certain legalistic gaps in it. The circumstances, however, were such that political and moral bridges over these gaps were completely justified. One had to reckon in this connection with the very strong public opinion on this matter in Israel.
Mr. Byroade asked what Mr. Horowitz had meant by a German readiness to do something. Mr. Horowitz replied that there seemed to be a realization in the higher circles in Germany that a measure of [Page 631] additional retribution was called for, but that it was quite possible that this feeling did not prevail among the people.
Mr. Byroade suggested that what the Israelis wanted was really reparation out of current production. It also seemed to him that the Israelis saw the German picture in brighter terms than we did; actually we expected a German trade deficit next year, additional ECA assistance, and a mounting burden on the Germans in connection with the defense effort. Mr. Horowitz admitted the point about reparation out of German production, but stated that he preferred to consider it a measure of necessary retribution. It was realized that the German Government would be faced with certain other obligations which would have to be satisfied out of limited resources. The matter really boiled down to a question of priorities and in considering these, one would have to bear in mind such matters as the comparative standard of living as between Germany and Israel. For the Israelis, the question was whether the Israeli people should be kept on a level of starvation so that the Germans might be permitted to contribute to Allied security while maintaining their present relatively high standard of living. The amount of the Israeli reparation claim was actually relatively insignificant in the total German economic picture. Furthermore, since the matter of the defense of the Western world had come up, it might be well to bear in mind that a strong and well developed Israel was also a very considerable asset to that defense.
Mr. Byroade stated that he agreed that there was a question of priorities here and that he had really wanted to indicate that there would be a German deficit for sometime to come, and that the priority for the support of Allied Forces would place heavy demands on the German economy. He inquired what time period the Israeli Government had in mind for the payment of the Israeli claim. Mr. Horowitz replied that this might be five to seven years, depending on the development of German exports. Mr. Byroade commented that he wished the problem were as easy as the Israeli representatives had made it out. Mr. Eban commented that the impact on the Israeli economy of rehabilitating 500,000 persons was greater than the impact of the necessary assistance on the German economy.
Mr. Horowitz remarked that there were strong psychological considerations. Something had to be done soon by the Germans and gracefully, if this question was not to poison the atmosphere for years to come.
Mr. Byroade stated that the Israeli claim was really an Allied problem. He was sympathetic to the logic of the Israeli position, but he was also acutely conscious of the practical difficulties arising out of the nature of the world in which we live today.
[Here follows discussion of procedural matters.]