No. 20
The Secretary of Defense (Lovett) to the Secretary of State


Dear Mr. Secretary: I have noted with satisfaction that the many complex issues relating to the contractual agreements with the Federal Republic of Germany are rapidly approaching resolution. I am also gratified to note your recent proposal that these agreements as well as the treaty establishing the European Defense Community be completed and signed by May 9, 1952.1

In this connection, however, I believe that we should clearly recognize the additional financial burdens to the United States which underlie the contractual agreements and the negotiations relating thereto. In particular, I am concerned about the reaction of Congress should it become necessary to seek supplemental appropriations, the need for which were not apparent at the time of submission of our budget estimate.

At the recent meeting of the Foreign Ministers at Lisbon, a broad general agreement was made with the German Federal Republic on the overall level of the contribution to be made by the Federal Republic to Western defense during the initial defense period.2 However, as I recall, no understanding was reached which expressly relieved the Federal Republic from its responsibility for [Page 34]liquidation of obligations incurred for the benefit of the Allied Forces during the occupation period. On the other hand, I am informed that the Bureau of German Affairs of the State Department interprets the intent of the Lisbon Agreement as placing a ceiling of 850 million DM per month from the effective date of the contractual agreement to 30 June 1953 as the total contribution which the German Federal Republic can be called upon to make during the initial defense period.

If it were possible to do so consistently with the position taken by the United States in connection with the Lisbon Agreement, and if it were otherwise politically feasible to do so, it would, in the opinion of the Department of Defense, be desirable to call upon the German Federal Republic specifically to undertake the payment of the unliquidated balance of obligations incurred for the benefit of Allied Occupation Forces during the period prior to the coming into effect of the contractual agreements.

I believe you will agree with me that it would be undesirable to have the Congress gain the impression that our dollar burden will be increased now or in the future, either directly or indirectly by reason of the failure of the Federal Republic to retire obligations incurred during the occupation period. Manifestly it would be difficult, if not impossible to meet the contention that dollar appropriations might be used, directly or indirectly, to liquidate obligations incurred during occupation.

In any event the problem confronting both our Departments, with respect to obtaining dollar support from Congress for the U.S. Forces in Germany, is wholly dependent on the amount of DM made available to the U.S. Forces. I understand that discussions are currently proceeding at Bonn and Paris on the division of the Federal Republic’s contribution between German contingents to the EDC and the Allied Forces. Considering all the ramifications involved in the division as I see it, there is no assurance that the amount of DM to be made available to U.S. Forces will fully cover their minimum requirements for the first defense year. Furthermore, the effective and economical utilization of the U.S. share can only be accomplished if funds available can be properly programmed. It is the view of this Department that to accomplish this end this Government must insist that the Finance Convention include a positive commitment on the part of the Federal Republic to the effect that the portion of the contribution made available to the U.S. Forces will remain available until fully expended.

I would appreciate an early expression of your views on the considerations covered herein; particularly I would appreciate your suggestion as to appropriate language for incorporation in the Finance [Page 35]Convention to accomplish the purpose set forth in the preceding paragraphs.


Robert A. Lovett
  1. See the message from Secretary Acheson, transmitted in telegram 2523 to Bonn, Document 16.
  2. For the exchange of letters between Chancellor Adenauer and the Foreign Ministers of the United States, the United Kingdom, and France at the time of the NAC meeting at Lisbon, see vol. v, Part 1, pp. 258 ff.