Foreign Relations of the United States, 1952–1954, Germany and Austria, Volume VII, Part 1

740 5/5–2052: Telegram

No. 39
The United States High Commissioner for Germany (McCloy) to the Department of State ¹

secret priority

Bonn , May 20, 1952—8 p.m.

2951. Dept pass MSA, Paris pass SRE, inform Defense. Ref: Bonn to Dept 2936 rptd Paris 960 London 836.² During dinner after yesterday’s mtg between HICOMers and Adenauer,³ I discussed informally distribution first year’s contribution with Chancellor and Schaeffer. I stressed our argument that we did not believe FedRep could spend wisely the funds which they seek and again said that we wld not agree to div which gave FedRep funds which it could not translate into men and weapons. I cited several examples of US experience and pointed out that even Ger estimates showed that deliveries of equip could not take place within time period envisaged between the effective date of treaty and June 30, 1953. Chancellor appears to have very little knowledge of problem and seemed most sympathetic to this argument.

Schaeffer was in a conciliatory mood and in principle seemed to assent to my suggestion that the distribution should reflect actual expenditure possibilities. Schaeffer said he was working out chart which wld demonstrate the ascending requirements of FedRep. He implied he was prepared to take lower figure for first few months providing it is recognized that FedRep’s requirements will increase and division based thereon. This seems to provide some possibility for agreement prior to FonMin mtg.

Unfortunately, greatest difficulty is still with Brit. They have adopted firm position that they cannot go below the proposal outlined in Bonn to Dept 2911, rptd Paris 953, London 830.⁴ Their concern now seems to be chiefly with second year. They are fearful that decreasing amt for Allies as suggested in Bonn to Dept 2889 rptd Paris 940 London 818⁴ will prejudice distribution of second year’s contribution by tacitly admitting Allies can get along with comparatively small amt. Therefore, they are committed to flat unchanging rate per month for Allies.

In our view their position extremely shortsighted. If we grant Ger her full minimum requirements exclusive of heavy equip and make allowances for prefinancing, etc., for first six month period, we wld have recd DM 593 million per month and for third quarter DM 291 million per month, totaling for the nine month period DM 4,431 million. The Brit proposal of DM 511 million per month for nine-month period totals DM 4,599 million.

We are calculating that treaty will be effective at earliest on Oct 1, 1952 and more probably sometime between that date and January 1, 1953. If effective date is Dec 1, leaving a seven-month period, under sliding scale DM 3,849 million. Adjustments can be made in the amt allotted to Gers so that the nine-month total under either method will be equal. Our point is that by having higher figure for first six-month period, we not only will obtain more funds in event treaty is effective after Oct 1, but we will also be able to relate distribution to Ger requirements giving us a more forceful argument with Gers.

It is, of course, possible to adjust the figures so that the disparity between amt we receive in first six months and amt for last three will be smaller. Unfortunately, an adjustment of this sort is limited because we have already proposed to Gers a flat monthly rate of 511 million per month and this is tantamount to admission that we can get along on this amt. Despite this we might propose 54 million for first 6 months and 420 million for the last three. While the disparity between the two figures is less, we wld still obtain a greater total amt in event effective period prior to June 30, 1953 is only 6 months.

Equally impt is fact that as long as we negotiate for flat monthly rate we have no room to bargain. It appears Gers simply will not accept split of 511 million for US and 339 million for themselves and only bargaining we can do is downward. Other system provides much more flexibility. The Brit here concede this argument. However, they are bound by their instructions not to reduce Allied budgets below 10 percent which may be necessary and to oppose a lower rate for the last three months for fear it will be admission that Allies can get along on this low rate and thus prejudice our case in second year. We believe this reasoning unsound because no matter what distribution is for first year Ger requirements in second will increase substantially.⁵

McCloy

1. Repeated to Paris and London.
2. Not printed.
3. See telegram 2935, supra.
4. See footnote 2, supra.
4. See footnote 2, supra.
5. On May 20 Frank Nash, who had arrived in Bonn during the second week in May to assist McCloy with the discussions of a German financial contribution, met with Schaeffer at the latter’s request to continue the talks on this subject. The two officials discussed the entire problem at some length in what Nash characterized as “a generally business like and friendly” conference, but no agreement was reached. (Telegram 2959 from Bon, May 20, 740.5/5–2052) The financial agreement was discussed again on May 21 and 22, and at the latter meeting the Chancellor and the High Commissioners reached agreement on a recommendation to be presented to the Foreign Ministers. Under the terms of this agreement Allied forces would receive DM 474 million a month while the German contingents would receive DM 376 million a month. McCloy reported on these meetings in telegrams 2987 and 3007, May 22 and 23, from Bonn. (762A.0221/5–2252 and 740.5/5–2352)