127. Report Prepared by the Operations Coordinating Board1


(Policy approved by the President, August 13, 1953)

(Period covered: December 6, 1956 through July 17, 1957)

A. Summary of Operating Progress in Relation to Major NSC Objectives3


OCB Recommendations Regarding Policy Review. While the basic objectives of NSC 160/1 are still considered fundamentally valid, many of the ten courses of action are now out-of-date and no longer furnish adequate operating guidance. In particular, up-to-date guidance is required with regard to the specific courses of action to be followed in promoting the basic objectives of Germany’s association with the West, an effective German contribution to the military strength of the Free World, and the reunification of Germany.

The Board notes the National Security Council has already directed a review of policy on West Germany, East Germany and Berlin.

Summary Evaluation. Progress has been made with regard to the major objectives of the firm association of the Federal Republic with the West and Germany’s participation in the collective defense of the West. However, influenced by the approach of the next Federal elections and uncertainties regarding atomic armament, the German Government has not taken the vigorous action necessary for a rapid and effective military build-up. It is unlikely that firm decisions regarding the ultimate force goals will be made until after the German elections.

German contribution to Western defense. Reluctance to take in an election year unpopular measures necessary to large-scale rearmament, coupled with practical difficulties (particularly a shortage in [Page 298] training areas, barracks, and potential pilots and technicians) and uncertainties as to the future course of NATO strategy, have resulted in a drastic revision of the Federal Republic’s defense plans which were presented to NATO in Germany’s initial submission to the 1956 Annual Review Questionnaire. In the Fall of 1956, the Federal Republic announced that the goals for the number of men in uniform by the end of 1956 would be reduced from 96,000 to 70,000 and by the end of 1957 from 270,000 to 135,000. Government spokesmen stated that the goals for the period beyond 1957 would depend on the results of the current NATO reappraisal of basic strategy.

Despite this element of uncertainty as to the eventual strength of the German armed forces, slow but basic progress is being made in the military build-up. During 1957, five understrength divisions with a limited combat capability are scheduled to be assigned to SHAPE. Two additional divisions at regimental combat team strength are expected to be assigned to SHAPE during the Spring of 1958. A small naval command and two air transport squadrons also are to be turned over to NATO command during the current calendar year. On April 1, 1957 approximately 10,000 men were inducted under the conscription law enacted last July. Under present plans no more men will be drafted this year; inductions will be resumed in the Spring of 1958 when another 30,000 men will be drafted.

Prevention of Soviet domination over all Germany: reduction of Soviet power in East Germany and Communist influence throughout Germany. See Progress Report on East Germany.
Restoration by peaceful means of a free united Germany. Soviet intransigence has continued to block progress toward this objective. A U.S.–U.K.–French–German Working Group met in Washington March 6 to March 15, 1957 to review Western policy with regard to German reunification in relation to European security.4 There was general and unreserved agreement that there is no prospect of entering into successful negotiations with the Soviets on German reunification in the near future. There was also agreement that the proposals advanced by the Western Powers at Geneva remain generally valid but that there was a need for increased public understanding of the Western position. Further meetings of the Four-Power Working Group were held in Bonn from May 13 to 18 and in Paris from June 18 to 22 to study methods of presenting the Western position on reunification in positive terms designed to convince Western—and particularly German—opinion that this position is completely sound.
Promotion of a healthy German economy. The economy of the Federal Republic has continued to set new records in production and foreign [Page 299] trade, and rapid growth in foreign exchange reserves has continued.
Maintenance of the Western position in Berlin. The Western position in Berlin has been fully maintained. (See Progress Report on Berlin.)
Progress in Carrying Out Commitments for Funds, Goods, or Services and Other Programs. Commitments for the delivery of military equipment to the Federal Republic both as grant aid under the Nash list5 and on a reimbursable basis are being met. German cash orders for United States material under the Procurement Agreement of 1956 now total over $300 million. Orders for additional equipment, including guided missiles, will probably increase this amount substantially during the current year.
New Commitments for Funds, Goods or Services. A loan agreement with the Federal Republic has been concluded under which the United States will make available on loan one destroyer for an initial period of five years. The Federal Republic will pay for all outfitting and rehabilitating costs.

B. Major Operating Problems and Difficulties Facing the United States

Defense Contribution. The whole character of the Federal Republic’s defense contribution in terms of manpower, weapons and the mission of her forces is under searching review by the Federal Government. Doubts already existing within Germany as to whether the Germany military contribution was being properly organized or adapted to the requirements of the “atomic age” were strengthened by the British decision to withdraw part of their forces stationed in Germany and to place primary emphasis on strategic atomic weapons to deter attack against Great Britain and the NATO area. At the present time there appears to be a certain dichotomy in German thinking on this subject, with certain elements contending that the NATO powers, including Germany, should have large ground forces in Western Europe armed with conventional weapons and others maintaining that primary reliance should be placed on smaller units equipped with tactical atomic weapons. The Federal Republic has recognized that a unilateral solution of this question is not possible and, through the WEU, has raised the whole problem for consideration by the North Atlantic Council and SACEUR. Substantial public opposition has developed in West Germany to arming German forces with atomic weapons or to stationing atomic weapons in the Federal Republic. Judging from informal statements, the German Minister of Defense, Franz Josef Strauss, is prepared to argue for a reduced German defense contribution in terms of man-power (from 500,000 to as low as 340,000) but with a combat capability equivalent to that [Page 300] of the final force goals expressed in both the 1955 and initial 1956 ARQ (Annual Review Questionnaire) submission in terms of new weapons with atomic capability.
Certain Specific Points of Disagreement. During the period the United States Government found itself at odds with the Federal Government on the following specific problems:
Financial support of U.S. troops. The Germans were informed we could not accept as final the contribution of DM (Deutschemark 325 million ($77.5 million) for the support of American troops in Germany for the year ending May 1958—one-half of last year’s amount— offered by the Federal Government. An interim arrangement has been agreed to under which the U.S. has accepted the German offer subject to the understanding that the matter would be reviewed at the end of six months upon U.S. request;
German assets in the U.S. Despite German pressures on behalf of proposed legislation by the United States Congress for the full return of vested German assets, the Administration has reaffirmed its position favoring only a limited return of such assets (i.e., only those properties with a value of $10,000 or less); and
Status of Forces Negotiations. The Germans revealed their dissatisfaction with the slow progress of the Status-of-Forces Conference in Bonn and proposed that the conference be terminated even though agreement has not been reached on all issues. We consider none of the remaining areas of disagreement to be insuperable and are urging that these negotiations be pursued to their conclusion.
German Reunification. The desire for reunification and the problem of how to make progress toward this goal continue to represent fundamental motivating forces in Germany with regard to both external and internal policies. However, the importance of reunification as an issue in the context of the German election campaign has been reduced, partly as a result of the Chancellor’s skillful tactics in rebutting the charge that he is inflexible on this issue, and partly because of renewed evidence that the Soviet Union is unwilling to discuss the subject in realistic terms at this time. On the other hand, the Germans are devoting increasing attention to the relationship to the German reunification problem of the current disarmament negotiations in London and of the atomic armament issue. Certain anxiety persists that an agreement on disarmament may be reached among the Big Powers without parallel agreement on German reunification, which would eliminate an important bargaining point for achieving the latter objective. Although Soviet repression in Hungary dampened German hopes for reunification in the short run, Germans point to the revolutionary situation in Poland as holding forth promise of fundamental changes in the Soviet empire which could in due course alter the present negative attitude of the Soviets on the reunification issue.
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C. Listing of Additional Major Developments During the Period


Chancellor Adenauer’s U.S. Visit (May 24 to 29). During his visit, the Chancellor held a series of important discussions with the President and Secretary of State which dealt primarily with the problem of disarmament and its relation to German reunification. Following these talks a communiqué and joint declaration6 were issued by the President and the Chancellor in which they agreed that if initial steps toward disarmament should be successful, “they should be followed within a reasonable time by a comprehensive disarmament agreement which must necessarily presuppose a prior solution of the problem of German reunification.” In addition the joint declaration noted that the Chancellor had advised the President, as well as the British and French Governments, “that the Federal Republic would consider that the conclusion of an initial disarmament agreement might be an appropriate time for a conference on the reunification of Germany among the Foreign Ministers and the four powers responsible therefor.

In anticipation of the German general elections next September a number of other important German political leaders, including Erich Ollenhauer, leader of the opposition Social Democrats, also made visits to the United States.7

The Coming German Elections. The campaign for the general elections to the next Bundestag on September 15, 1957 got well under way. Since the end of 1956, at which point the opposition SPD (Social Democratic Party) had overtaken Adenauer’s CDU (Christian Democratic Party) in public opinion polls, the popularity of the Adenauer Government, and with it the confidence of the CDU, have recovered steadily. This trend reflects: (a) public reaction to the developments in Hungary, which seemed to have confirmed Chancellor Adenauer’s policies based on the assumption of a continued Soviet threat, (b) the government’s achievements in the fields of internal prosperity and social welfare, and (c) the difficulties being experienced by the opposition parties in finding solid campaign issues. (At present, the Social Democrats are concentrating their attack on the government position regarding atomic weapons for the German armed forces and the storing of atomic weapons on German soil by other powers.) The election promises to be extremely close, and it is still doubtful that either the governing Christian Democrats or the opposition Social Democrats will win a majority of Bundestag seats in September. Coalition possibilities after the elections, in descending order of probability, are: (1) the continuation, with the help of several [Page 302] of the smaller minor parties, of the present coalition dominated by the Christian Democrats; (2) a coalition of the Christian Democrats and the largest minor party, the Free Democrats; and (4) a so-called great coalition of the Christian Democrats and the Social Democrats. Of these various alternatives the third would give rise to the greatest likelihood of any considerable departure from the foreign and domestic policies which have been pursued by the Adenauer government for the past eight years.
European Integration. The Saar territory passed from French to German sovereignty on January 1, 1957 under the terms of the agreement between the two governments on the matter. The Federal Republic signed the treaty for EURATOM and the Common Market on March 25, 1957, and has taken steps toward ratification of these agreements this summer.

East-West Trade. The Federal Republic agreed in April, in response to Soviet initiative, to enter into trade talks with the Soviet Union [which] will begin on July 22, 1957. The Federal Government has informed NATO that in these talks (1) it plans to propose an exchange of goods for a period not to exceed three years; (2) it has no intention of concluding a bilateral clearing agreement; and (3) it will strictly observe existing embargoes. The Germans hope to receive manganese ore, coal, oil and timber from the Soviet Union. The German Government is under considerable pressure from German industrial and commercial interests to expand trade with Communist China.

During the second half of 1956 German exports to the Soviet Bloc accounted for about 3.6% of the total exports. German imports from the Soviet Bloc during the same period amounted to about 4.2%.

EPU Trade Imbalances. Large-scale EPU trade balances in favor of the Federal Republic continued to complicate the economic relations between Western European countries. The German Government has agreed to make advance payments amounting to 30 million pounds ($84 million) to the U.K. for purchases of arms. It has also agreed to advance 75 million pounds ($210 million) to the U.K., in the form of a deposit at the Bank of England, in anticipation of ten annual installments due on the debt arising out of British postwar aid paid to the Federal Republic.
  1. Source: Department of State, OCB Files: Lot 62 D 430, Germany. Secret. A memorandum of transmittal, dated June 1, which stated that the NSC had noted and discussed the Progress Report with particular reference to the recent reduction in the West German defense plans; reports on Berlin and East Germany; and a financial annex are not printed. For the July 17 Progress Reports on Berlin and East Germany, see Documents 204 and 235.
  2. For text of NSC 160/1, see Foreign Relations, 1952–1954, vol. VII, Part 1, pp. 510520.
  3. The latest NIE on West Germany is 23–56, dated 4/17/56. [Footnote in the source text. NIE 23–56 is printed as Document 48.]
  4. See Document 98.
  5. Not further identified.
  6. For texts of the communiqué and joint declaration, see Department of State Bulletin, June 17, 1957, pp. 955–956.
  7. See Document 92.