53. Report Prepared by the Operations Coordinating Board1

PROGRESS REPORT ON UNITED STATES POLICY TOWARD THE FEDERAL REPUBLIC OF GERMANY (NSC 160/1)2

(Policy Approved by the President August 13, 1953)

(Period Covered: February 1, 1955 through May 17, 1956)

A. Listing of Major Developments During the Period

1.

General

The Federal Republic acquired sovereignty. The Allied High Commission was abolished (May 5, 1955).

2.
Military
a.
The Federal Republic entered the Western defense system (NATO and WEU) (May 9, 1955).
b.
The Federal Republic began the build-up of the forces to be contributed to NATO. The Germans participated in the NATO Annual Review process for the first time (November 1955). Chancellor Adenauer stated publicly in September 1955 that the German ground forces would be brought to their projected full strength in three years and the naval and air forces in four years. These force goals were approved in the 1955 Annual Review. The MDA Agreement with the United States came into force on December 27, 1955. Recruitment and training of German forces commenced in January 1956, with the induction of a small number of German soldiers into the armed forces pursuant to interim legislation. Permanent basic defense legislation was approved by the Lower House of Parliament on March 6, 1956 and by the Upper House on March 16.
c.
The transfer of United States military equipment to the Germans was initiated in January 1956. Thus far only limited amounts of equipment for demonstration and training purposes have been turned over to the few German units which have been activated. Further equipment will be transferred as the German units become ready to receive it. During the period under review, the U.S. has programmed $14,000,000 for training of the German forces.
d.
The Federal Republic indicated its unwillingness to contribute to the support of foreign troops stationed in Germany except by providing goods and [Page 100] services on the same basis as other NATO powers. The sending states have taken the position that the Federal Republic should continue to provide substantial direct financial support in view of the lack of significant progress in her defense effort and the projected low level of her defense expenditures. Negotiations looking to a resolution of this issue are now underway in Bonn.
3.

German Unification

Western Allied proposals toward German unification were blocked by the USSR at the Foreign Ministers Conference, October 1955. NATO reaffirmed in December 1955 the recognition of the Federal Republic as the sole legitimately constituted German government.

4.
External Affairs
a.
Diplomatic relations between the Federal Republic and the USSR were initiated as a result of the Chancellor’s visit to Moscow in September 1955. However, to date Soviet efforts to exploit their mission in Bonn for the furtherance of their objectives in Germany have met with no significant success. The Federal Government sent a strong note to the Soviet Embassy expressing objection to certain of the Embassy’s activities calculated to exert pressure on the Government.
b.
The Saar moved toward political reattachment to Germany following the defeat in the referendum of October 23 of the statute providing for the Europeanization of the Saar. The French and German Governments commenced negotiations on February 20, 1956 for an alternative solution of the Saar issue. The French have indicated their willingness to agree in principle that the Saar should be reattached to Germany politically in return for safeguarding of their economic interests in the Saar, with particular reference to their desire for canalization of the Moselle. The negotiations are continuing in a spirit of cooperation.
c.
The Federal Republic was admitted by ECOSOC to the Economic Commission for Europe. The East German regime’s attempt to gain membership in ECE and UNESCO was defeated.
d.
German Foreign Office. The appointment of a full time Foreign Minister (Heinrich von Brentano), a function previously exercised by Chancellor Adenauer, has resulted in a considerable strengthening of the position and prestige of this Ministry. The Federal Government has launched upon a program of negotiating the solution of problems largely arising out of the war which have been an irritant in its relations with a number of countries (notably Austria, Belgium, the Netherlands, Sweden, and Italy), and has reached an agreement with Yugoslavia.
5.
Internal
a.
The Federal Government’s majority in Parliament was further reduced as a result of the ouster of the CDU party from the government in the [Page 101] key state of North Rhine-Westphalia and the subsequent split on a national scale in the Free Democratic Party.
b.
Communist efforts to penetrate industrial works councils and win over West German youth leaders through friendly approaches and subsidized visits to the Soviet Zone were recognized and countered by more aggressive local trade union leadership and an increase in the general concern over communist intentions and objectives.
6.
Economic
a.
The economy of the Federal Republic has continued to expand and increase in strength. German production and income continued to increase at a rate substantially higher than that of other European countries. Some concern arose about possible inflationary trends, and credit was tightened in the late summer of 1955 and again in March 1956. There was a further substantial increase in foreign exchange reserves, with gold and dollar reserves increasing nearly $400 million during the 12 months February 1955–January 1956.
b.
The Federal Government indicated considerable interest in joining with the U.S. and other countries in efforts to restrain Soviet influence in the Mediterranean area and the Middle East by promoting programs of economic development and investment.
c.
The Federal Republic concluded several important economic agreements with the U.S., including a Treaty of Friendship, Commerce and Navigation, and an Air Transport agreement.

B. Summary Statement of Operating Progress in Relation to Major NSC Objectives 3

7.

Validity of the Basic Policy

The five basic objectives are considered fundamentally valid. With regard to the ten courses of action set forth, there are certain particulars of the specific language which could be edited to reflect the developments occurring since their approval; substantively, and aside from these editorial amendments, it is considered that the courses of action are still valid and capable of effective implementation. In this connection it is to be noted that the NSC is reviewing NSC 1744 for which the Working Group on Germany has been assigned coordinating responsibility (June 1955) as it applies to East Germany. It is recommended therefore, that should the NSC omit East Germany from the new policy paper re the satellites, the NSC supplement NSC 160/1 with an appropriate new section pertaining to U.S. policy toward East Germany; this would package U.S. policy [Page 102] toward both East and West Germany in a single paper. (N.B. See paragraph 3 of the Progress Report on NSC 174).

8.

German Association with the West

a.
The defeat of the EDC has caused a considerable loss of faith on the part of Germany in the European idea. Although the Germans continue to be attached by the European idea, the coincidence of the defeat of the EDC and the restoration of sovereignty to the Federal Republic has resulted in a state of mind in which more and more Germans tend to look at their problems predominantly from a viewpoint of national self-interest. This tendency is reflected in the somewhat negative attitude of a number of German leaders toward such specific European integration projects as EURATOM and the common market; their lack of enthusiasm for these projects appears to be motivated primarily by their assessment of the relative advantages and disadvantages of the arrangements in terms of short-range German national interest. On the other hand both Chancellor Adenauer and Foreign Minister Von Brentano continue to lend their strong support on broad political grounds both to the general concept of European integration and to specific programs and projects designed to help bring it about.
b.
Despite the emergence of the tendency referred to above, there has not been any lessening of German ties with the West. On the contrary the Germans appear to find real benefit in their association with the West. During the occupation the Germans displayed some disinclination to push themselves forward vigorously in the international field. They now seem more disposed to take the initiative. They exhibit interest in and a desire to assume responsibilities in various areas of international life. In general their behavior in international organizations has been cooperative and forward-looking. At the same time, they appear to be strengthening their ties with the West in the political and economic spheres. The Federal Government continues to display keen desire to align itself closely with the United States despite some criticism in Germany that the Government is too dependent on this country.
9.

German Military Build-Up

Despite numerous assurances from the Federal Government that the German defense contribution will be completed on schedule, disappointingly little progress is being made. The delay is due in part to the thoroughness of the parliamentary review which permanent German defense legislation has undergone in the interest of insuring that it make adequate provision for civilian control of the army. While this aspect of the situation affords a basis for confidence that the new German army will not fall prey to the excesses and abuses of the past, the Federal Government in other respects has been deficient in making plans and taking measures to prepare the way for a [Page 103] quick build-up following the enactment of the legislation. Among the factors involved are the Government’s proclaimed determination not to increase its annual budgetary provision for defense above Deutschemarks 9 billion and the fact that its plans contemplate the receipt of substantial U.S. aid for which no adequate justification has been given. In addition there is growing support to reduce the conscription term from 18 to 12 months. This position, if enacted into law, will further reduce the capability for an effective build-up.

10.

German Reunification

No progress toward this objective was made during the period as a result of Soviet obstruction, as demonstrated by their repudiation at the second Geneva Conference of the Summit directive calling for negotiations regarding German reunification on the basis of free all-German elections.5 At the same time, the harsh rejection by Soviet Foreign Minister Molotov of the proposals put forward by the Western Powers served to convince the majority of the Western Germans, including political leaders in all parties, that the USSR had no intention, at least for the present, of reunifying Germany except upon terms which would result in the bolshevization of the entire country. However, the Four Power impasse over reunification has stimulated some demand in West Germany that the Government develop greater self-initiative toward reunification. The Federal Government meanwhile has given assurances that it will not discuss the German unity question with the USSR except in closest consultation with the U.S., U.K. and France.

11.

Economic Progress

The very substantial economic progress and strength achieved by the Federal Republic has made little or no special action necessary by the United States to assist it as authorized in paragraph 25 of the NSC paper. (Re Berlin, see Progress Report on NSC 5404/1).6 Similarly, offshore procurement has not proven necessary except in Berlin. Germany now participates fully in GATT, and the proposed OTC, with its exports enjoying the same treatment as those of other members. The German Debt Settlement came into effect September 16, 1953, and the Federal Republic has fully met its obligations under the Settlement. Settlements of private debts have been proceeding in an orderly and satisfactory way. The Federal Government’s dollar liberalization measures have removed the basis of some complaints by U.S. producers and exporters, but its policy regarding agricultural commodities has not been satisfactory. German interest in trade with the Soviet orbit has increased, but Germany has met its obligations [Page 104] to COCOM. The special political problems inherent in Federal Republic relations with the Soviet Zone have led to some disagreement in SCOM, but it has proved a useful technique for dealing with a difficult problem.

C. Major Problems or Areas of Difficulty

12.
The Establishment of German Defense Contribution
a.
In view of developments referred to in previous sections of this paper, the build-up of the German forces is likely to take longer than publicly announced by the Government and approved as NATO force goals. A State–Defense–ICA task force appointed February 1956 is currently studying this problem. The approach of the 1957 elections will probably make the Federal Government more reluctant to increase its budgetary provision for defense or to press for enactment of an adequate conscription law, steps which will both be necessary if established force goals are to be attained. It even seems probable that the build-up program will not gain sufficient momentum or develop to a point which would commit the government resulting from the 1957 elections to carry on with the program.
b.
It will take some time, and continuing discussion with the Federal Republic, to determine exactly what equipment the Germans will need to obtain from the United States to complete their buildup. At a later stage, it may be necessary to consider further the question of whether the pace of the German defense build-up and the over-all German financial and political situation would justify additional United States military aid in the light of the importance of a prompt German defense build-up to NATO defense plans and U.S. national security.
13.
German Association with the West
a.
The development of a closely integrated European Community still continues to provide the best possible way of tying Germany to the West. However, this is a policy for the long term. Furthermore, it does not appear that the U.S. can rely on institutional arrangements alone as a method of insuring German association with the West. As a practical matter, it will be necessary to work closely with the Germans, both in international organizations and in normal diplomatic and economic relations, if we are to be able to influence German policy.
b.
The Germans are very much aware of their restored sovereignty and are sensitive regarding discrimination against them. They will desire a place in the councils of the West which accords with the importance of the German nation; the pattern of West Germany’s foreign policy indicates that West Germany is seeking to establish co-equal status with the Western Big Three Powers. The degree to which this outlook is taken into account and consideration is given [Page 105] the German interests will have an important bearing on the development of German policy and on the habits of cooperation with the Western Powers.
14.

German Participation in Development of Newly Developing Areas

German initiative for a cooperative approach toward less developed areas reflects a desire to play some part in meeting Soviet initiatives in the Mediterranean and other less developed areas and also to secure a large and developing market for exports of capital goods. Although German proposals for a program for dealing with this problem have been vague, an opportunity may be offered for obtaining a German financial contribution for the development of the less developed areas, and at the same time for developing closer ties between Germany and the Western Powers. A problem is presented in determining the means by which this can be achieved in order to further cooperative relations with Germany and within the framework of basic U.S. policies.

15.
German Reunification
a.
German reunification remains a major problem. The Soviets’ control of East Germany gives them a point of leverage against the Federal Republic for efforts to split it from the Atlantic Community. Consequently the continued championing of German unification by the West appears to be an essential element in tying Germany to the free world. Should the suspicion that the West had lost interest in this issue become widespread in Germany an alienation of the Germans from the West might result.
b.
The approach of the 1957 Bundestag elections can be counted on to increase the pressure in German political circles for renewed demonstrations of activity on behalf of German reunification. The Socialist and Free Democratic opposition views this issue as a promising line of attack against the Adenauer government. In such an atmosphere reiteration at regular intervals of Allied interest in unification appears essential. It seems likely that the Federal Government will seek some fresh Western initiative on the reunification issue prior to the 1957 elections.
16.

Post-Election Prospects

The composition of the Federal Government following the 1957 elections will have most important bearing on the depth of the Federal Republic’s attachment to the West and its capabilities for resisting Soviet blandishments. The chances seem good, even if Chancellor Adenauer should disappear from the scene, that a moderate center coalition will continue as the strongest element in the German Parliament, which could be counted on to carry on the policies of the present government without substantial change. On the other hand, increasing military power, a sense that the West is not active enough in pursuing German reunification or other German interests, and inherent [Page 106] German dynamism and the nationalistic ambitions of some German politicians may lead the Federal Republic to follow a more independent course.

17.

Maintenance of Economic Stability

The economic prosperity of the Federal Republic has played an important part in developing the stability and moderation of the present political system. The current prospects for the West German economy are encouraging. However, Germany is vulnerable to a marked degree to fluctuations in international economic conditions, and a severe economic depression might endanger moderate democratic government in Germany. The continuation of U.S. economic policies which maintain international trade at a high level will thus have an important bearing upon the political stability of the Federal Republic.

18.

Support Costs

The support costs for U.S. forces stationed in Germany continue as a problem. The U.S. and the Federal Republic have undertaken bilateral negotiations within a multilateral framework. (See paragraph 2–d.)

  1. Source: Department of State, OCB Files: Lot 61 D 385, Germany. Secret. A cover sheet, memorandum of transmittal, and financial annex are not printed.
  2. For text of NSC 160/1, August 13, 1953, see Foreign Relations, 1952–1954, vol. VII, Part 1, pp. 510520.
  3. NIE 23–54, dated 12/20/54 is superseded by NIE 23–56, dated 4/17/56. [Footnote in the source text. NIE 23–56 is printed as Document 48; regarding NIE 23–54, see footnote 2 thereto.]
  4. For text of NSC 174, dated December 11, 1953, see Foreign Relations, 1952–1954, vol. VIII, pp. 110127.
  5. For text, see vol. v, pp. 527528.
  6. Regarding NSC 5404/1, dated January 25, 1954, see Foreign Relations, 1952–1954, vol. VII, Part 2, p. 13901394. The Progress Report is printed as Document 179.