246. Paper Prepared by the Operations Coordinating Board0


(Approved by the President on February 7, 1958)

(Period Covered: From July 17, 1957 Through September 3, 1958)

A. Summary Evaluation

This period brought no basic change in the situation in Germany. As far as the situation within the Federal Republic is concerned, there was continued progress toward the accomplishment of U.S. policy objectives. U.S.-German relations remained close and cordial. The political stability of the Federal Republic and the West Germans’ repudiation of extremism and attachment to Western-oriented political parties was confirmed anew in the third Bundestag elections and the North [Page 650] Rhine-Westphalia elections. The economic boom continued, although at a somewhat less accelerated rate. European integration with German participation took important steps forward with the establishment of the European Economic and Atomic Communities. Efforts to obtain German collaboration in the pursuit of Western objectives in Eastern Europe and in the Near East and other “uncommitted areas” had limited success. Gradual progress was made towards achieving the reduced NATO goals for the German military establishment, but obstacles remained to be overcome in the retarded buildup of the Air Force and in wide-spread opposition to the stationing of nuclear weapons in Germany.
No discernible progress was made towards national reunification and the elimination of Soviet influence in East Germany, although the Western position in Berlin was fully maintained. The Soviet Union clearly indicated its unwillingness to resume discussion of reunification at a summit conference. There were signs that new efforts might be required to deflate ill-considered and dangerous proposals, for example, the scheme for the “confederation” of the two parts of Germany, which could derive support within Germany from impatience at the lack of a solution of the German problem and to some extent from misgivings about the effectiveness of Western defense arrangements.
A review of policy is not recommended.

B. Major Operating Problems or Difficulties Facing the United States

German Reunification.
No progress was made toward a solution of the basic German problem—that of national reunification. The problem was reviewed in connection with the possibility of another summit conference. The U.S., U.K. and France took the position that another summit conference, if held, should resume discussion of German reunification and European security where it broke off at the Geneva Conference of 19551 and that they should press toward an agreement with the U.S.S.R. on the basis of the Eden Plan2 or some modification thereof. The U.S.S.R., on the other hand, persisted in its contention that reunification should be worked out in negotiations between the “two German States” rather than among the Four Powers, and the East German Communists played a variant of this theme by calling for a “confederation” of the Federal Republic and the “German Democratic Republic”. Chancellor Adenauer believed it important that a summit conference not fail solely over the issue of inclusion [Page 651] of the German problem as an item of the agenda, and he apparently considered that more progress might be made toward a solution of this problem if the Four Powers could first reach an understanding on disarmament.
The attitude of the German population continued to be more one of resignation than of restiveness, but there were indications that the prolonged stalemate might be persuading a greater body of opinion of the inevitability of making greater concessions toward the Communist position. The Opposition showed a growing disposition to deal with the East German regime, and increased contacts with the GDR were in fact endorsed by the National Convention of the SPD.
West German Contribution to European Defense.
Among the most pressing problems with relation to Germany continued to be that of assuring an adequate contribution by the Federal Republic to Western defense. Progress was made toward the attainment of the reduced West German force goals fixed by NATO.
The German armed force increased its strength to about 140, 000 men. Seven divisions, at less than full combat strength, were turned over to NATO. Another two divisions will be activated in the fall of 1958. The buildup of the Air Force was delayed by a lack of trained pilots and airfields but training under American supervision progressed satisfactorily. A small Naval arm has limited combat ability in the Baltic. According to the latest German plans, twelve divisions, 40 air squadrons and a small naval arm, comprising a total of about 350, 000 men, will constitute the German military establishment in 1961. Military expenditures are expected to increase sharply and will total Deutsche marks 21 billion by 1961, including aid to Berlin.
Nuclear Weapons in Germany.
A serious, although perhaps transitory, problem in connection with the prosecution of the defense and foreign policies of the Federal Government arose from wide-spread opposition to the stationing of nuclear weapons in Germany. Many Germans feel that the acceptance of nuclear weapons would increase the risk of a third World War and threaten Germany with atomic destruction. Largely for the lack of other issues, the Opposition attempted to gain the support of this body of opinion by seizing on the issue of nuclear armament as the principal theme for its attacks on the Federal Government. The SPD, with considerable support from trade union and professional circles, pulled out all stops in a “Campaign against Atomic Death” which reached its peak on the eve of the North Rhine-Westphalia elections in July 1958. The SPD’s endorsement of plebiscites and warning strikes indicated the temper of the dispute. Although the principal objective was to bar nuclear capability for the Bundeswehr, propaganda was directed against atomic weapons [Page 652] in general and thus against possession of them by U.S. forces in Germany.
The Federal Government was, however, able to win the approval of the Bundestag in March 1958 for the equipping of the Bundeswehr with “the most modern weapons” (a euphemism for nuclear capabilities) and the North Rhine-Westphalia election indicated that the “atomic death” campaign influenced few votes. In short, the Opposition argument that the stationing of nuclear weapons in Germany will prevent German reunification had no more immediate effect than the earlier argument that the creation of a German armed force would prevent reunification. The uneasiness expressed so vociferously by the Opposition is, however, privately shared by some supporters of the Government.
Franco-German Relations. The accession of De Gaulle appeared to have raised a new problem for Franco-German relations and understanding, which previously had been developing in a very satisfactory fashion. Federal German leaders feared that De Gaulle might undertake a reorientation of French policy, laying more stress on French national interests and prestige, to the detriment of European cooperation. Specifically, the Germans were concerned about possible French attempts to reorganize NATO defense arrangements, about France’s desire to become a fourth atomic power, about De Gaulle’s known reservations regarding German reunification, about De Gaulle’s desire to restore formal “tripartitism” (collaboration of the U.S., the U.K. and France) and the danger that Germany would thereby be relegated to a secondary position, and about De Gaulle’s apparent reluctance to commit France to a solution of the issue of a Free Trade Area. The problem was complicated by the facts that some Germans saw parallels between De Gaulle’s and Hitler’s accessions to power and that De Gaulle and Adenauer had not yet met.
Federal Republic’s Relation to Underdeveloped Areas. The United States policy of encouraging substantially increased West German financial and technical assistance to underdeveloped areas, both directly and through appropriate international institutions, had limited success. The Federal Republic continued to express its interest in the underdeveloped areas in various forums and made clear both its awareness of the need to forestall Soviet penetration into these areas and its desire to expand trade with these areas. While the Federal Republic made suggestions for increased coordination with the United States in aiding underdeveloped areas, it became increasingly clear that German assistance will usually take the form of credit insurance to German exporters and loans to international organizations and will rarely take the form of making available public funds directly to other countries. The [Page 653] Germans have indicated that additional possibilities of private or public aid for underdeveloped countries are limited as far as the Federal Republic is concerned and, in particular, have taken a negative attitude toward European initiatives in the NATO and OEEC for multilateral arrangements for aid to underdeveloped countries. (See paragraph 16 in Annex A.)
Return of German Assets. On July 31, 1957 the White House announced the Administration’s intention to submit as a matter of priority to the next session of Congress a plan providing for the payment of all legitimate war damage claims of American nationals against Germany and an equitable monetary return to the former owners of vested German assets.3 The German Federal Government expressed its grave disappointment with the terms of the Administration proposal and asked that the submission of a draft bill be deferred. The Germans were advised that the proposal for an equitable monetary return to former owners of vested assets could be deferred, as they requested, but that it would be necessary to go forward with a separate American claims bill. Such a separate draft bill, for the payment of the war damage claims of American nationals against Germany from the proceeds of vested assets, was submitted to Congress July 8 by the Foreign Claims Settlement Commission on behalf of the executive branch. Just prior to its adjournment on July 4, the German Parliament unanimously adopted a resolution requesting the German Federal Government to work vigorously for the settlement of the question of German assets vested in the United States and to pay particular attention to the proposed draft bill for the payment of American war damage claims from vested assets.
Support Costs. The Federal Republic and the United States reached an agreement on June 7, 1957 under the terms of which the Federal Government paid $77.4 million to cover partially the Deutschmark costs of maintaining U.S. troops in Germany during FY 1958. This sum was half of the amount received in the previous year. The United States has approached the Federal Government several times since the fall of 1957 for an additional $77.4 million, but the Germans have refused to pay us any further support costs. The approach was made pursuant to the agreement of June 7 in which we had reserved the right to bring up the matter again if we so desired.
London Debt Settlement. Under the Anglo-German support cost arrangements recently approved in NATO, Germany agreed to pay the British a lump sum constituting installments otherwise due in 1961–1964 on its post-war debt. Should the Germans not make a proportional [Page 654] payment to us, they must obtain a waiver of our rights to equal treatment provided for in the London Debt Agreements. However, the German Government, in stating to parliament that it will not pay additional troop costs to the U.S., recently indicated that it may be prepared to accelerate payments on its post-war debt to the U.S.

Note: See latest National Intelligence Estimate NIE 23-57, dated 5 November 1957, “The Outlook for Germany”.4

Annex A


Bundestag Elections. The third Bundestag election on September 17, 1957 resulted in an overwhelming victory for the leading party of the governing coalition, the CDU/CSU, which won 270 of 497 seats. The election thus assured the continuation of the Government which, under Chancellor Adenauer, has guided the Federal Republic since its creation in 1949. The SPD won 169 seats, the FDP 41, and the DP 17. The election results confirmed the trend toward a two party (CDU/CSU and SPD) system in the Federal Republic. The CDU/CSU also obtained an absolute majority in the North Rhine-Westphalia elections on July 6, 1958, thus winning back control of the Government of the Federal Republic’s largest state and containing better than a two-thirds majority in the Bundestag.
Leveling Off of the German Economic Boom. The exceptionally high rates of economic growth in the Federal Republic during recent years have been tapering off since late 1956. In its earlier phase, this development was occasioned by the almost full utilization of most resources, including manpower. Toward the end of 1957, the leveling-off process coincided with a decline in export orders whose effects will probably become more pronounced later in 1958 but are not expected to be severe. Furthermore, internal demand remains strong and can be encouraged if necessary by government policies. The outlook therefore is one for continued but more balanced growth.
European Integration. The integration of the Federal Republic into the Western European community took a long step forward January 1, 1958 when the European Economic Community (Common Market) and the European Atomic Community (EURATOM) came into being. The Federal Republic plays an important role in both organizations.
Franco-Italo-German Cooperation in Weapons Research, Development, and Manufacture. In early 1958, the Governments of Germany, Italy, and France agreed to undertake a coordinated approach to the development and production of military weapons. At first many of the NATO countries feared that this arrangement (FIG) would be inimical to plans for cooperation in this field on an all-NATO basis. Recently, however, statements made by FIG spokesmen, particularly Defense Minister Strauss of Germany, and the willingness of the FIG countries to keep NATO informed and to cooperate in this field with the WEU and NATO have done much to allay such fears. After presentation in NATO, Belgium and the Netherlands joined the group and it was re-formed into an official NATO Working Group. Technical experts of the five countries have been meeting in order to work out the details of development and production planning including the extension of financial participation of these countries. Three major projects under discussion at the moment are the development of a solid fuel IRBM, Sidewinder, and a surface-to-air missile of the Hawk type. Beyond this NATO recognition, FIG cooperation is evidenced by the agreement between Germany and France relating to joint research and development work to be done at the French military research center in St. Louis. Fears were also aroused that FIG would develop nuclear weapons in France, but Minister Strauss has stated Germany is interested in the use of atomic energy for such purposes as the propulsion of ships but not in the production of atomic weapons. The FIG agreement as such neither expressly includes nor excludes joint production of atomic weapons. There have been recent indications that the new French Government may have certain reservations regarding the FIG arrangement.
German Contributions to Underdeveloped Areas. (See paragraph 8 of the Report.) In contributing to underdeveloped areas, the Federal Republic has:
established a technical assistance program for underdeveloped areas which appears to be in the neighborhood of $12 million annually; it is not clear now much of this accumulating sum has been committed and spent;
made a commitment of $200 million contribution to the overseas investment fund of the European Economic Community (Common Market);
maintains a revolving fund of $2.3 billion for export credit insurance, mainly to underdeveloped countries;
indicated its intention to fund over a three-year period $157 million of the $330 million owed to the Federal Republic by India on current account;
agreed to contribute $50 million to a loan to Turkey for imports from the OEEC countries;
loaned $250 million to the World Bank in U.S. dollars;
is contributing less than half a million dollars to the United Nations Technical Assistance Fund for 1958 (as compared with a contribution [Page 656] of $2.2 million by the United Kingdom; $1.5 million by France; $1.1 million by the Netherlands; $2.0 million by Canada, and $1.5 million by the United States); and
made voluntary contributions from 1950 to date to UNRWA (Palestine Refugees) in the total amount of $65, 400. In addition, Germany has now pledged $360, 000 for UNRWA’s 1958 program.
Breaking of Relations with Yugoslavia. With considerable reluctance, the Federal Republic severed diplomatic relations with Yugoslavia in October 1957 after Yugoslavia extended diplomatic recognition to the “German Democratic Republic” (GDR). The Federal Republic feared that its failure to react to the Yugoslav recognition of the GDR might encourage other states, particularly the “uncommitted” ones, to follow suit. It now seems that both Yugoslavia and the Federal Republic desire to find some formula for re-establishing diplomatic relations.
Agreements with U.S.S.R. In April 1958, after nine months of difficult negotiations, the Federal Republic concluded Trade and Consular Agreements and an understanding on the repatriation of German nationals with the U.S.S.R. As evidenced by the attacks on the Soviet Embassy at Bonn and the Federal German Embassy at Moscow after the announcement June 17 of the execution of the leaders of the Hungarian revolt, the progress toward the normalization of formal relations did not denote an improvement in the general political relations between the two countries.
Relations with the Satellite Area. The Federal Government and popular opinion within the Federal Republic showed increasing interest in the establishment of closer relations with the countries of Eastern Europe, especially with Poland. Sympathy with Poland’s efforts to win a greater measure of freedom from the U.S.S.R. tended to offset antipathy based on the Polish annexation of former German territory. However, the Federal Government was inclined to move slowly in this area, primarily because of the fear that the establishment of formal relations with countries of the Eastern European area (which already have relations with the “German Democratic Republic”) might tend to give greater currency to the Soviet-sponsored concept of the existence of “two German States”.
Status of Forces Arrangements. In December 1957 the German Federal Government submitted a memorandum setting forth the “final” German proposal on the main outstanding issues in this multilateral negotiation to work out arrangements supplementing the NATO Status of Forces Agreement as a replacement for the Bonn Forces Convention,5 In May 1958 the Ambassadors from the “sending states” (U.S.–U.K.–France–Belgium–Denmark–Netherlands–Canada) presented to the [Page 657] German Foreign Office a written reply accepting the principles of the German proposal as a basis for concluding the Status of Forces negotiations.6 The Conference has been resumed accordingly, and it is hoped that the negotiations may be finished this summer. It is anticipated that, after conclusion of the negotiations and before final signature can be authorized, the governments concerned may require some months to review the extensive and complicated provisions contained in the supplementary arrangements.
Overflight Problems. The Soviets have refused to authorize flights of U.S. aircraft over the Soviet Zone east of Berlin (i.e., outside the quadripartitely established Berlin air corridors), maintaining that such authorization must be sought from the GDR, which, as a “sovereign state”, exercises control over its own airspace. An implied threat by the Western Powers to refuse permission for Soviet overflight of the Federal Republic in retaliation has failed to change the Soviet position. The Soviets have declared that they do not regard the U.S., U.K. and France as responsible for controlling Soviet overflights of the Federal Republic and attempted to obtain such permission directly from the Federal Republic instead. The Federal Republic has recommended that the Western Powers propose to the Soviets an arrangement under which all Four Powers will have unrestricted overflight rights over both parts of Germany and Berlin will at the same time be opened to international aviation on a normal basis. (See paragraph 7 of the Berlin Report of this date.)
Reaction to U.S. Landing in Lebanon. The U.S. action in landing troops in Lebanon was sharply criticized by a majority of the West German press, which took the line that such action, involving as it did a serious risk of major war, had been taken without adequate consultation with the Germans or appropriate consideration of legitimate German interests. Concern was also expressed that American troops had been sent from Germany to Lebanon, a practice which, it was felt, could contribute to weakening the Federal Republic’s own defense, and to undermining its good relations with the Arab world. The German reaction also appears to have been colored by recollections of the Hungarian and Suez affairs of 1956. The Federal Government conspicuously failed at first to give its American ally the moral support which might have been expected under the circumstances, although such support was later given in somewhat reserved fashion. Since the situation in the Middle East is no longer critical, further U.S.-German difficulties on this score are not expected, but the development appears noteworthy as a symptom of the Germans’ desire or intention to exercise somewhat more independence in the field of foreign policy.
  1. Source: Department of State, S/SNSC Files: Lot 63 D 351, NSC 5803 Series. Secret. For the section of this report on Germany (Berlin), see vol. VIII, Document 19. For the section on Germany (East Germany), see Document 279. A Financial Annex and Pipeline Analysis is not printed.
  2. For documentation on the Geneva Summit Meeting July 17–23, 1955, see Foreign Relations, 1955–1957, vol. V, pp. 119 ff.
  3. For documentation on the Eden Plan for German reunification and European security, see ibid., pp. 301 ff.
  4. For text of this announcement, see Department of State Bulletin, August 19, 1957, p. 306.
  5. Not printed. (Department of State, INR-NIE Files)
  6. The memorandum has not been found. For text of the Forces Convention, October 23, 1954, see 6 UST 5689.
  7. Not found.