Foreign Relations of the United States, 1948, Germany and Austria, Volume II

740.00119 Control (Germany)/10–448: Telegram

The Acting Secretary of State to the United States Political Adviser for Germany (Murphy), at Berlin¹

top secret
us urgent

Washington, October 5, 1948—6 p. m.

1691. Personal for Murphy (Eyes Only) from Saltzman. Refer urtel 2436 October 4 and Paris 601 October 2 and urtel 723 October 3 to Paris.² Assume you have seen War 89446 September 18 Clay from Draper³ and War 90132 September 30⁴ subject introduction western B mark Berlin as sole legal tender. Technical Committee composed of Treasury, State, Army members set up jointly by Roy all and Lovett under chairmanship Frank Southard, Treasury, to advise on technical financial aspects Berlin and Moscow negotiations. After the breakdown in Moscow negotiations Technical Committee advised that the western B mark should be established as the sole legal tender in the western sectors of Berlin and that the Soviet mark should not be allowed to maintain its de facto legal tender status for any purpose in the western sectors of Berlin. It recommended, however, barring circulation of Soviet mark in western sectors only if Soviets ban commercial intercourse and the movement of persons among the sectors.

The Department accepted these recommendations but recognized the need of timing any change in the status of the Soviet Zone mark in the western sectors of Berlin so as not to prejudice U.S., U.K. and French case before United Nations. With this in mind General Clay was authorized on September 30 to work out arrangements with the British and French in Berlin for protecting currency position in western sectors including the establishment of western currency as sole legal tender. Clay has been instructed to submit proposed program to Washington and has been informed that Department desires to coordinate any action with delegation in Paris.

It is the desire of the Department that Clay’s proposal to British-French colleagues be submitted to Washington as well as British and French reaction.

Although the timing of any new move on our part in Berlin currency field is important it is nevertheless urgent that financial and economic life in Berlin not be permitted to deteriorate further.⁵

Repeated to Paris. [Saltzman.]

Lovett

1. Repeated to Paris as 3915.
2. None printed.
3. Not printed.
4. Not printed; in it Draper authorized Clay to proceed with the British and French on the measures necessary to protect the western currency position in Berlin, including the introduction of the western mark as sole legal currency in the western sectors of the city. Before initiating any change Clay was to clear his plan with Washington to avoid any chance of embarrassing the Western powers in their presentation of the Berlin case at the Security Council. (Department of Defense Files)
5. In telegram 2455, October 6, from Berlin, not printed, Murphy reported that Clay, after a telecon with the Department of the Army, felt he was not under instruction to proceed on the establishment of the western currency in Berlin and preferred to let the matter ride temporarily (740.00119 Control (Germany)/10–648).