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

740.00119 Control (Germany)/12–648: Telegram

The Acting Secretary of State to the Embassy in France ¹

top secret
us urgent

Washington, December 7, 1948—7 p. m.

4673. Dept and Army regret delay and apparently some confusion have arisen in preparation plans for introduction B mark in Berlin. We note Brit propose postpone consideration until late this week (urniact 6168²). What we desire is urgent speeding up of studies and designation some place where we can come to grips with problem soon as possible with Brit and Fr. In view presence our experts and opportunities for liaison with our del, Paris appears appropriate place if effective contact can be maintained with Brit through their Emb or del³

Re substance proposal, we have seen Clay’s comments Berlin’s 999⁴ to you and also experts opinion Delga 1057.⁵ On advice our technical committee and view importance local political factors in Berlin, we incline agree with Clay and hope some solution can be achieved with Brit and Fr preserving essentials plan he recommends. We request you explore with Brit and Fr following views Wash technical committee with which we agree:

“The technical question is whether the B mark should retain its legal tender status in western Ger when it is made the sole legal tender in western Berlin. The technical arguments in favor of depriving the B mark of legal tender status in western Germany are strong, primarily from the viewpoint of protecting the currency in western Ger. But, at the same time, the risks of retaining such legal tender status do not seem so great as to make them a conclusive argument against Clay’s position. Controls against smuggling to the West could not be watertight but they would probably be reasonably effective and would cut down the currency drain to tolerable proportions. There might well be currency hoarding in Berlin but it would be preferable to goods hoarding, and in any event could be dealt with at any time if it should become imperative to cut the currency link with the West.

Under present conditions in Berlin, an independent 3-power currency might be so weak as to involve serious danger of sharp depreciation in terms of black market prices for goods and might even move to a discount in terms of Sov marks. Accordingly, it is probably preferable to return the legal tender status of the B mark in western Ger even at the risk of an undesirable drain of currency to the West.

It might be possible to work out some compromise. One such compromise might be to have the bank for the Western Sectors of Berlin be a non-voting member of the Bank Deutsche Laender. This would create the legal basis for provision of zonal currency and central bank credit to Berlin by the BDL and would at the same time overcome French objections to giving the Berlin bank a voice in zonal affairs. The French have at one time made this suggestion in Berlin.

Two points which particularly impress us are:

a. The creation of a separate currency for Berlin would progressively impair the feeling Berliners have of support from the Western Zones and would have a consequently incurring severe psychological effect on their morale and resolution.

b. There are clear indications that the acceptability in the Soviet Zone and Soviet Sector of Berlin of the currency and circulation in the Western Sectors results in a very considerable quantity of supplies passing into the blockaded sectors. If separate currency introduced and its value shrinks obviously this trade would be reduced to disadvantage of western sectors.”

Re possible interest UN committee experts in reports concerning use B mark in Berlin, we consider Jessup, as reported last para Delga 1061,⁶ furnished appropriate answer.

Lovett

1. Repeated to London as 4563 and Berlin as 1919.
2. Not printed.
3. It was subsequently decided that the military governors in Berlin should formulate the plans for the introduction of the B mark in the city.
4. Not printed; in it Clay stated that the introduction of a third currency in Berlin was technically sound, but would probably drive West Berliners into the Soviet orbit by cutting them off from West Germany (740.00119 Control (Germany)/12–548).
5. Not printed; it stated that capital flight and inflationary pressure would result from the introduction of the B mark in Berlin and stressed that the Soviets would continue to finance their illicit activities in the western zones through B marks acquired in Berlin (740.00119 Control (Germany)/12–448).
6. Not printed; Jessup had stated, in the paragraph under reference here, that the western powers had been considering the possibility of the introduction of the B mark, but had fixed no date (501.BC/12–448).