740.5 MSP/5–752
No. 259
Memorandum of Conversation, by Roderick H. Riley of the Office
of German Economic Affairs
Subject:
- Allocation of Cut in MSA Aid
Participants:
-
EUR—
- Mr. Martin
- Mr. Vass
- Country Desk Officers
-
GEA—
- Mr. Fowler
- Mr. Riley
The meeting was called by Mr. Martin as the first step in preparation for a meeting he will have with Messrs. Lincoln Gordon and Harlan Cleveland on Friday to discuss the MSA proposals for defense support in Title I.1
He opened the session by circulating a tabulation (copy attached) showing what the reduced illustrative figures of defense support aid would be if the proposed Senate cut of $1 billion were prorated over the participating countries. Such a cut (12.66 percent) would reduce the German illustrative figure from $160 million to $139.5 million.
Mr. Martin first asked for views on the adoption of a prorata cut in preference to a selective distribution of the $1 billion. The discussion was inconclusive, but it was the consensus that so many further adjustments would become necessary in the course of the actual programming that the essential point should be to retain transferability and other flexible features and that at the appropriation stage a prorata cut might be more satisfactory than any weighing of factors affecting the countries individually.
[Page 466]With this general proposition in mind, Mr. Martin nonetheless wished to identify countries where the second column aid figure might be considered relatively “soft” and those to be considered relatively “hard”.
With respect to Germany it was explained that the adequacy of the illustrative figure of $160 million depended largely on the amount of Defense Department expenditures which shows up in the German economy, that the latest information on dollar accruals to the BdL indicate that the MSA estimate of $227 million for fiscal 1953 from this source might prove well justified, and that an aid figure no greater than $160 million might therefore prove adequate. How much below this level it would be possible to go without economic difficulties could not be stated. It was added that GER is inclined to be optimistic with respect to the German economy, that in these terms the German figure could be regarded as potentially “soft”, but that to treat it thus would be to disregard the political setting in which aid would be negotiated.
Mr. Martin was fully up-to-date on the representations which Adenauer and Schaeffer had made.2 Mr. Fowler explained it was the view of GER that, while we might well agree with HICOG that the German budgetary difficulties were being considerably exaggerated, we were not free to disregard the political pressure which might be brought to bear with the result that a disproportionate cut of planned German aid might add seriously to our difficulties in securing our objectives in Germany.
The meeting was a brief one, adjourning shortly after 5. Mr. Martin was to communicate to the interested offices what he learned of the MSA proposal and the results of the conference with Messrs. Gordon and Cleveland.
[Page 467]- The meeting under reference has not been further identified.↩
- For documentation on negotiations regarding the financial aspects of the proposed contribution to Western defense by the Federal Republic of Germany, following the Ninth Session of the North Atlantic Council at Lisbon, Feb. 20–25, 1952, see vol. vii, Part 1, pp. 328 ff.↩
- Funds proposed for assistance to Spain in 1953 are included in unexpended carryover from 1952. [Footnote in the source text.]↩