Office of the Historian

S/S–NSC files, lot 63 D 351, NSC 160 Series

No. 223
Memorandum by the Acting Director of the Office of German Affairs (Lewis) to the Secretary of State1

top secret
Washington, September 29, 1953.

Subject: NSC 160/1, “U.S. Position with Respect to Germany”.

Discussion:

1.
When the NSC approved the German position paper2 on August 13, it agreed that the policy should be reviewed not later than the first Council meeting in October, including a review of the Financial Appendix.
2.
Reservations regarding the Financial Appendix NSC 160/1 were made in the discussion in the NSC.
3.
The basis for a review of our policy toward Germany will not exist until the proposed Four-Power Conference at Lugano3 has been held or we have terminated our present exchange of notes with the Soviets on this subject, and until the French EDC ratification picture becomes somewhat clearer than it is at present. Clarification of the situation with respect to both of these matters does not appear likely until November.
4.
FOA distributed on September 25 a proposed revision of the Financial Appendix to NSC 160/1.4 The FOA draft proposes, in effect, that the U.S. should not provide military aid for German units beyond the equipment which has already been programmed, which would provide initial equipment for seven divisions and some supporting battalions. The total force goals envisaged for the German contribution are twelve divisions and necessary support units. The FOA proposal is based upon the suggestion that German [Page 539] financial resources would permit the Federal Republic to procure out of its own resources equipment for the remaining units.
5.
At a working level meeting of the interested agencies on September 28, it was agreed that the FOA proposal raised important political issues. It was also agreed that sufficient data are not available at the present time to judge the cost of the German buildup and the degree to which the Federal Republic could finance the completion of the buildup plan. It was therefore not possible to submit an agreed recommendation regarding the revision of the Financial Appendix.
6.
Some of the policy issues raised by the FOA proposal are:
a)
It would involve extending the period of the German buildup to three years and possibly more. The plan for the German buildup contained in the secret military protocol to the EDC Treaty which has been approved for planning purposes by NATO envisaged a buildup period of two years. The Germans attach great importance to a speedy buildup since they regard the period of the buildup as that of greatest risk of Russian action. Extension of the buildup period on financial grounds would cause major political difficulties with Germany. Great stress has been consistently placed on a speedy buildup by the U.S. since the question of rearming Germany was first raised in 1950. A rapid buildup of German forces would become even more important in the event of the unification of Germany.
b)
Even assuming that Germany or the EDC would eventually be able to pay for the matériel required to complete the equipping of the German units, it is doubtful whether the equipment would be available in time to meet the buildup plan unless the production of the essential equipment is provided for out of U.S. funds.
c)
End-items furnished by the U.S. to equip German EDC contingents are, under the terms of the EDC Treaty and the proposed Mutual Assistance Agreement with EDC, transferred to the EDC and not to Germany. The funds provided by Germany for defense will form a part of the EDC common budget and any payment for end-items would therefore have to be sought from the EDC, not directly from Germany. The EDC common budget is a novel concept and much work remains to be done on it. It will be some time before it will be clear what resources the EDC might have to pay the U.S. for end-items and the extent to which they might exist is a highly speculative matter.
d)
End-item assistance to NATO countries has been furnished heretofore on a grant basis. To confront the new European community with a policy of requiring payment for American aid raises major political considerations.

Recommendation:

It is recommended that you propose:

1)
that the review by the NSC of NSC 160/1 and of the Financial Appendix be deferred until the middle of November;
2)
that the interested agencies meanwhile consider urgently the Financial Appendix and the policy issues connected therewith.

  1. Drafted by Reinstein and concurred in by Bowie, MacArthur, Merchant (who agreed with the recommendations but not with all of the points made in the discussion), and WE.↩
  2. NSC 160/1, Document 214.↩
  3. The proposal for a four-power conference at Lugano eventually led to the Berlin Conference.↩
  4. No copy of this revised financial appendix has been found in Department of State files.↩