Foreign Relations of the United States, 1952–1954, Germany and Austria, Volume VII, Part 1

762A.0221/5–952

No. 32
Memorandum of Conversation, by the Special Assistant to the Director of the Bureau of German Affairs (Reinstein)¹

secret

Washington, May 9, 1952.

Subject: Financial Support of British Troops in Germany

• Participants: Sir Oliver Franks, British Ambassador to the United States
• The Secretary
• Mr. James C.H. Bonbright, Deputy Assistant Secretary, EUR
• Mr. Jacques J. Reinstein, GER

Sir Oliver read to the Secretary instructions which he had received from Mr. Eden on the subject of the German contribution to defense and its effect on the British position. He said that these instructions had been conveyed to him after the problem had been considered by the Cabinet.

In the first place, the British Government was anxious that the United States Government should be fully cognizant of the longer-term implications of conclusion of the contractual arrangements with respect to the British position. It was clear from the studies which have been made at Paris that the cost of building up the German contingents would rise very rapidly in the NATO Fiscal Year 1953–1954. In consequence, there is little prospect that all or a substantial part of the cost of support of the British Forces in Germany after June 30, 1953, can be met from the German contribution. The British Government is most anxious to carry out the commitments which it made at Lisbon with respect to the stationing of British Forces in Germany, to which it attaches great strategic importance. At the same time, in the light of the hard realities of the British economic position, a very serious problem will be posed. An increase in the United Kingdom’s defense budget would involve very serious strains. Beyond this, the situation involves the most serious implications from the view point of the British balance of payments situation. The Ambassador indicated that the British Government does not wish at this time to do more than to impress these facts upon the American Government. They will have to be taken up in the next NATO review.

The Ambassador said that the British Government is also concerned regarding the development of the shorter-term problem of the support costs for the year 1952–1953. In the light of the discussions which have been going on in Bonn and Paris, the British Government questions whether the Germans can in fact spend the sums of money which have been suggested in these discussions. It is concerned that the United States may, in an effort to bring about a speedy conclusion of the negotiations, press for a reduction in the figure of Allied support costs. Economies have been made in the expenditures of the United Kingdom Forces in Germany; some additional economies may be possible, but they will be marginal. In any event, they are likely to be swallowed up by costs which have not been budgeted for, such as the possible re-deployment of British Forces in response to the requirements of SHAPE. The United Kingdom Forces would need their full share of the DM 6.8 billion which had been agreed upon by the Foreign Ministers in London.² The British Government hopes that the United States will support this position in the negotiations now under way. The Ambassador pointed out that a reduction in the funds available for the United Kingdom forces would, in effect, cause the longer-term problem to which the British Government had referred to arise during the year 1952–1953.

The Ambassador said that it was not to be inferred from these representations that the British Government was not anxious to proceed to the conclusion of the contractual arrangements as soon as possible. This is, in fact, its desire.

Mr. Acheson said that we were quite aware of the longer-term problem to which the Ambassador had referred. It had been agreed at London that it would be difficult at this time to reach any conclusion as to what should be done after June 30, 1953. The matter had therefore been left for later discussion when there would be more clarity as to what the Germans could do, the British situation and other factors.

Mr. Acheson said that we had been looking into the problem of dividing the German contribution for the first year. The cost of the German contingents during the year 1952–1953 has been estimated by the Allies as DM 4.2 billion, and by the Germans at DM 7.7 billion. This represented a narrowing of the previous difference, which had been between DM 9 billion on the German side and DM 3.1 billion on the Allied side. The German estimates were probably still excessive. Mr. Acheson pointed out that if, as now seemed likely, the EDC treaty were not ratified until the fall, the last quarter of the year would, in effect, be shifted into the following fiscal year. This would involve a considerable reduction in the estimated costs of the German contingents, since the costs were proportionately much larger in the last quarter. The figure for the last quarter, according to the Allied calculation, is DM 1.8 billion, which would reduce the Allied figure to DM 2.4 billion for nine months. The German estimate for the last quarter is DM 3.4 billion, which would reduce the total for nine months, on their calculation, to DM 4.3 billion.

Mr. Acheson said that in the light of these considerations the problem appeared to be of manageable proportions. However, reconciling the figures would involve a very tight fit. Mr. Acheson pointed out that the DM 6.8 billion figure for Allied troop support which the Foreign Ministers had agreed at Lisbon was a maximum figure and was to be subject to reductions. Non-defense expenditures, for example, were to be taken out. He felt that an effort should be made to see what could be done in the way of reducing costs in the field of defense expenditures. It was pointed out to the Ambassador that, in the discussions in the Tripartite Group on Germany prior to the Paris and Rome meetings in 1951, the British had proposed a flat cut in the troop support budgets for the first defense year of twenty to twenty-five per cent below the occupation cost budget for 1951–1952.

The Ambassador said he would report this conversation to his Government.

On May 10, the Ambassador called on Mr. Bonbright and Mr. Reinstein to ask whether, in the event the EDC treaty and the contractual agreement were not ratified until the fall, the German contribution for the NATO Fiscal Year 1952/53 would still be DM 10.2 billion. He said that, if the contribution were reduced say to DM 7 1/2 billion, a substantial problem would still remain. The Ambassador assumed that under these circumstances the Allied troop cost figure would still be DM 6.8 billion.

It was explained to the Ambassador that the contribution, by agreement between the Foreign Ministers and Chancellor Adenauer, had been fixed at DM 850 million per month from the effective date of the treaties until June 30, 1953. However, the troop support cost figure would also be reduced by something like DM 600 million per month, since we would continue to receive occupation costs until the treaties became effective.

The Ambassador was satisfied with this explanation.

1. Drafted on May 13. Copies were sent to Paris, London, Bonn, the Departments of Defense and the Treasury, and to the Mutual Security Agency.
2. The records of the Foreign Ministers discussions at London, February 13–19, are printed in vol. v, Part 1, pp. 36 ff.