662A.00/5–1652: Telegram
No. 36
The United States High Commissioner
for Germany (McCloy) to the Department of
State1
2870. Inform Defense; pass MSA. On May 14 I had long informal discussion with Schaeffer and Pferdmenges on remaining issues in financial convention.2 Schaeffer repeated his standard argument that Germany must have the majority share this year’s contribution for her own build-up. He said he would not agree to solution which gave him a majority by an optical device, such as increasing his budget by means of a joint construction budget. He supports the idea of a joint construction budget, but if this results in increasing Germany’s share it must be an increase above the actual majority share which Germany desires. He argued most vehemently that the contract would not be approved by the Bundesrat if, after questioning, the Bundesrat would discover that the Allies received more for support costs than did Federal Republic for its own build-up. In terms of figures he said that even the proposed DM 5.6 for the Federal Republic would cause serious misgivings and would be interpreted to mean that the Allies were not really interested in building up the 12 divisions. He was sure that the Bundesrat would [Page 70] place the worst possible construction on Germany’s commitments to raise 12 divisions in contrast to the meagre amount left her to finance them.
I argued that the real question was to increase total western strength and that the problem should be tackled not on the basis of who gets how much, but in terms of meeting the real requirements of the troops now in being and the troops to be organized. I said that, as he was well aware, the US was vitally interested in the build-up of EDC contingents of German origin and that we believed it was possible in the first year to satisfy their real requirements in conformity with SHAPE’s recommended build-up. I pointed out that the supply of military equipment was limited and that this, taking also into account the long lead time required for construction, administrative organization, etc., convinced me that Germany could not spend the amount she requested unless she were to lavish it on administrative equipment rather than hard goods.
Unfortunately, we do not have a tripartite position as yet and I could not talk about a specific counter-proposal and had to confine myself to a generalized argument. While Pferdmenges was visibly impressed, particularly with the information which I gave then on US end item assistance (this previously given me by Nash), and told Schaeffer that in his view this appeared to him to be a cogent argument for the Bundestag, Schaeffer would not retreat.
Schaeffer also raised the subject of costs to be charged against the monthly contribution. He desires to charge against the DM 850 million per month as much as possible and is most obsessed with the question of claims. We made no progress on this issue either, but enough was said to convince me that if we can find an acceptable formula on the division of the contribution we will be able to settle the claims issue with some concession which I hope can be kept as small as possible.
Surprisingly, Schaeffer supported Blank’s position, previously cabled you from Paris,3 that the German build-up should start in advance of ratification of the EDC treaty by all EDC countries. Schaeffer argued at great length and with considerable conviction that early effective date was absolutely vital for Germany. Point of greatest danger would arise the summer of 1953 and the training and preparation of facilities for German forces would therefore have to start summer of 1952. He suggested that convention contain a clause making the convention and EDC treaty effective between the four powers and between France and Germany respectively on ratification between four powers. He visualized ratification by US in June, by Germany in July, and by France before the [Page 71] end of July, and certainly before the parliamentary vacation. He felt that if French delayed until after the parliamentary vacation it might prove fatal. Such an arrangement, in his view would provide the legal basis to pay the full contribution on ratification by the four powers and in advance of the EDC coming into full force and effect. I told him this clause now absolutely out of question and suggested that the same purpose could be accomplished if the amount earmarked for the EDC contingents were used for capital works and passed through the occupation cost budgets. (French have already suggested this and their formal proposal, which will be cabled separately, embodies this suggestion.4)
I said it was impossible to spend any funds for German EDC contingents before EDC treaty in force unless it were agreed tripartitely and by EDC Steering Committee with the funds passing through the occupation costs budget. I could not visualize expenditures for actual organization of troops or procurement of military hardware, but saw no reason why capital works could not be commenced under these conditions and pointed out that these were the items requiring longest lead time and must be prepared before troops recruited.
Schaeffer bitterly opposed increasing occupation cost budgets for this purpose. He said this would be misunderstood and interpreted as an extravagant, unnecessary increase in occupation cost and not as an attempt to assist organization German EDC contingents. He also said his method alone provided the legal basis for defense contribution coming before EDC treaty in full force.
We explored all of these points in great detail, the meeting not breaking up until 3 a.m. I am convinced that Schaeffer will be a real problem. While I did not give him the precise terms of the US position adopted in Paris last Sunday, we did discuss several of its component features. He rejected many of them and I am convinced that this formula cannot be sold to the Germans. This problem is difficult and complicated, but I believe it can be resolved within a broad outline of a policy designed to meet the real requirements of the Germans and provide us with maximum protection. We must have room to maneuver, not only with Germans, but also with the British and French. As difficult as the problem is, I believe it can be resolved within these broad outlines, but am skeptical of any rigid proposal. I am meeting with Frank Nash and later with the other High Commissioners today to try and get some tripartite position in the hope that we can put it to the Chancellor immediately. I fear time element and repeat need of real latitude to operate in hope we can avoid going to Foreign Ministers with wide open [Page 72] question which in the short time available to them they may not be able to settle and almost certainly could not settle equitably.