Foreign Relations of the United States, 1952–1954, Germany and Austria, Volume VII, Part 2

762A.5 MSP/10–2053

No. 589
The Acting Special Assistant to the Secretary of State (Nolting) to the Deputy Director for Program and Planning of the Foreign Operations Administration (Ohly)¹

secret

[Washington,] October 20, 1953.

My Dear Mr. Ohly: The Department has prepared at your request a statement of the political objectives relating to Berlin which would have a bearing on the determination of requirements for Berlin for inclusion in the FY 1955 MDAP Program.

According to the views expressed at the meeting of the Ambassadors at Vienna on September 24, 1953,² Berlin is the most critical area for the United States in Europe as it is a potentially volatile area and may become more so. The need for maintaining the morale of the population is evident. The city is the symbol of our resistance to Soviet expansion on the European continent, and is a show window behind the Iron Curtain which feeds the spirit of resistance in Soviet-occupied territories. Our policy of maintaining our position in Berlin and of sustaining a steady rate of improvement in the economic situation and a reduction in the number of unemployed is expressed in policy papers which have recently been re-examined and reaffirmed at the highest level of the government.

The Berlin economy is still depressed. There are now approximately 210,000 unemployed, even though unemployment was reduced in FY 1953 by about 62,000.

In our judgment, it is essential in order to accomplish our political objectives to program for a progressive reduction in unemployment. The Department considers that the target consistent with our political objectives would be a reduction in unemployment comparable to that accomplished in FY 1953, if possible, and in any event not less than 50,000 per year.

In the judgment of the Department, the following principles should be taken into account in the program:

A. Provision should be made to enable the United States and the Federal Republic to carry out such programs as may be developed as a result of the position taken by the Administration in the exchange of letters between the late Mayor of Berlin and the President of the United States last August relating to work relief.³

B. Provision should be made for a pipeline of the equivalent of $15 million which would carry the investment program into the first quarter of 1956, and assure an adequate rate of expenditure during FY 1955.

C. Because of the many uncertainties which affect planning for the Berlin area, particularly due to the increasing tension which can be anticipated, the Department urges that the factors entering into the assessment of requirements be conservatively estimated and that a reasonable margin of safety be provided.

D. The Department concurs in the judgment of the United States High Commissioner that continuation of aid for Berlin during FY 1955 will be required on economic grounds. The Department also feels that on political grounds as well it is necessary to include some figure for Berlin aid as a means of maintaining our position in the city.

E. The Department intends to press the Federal Republic, which is now spending between the equivalent of $200 million and $300 million for the support of Berlin, to step up its financial support. The Department believes that this would affect requirements for FY 1956. In order for these negotiations to be successful, however, the Department believes that it would be necessary for the United States to have additional funds to introduce into the Berlin economy during FY 1955.

F. Since the Berlin requirements are for German local currency and not for goods to be financed from dollar sources, the Department suggests that the requirements for Berlin be financed in part from local currency which will become available under the Surplus Property Agreement which entered into effect September 17, 1953. Under this agreement, the United States will be entitled to draw down the equivalent of $40 million in FY 1955, of which perhaps $25 million could be available for the purpose of Berlin support.

The Department has prepared its own estimates of Berlin requirements and will be glad to discuss them with members of your staff if they desire.

Sincerely yours,

Frederick E. Nolting, Jr.

1. Drafted by Eleanor Dulles and Margolies and cleared with Lewis, Morris, RA, and S/MSA.
2. Documentation on the Chiefs of Mission meeting at Vienna in September is in volume vi, Part 1.
3. For text of the letters exchanged between President Eisenhower and Mayor Reuter in August, see Documents 581 and 582.