Foreign Relations of the United States, 1955–1957, Central and Southeastern Europe, Volume XXVI

46. Memorandum of a Conversation, Ambassador Dowling’s Residence, Bonn, February 4, 1956¹

Bonn, February 4, 1956

SUBJECT

• Conversation during Under Secretary’s Visit to Bonn

PARTICIPANTS

• Dr. Schaeffer, Minister of Finance
• Dr. Westrick, Staatssekretär, Economics Ministry
• The Under Secretary of State, Herbert Hoover, Jr.
• Mr. Dowling, U.S. Embassy, Bonn
• Mr. Sailer, U.S. Embassy, Bonn

In a conversation with the Under Secretary after dinner at the Ambassador’s residence, Dr. Schaeffer smilingly alluded to his difficulties as Finance Minister, saying he was under attack from all sides regarding the disposition of a budgetary surplus that did not actually exist. He explained in detail that the apparent surplus was merely funds which were already fully-obligated, including funds for the military build-up and a carry-over of occupation costs, and which would soon begin to be expended at an increasing rate.

There followed a discussion of German tax policies, with the Minister pointing out that the tax burden on German industry was roughly equivalent to that in the United States. The Finance Minister indicated that he saw no chance for the near future of German taxes being reduced.

At this point, Staatssekretär Westrick joined the discussion as did Ambassador Conant and the Foreign Minister, and the conversation turned to the problem of the increasing fuel requirements of German industry. The Under Secretary remarked that, perhaps because of his background, he wondered if the answer might not lie in the increased utilization of oil. Dr. Westrick admitted that there were possibilities in this direction, and commented that it might be wholesome for the German coal industry to have to meet competition from this field. A general discussion of the possibilities of German trade with the Arab states ensued, with Minister Schaeffer referring also to the purchases of oil from the British for Israel, for which Germany was paying under its indemnification agreement with the latter country, and which could be diverted to the Federal Republic after the agreement was concluded. It was agreed that German purchases of oil from the Arab states would undoubtedly result in increased German exports to those countries.

At one point in the conversation, the Under Secretary referred to the vast oil resources of the Middle East which remained undeveloped, and suggested the possibility that Germany might want to consider the possibilities in this field also. Dr. Westrick said the advantages of German enterprise in joining in the development of these resources were attractive, but that the lack of German capital was a great difficulty. He added that even if capital were available, the coal industry in Germany could put up a strong argument that if these funds were made available to it for investment, the industry could guarantee to meet Germany’s fuel requirements for many years to come out of the tremendous coal reserves which Germany still possesses.

In his conversation with Dr. Schaeffer, the Under Secretary said he hoped the Finance Minister would find it possible to visit Washington again before too long. Dr. Schaeffer said he would like to come, and the Under Secretary suggested that perhaps the autumn of this year might be a good time, although it was perhaps too early yet to consider fixing a date. Dr. Schaeffer agreed, and the Under Secretary said we would communicate with the Finance Minister further in the matter.²

1. Source: Department of State, Conference Files: Lot 62 D 181, CF 653. Confidential. Drafted by Dowling.
2. On his return to the United States, Hoover delivered an address on February 10 before the Foreign Policy Association concerning the situation in Germany. For text of the address, see Department of State Bulletin, February 20, 1956, pp. 290–293.