Office of the Historian

176. Memorandum of Conversation1

Washington, September 26, 1966, 12:30 p.m.

SUBJECT

  • Offset

PARTICIPANTS

  • German
    • Chancellor Erhard
    • Foreign Minister Schroeder
    • Defense Minister Von Hassel
    • Minister Westrick
    • Ambassador Knappstein
    • State Secretary Carstens
    • State Secretary Von Hase
    • Dr. Ruete
    • Interpreter
  • American
    • President Johnson
    • Secretary Rusk
    • Secretary McNamara
    • Secretary Fowler
    • Under Secretary Ball
    • Ambassador McGhee
    • Mr. Bowie
    • Mr. Bator
    • Mr. Stoessel
    • Mr. Puhan

The President stated that the Chancellor had explained to him his budgetary difficulties.2 While intending to fulfill his commitments, the [Page 430] Chancellor had expressed the wish to find some other formula which would make it possible for the Germans to stretch out their payments beyond the due date of July 1, 1967. The President reported that he had told the Chancellor of our difficulties. He said even if the Germans had encountered no problem in meeting their current obligation to us, we still faced great problems. The President said he had suggested that his and the Chancellor’s advisers get together to consider solutions to the current problem. The President said he had assured the Chancellor he understood his problems and didn’t want to add to them. He remarked that neither of us wants to win an argument and lose a sale. He suggested that we examine the alternatives.

Chancellor Erhard reported he had told the President of the great value he placed on his relationship with the President and the talks they were having. He wanted to assure everyone that the Germans had stood faithfully by the United States, ready to support it, to support the U.S. dollar. Now the Germans found themselves in a situation where they found it difficult to meet their obligations within the time frame set. The Chancellor referred to his efforts to come up with as much of the offset as he could. He spoke of his conversation with the President of the Bundesbank. He asked that there be no misinterpretation placed upon German inability to fulfill its contract in time.

The President asked the Chancellor whom he wished to designate to meet with our experts to discuss the problem of the current offset. He thought that Mr. Ball and Secretaries Fowler and McNamara should form our team. Mr. Ball suggested that the Germans include Dr. Blessing of the Bundesbank since obviously there would have to be financial discussions.

The Chancellor reviewed some figures regarding funds available to the Germans. He said they could get $250 million from the Bundesbank to which they could add prepayment of the post-World War II debt of approximately $214 million. This would bring their total resources to $470 million.

At this point the President urged again that the experts meet to find a solution. Chancellor Erhard said he wished to add that the German Defense Budget would have to be increased to cover the present offset as well as the future one. It was agreed that Mr. Ball, along with Messrs. McNamara and Fowler, would meet with their German counterparts later.

  1. Source: Johnson Library, National Security File, Country File, Germany, vol. 11. Confidential. Drafted by Puhan and approved in the White House by Bromley Smith on December 2. The meeting was held at the White House. McGhee discussed Erhard’s visit in At the Creation of a New Germany, pp. 190–193, 199–200. President Johnson discussed the visit and its background in The Vantage Point, pp. 306–308.↩
  2. At their 11 a.m. meeting; see Foreign Relations, 1964–1968, vol. XIII, Document 207.↩