Policy towards Germany

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Policy towards Germany

On 7 May 1946 the Cabinet discussed the UK's future policy towards Germany.  The Prime Minister said that the Cabinet needed to discuss the various options and whether they should continue to work towards a unified, though federalised, Germany or seek to promote a Western German State which would act as a bloc to the spread of Communism.

The following extracts give a flavour of what was said in Cabinet:

P.M.

My own view - try for unified policy on E.B.'s line - a) because of end we wish to reach b) because attempt to achieve W. Policy wd. involve us in expendre of resources we can't afford. Diffies of econ. posn in W. Zone. Not in posn to make W. Zone attractive as cpd. eastern zone & on that grd. alone we shd. go for federal centralised G.

H.M.

Recognise weak posn in wh. we've bn. driven. Will be realised Potsdam was disastrous & we shall have to move away fr. it. We are being pushed around - must try & get the lead. R. getting the food: repns makg. econ. nonsense of W. Zone: we have unemplt., no food, & genl. chaos for wh. Comm. will blame U.K. policy. We shd. spk. out more - we shd. tell G. publicly why these condns arise. We shd. ask R. publicly how they defend their policy. No use going on grumbling inter nos. We must stand out in G. Aims a) prevent further aggression but b) teach them to make success of their democracy. We are doing somethg. on these lines but not takg. enough public credit for it. Agree with E.B. federal state with some central Govt. is right. Believe he is a bit pessimistic re inevitability of Comm. triumph, even in E. Germany. May over-estimate power of Comm. in G. No good dismembering - they wd. come together again in time.
Thus,
allow an adequate Govt. at centre with strong federal Govts. in Provinces. My doubts are wtr. in interim we are pushg. ourselves fwd. sufficiently as champions of democracy. Will educate, not only G., but Fr. and U.S.A. - possibly USSR. eventually. Beware of drifting into anti-Soviet policy as matter of course.

P.M.

Diff. to separate this from Food Situation in G. Alarming picture from Robertson. Memo. read to Cabinet.

H.D.

Disturbed for some time. As H.M. said, worst of both worlds. Political. Financial, too. As betwn. the 2 courses, more workg. out of econ. & finan. consequences. Unified G. might cost us even more. Most powerful part of memo. is para. 10. And I think it conclusive - we cdn't face those consequences. Essential to avoid drifting into automatic anti-Sov. policy. Don't share the view expd at x/ on p.3. Not long-term. But agree with followg. sentence that worse of all wd. be R. & G. "Unified Germany" sometimes thght. like Nazi State. Need to decentralise as much as possible. Dismemberment rejected because wdn't be permanent. We ought however to get G. to accept a constitn with large amount of de-centralisation - incldg. a Ruhr Province. It is the highly centralised G. that wd. be our gt. danger.

P.M.

Does anyone favour alternative?

A.B.

Don't follow F.O. memo. Seems to ride 2 horses. Doesn't support Potsdam proposals for centralised G. He argues for autonomous Fed. units. Will that give contented G! Peaceful G. only if she gets constitn she wants. Madness to suppose we can impose, preserve unpopular Fed. system. Memo. views R. thro' G. I'm not afraid of R. comg. west. They will themselves be influenced: & re- actions v. them set in as they come in contact with sympathisers. Shock to R. troops when they came in contact with richer civilisations of w. History shows that, when primitive peoples conquer civilised, latter absorbs former in the end. Don't impose a constitution - agitn v. it will be fostered by R. - o.k. if G. seeks federal system themselves. In G., R. is promoting & preaching centralisation. Agree with H.M. regarding publicity for our p'essive policy in G. No substantial policy. Our safety depends in the end on allowing G. to choose own system. Inspn alone wd. prevent aggression - garrisons will bring trouble.

J.

Agree re imposition. Approve E.B.'s policy. This is not moment at wh. final decision can be taken. Fear of Comm. spreadg. to west because starvation is its breeding ground. Only if decent condns can be restored, Comm. tide will recede - as it's doing in Fr. & Czechosl. For the moment therefore temporise. Agree with H.M. re public justifn for our policy - & not our fault

P.M.

Remember tht. attempts to get central adminn of G. have bn. stopped by Fr.

E.Sh.

All the logic is v. E.B.'s policy: but it's only practical course. Primary aim - prevent revival as mil. power. To do that, brk. it up, being econ. chaos & starvation. Secondary aim - create peaceful democr. nation. For that you need integration not dismemberment. Implicit in memo. to attempt to prevent R. fr. dominatg. Europe. Doubt wtr. pol. penetrn by R. can go as far as feared. Further she goes, greater her diffy. She has fish to fry in M/E. & F/E. If she disperses her forces, she won't succeed. R. has less capacity for col. adminn than we have. They will event. find they're cuttg. little ice with people of the countries concerned. Purpose of P. Protocol was centralised economic G. Find it diff. to reconcile that with Fed. political G. Another way out - w'draw from W. Zone. But agree, pro tem, we must try E.B.'s policy. And force R. to realise the consequences of Potsdam declaration.

J.J.L.

Support idea of Fed. unified Germany. If we haven't publicised our policy, it's because we haven't had one. We've bn. in interim period. Federal - not long since parts of G. had own Parlts. This policy puts us right with original Potsdam Decln. Agree with A.B. re Russia - consequences of her internal diffies. Early decn re occupying troops. Believe we cd. usefully remain.

H.McN.

E.B. must ride 3 horses not 2. Scheme wh.

a) enables us to admin our Zone

b) provides for eventual unificn

c) doesn't shut the door on R. & French.

Fr. have opposed pol. unificn: R. are makg. econ. unificn impossible. Sloganising p'essive democracy won't get us home - unless we have tools for econ. stability. What we have is worst of both worlds. R. are pol. crucifying us by denying econ. unity to G. Declare, if you like, that it's R. wh. is not enforcg. P. Decln. This is a temporising policy.

J.B.H.

Hope we don't accept control thro' Zone Commrs. of decentralised Provinces - w'out control at centre. Must go on pressing for central adminn - & review level of industry if they don't agree: cd. also export high-priced commies vice low price coal.

Taken from C.M. 43(46) - Meeting held on 7 May 1946.

On 21 October 1946 the Cabinet discussed the broad lines of policy to be advocated on Germany when meetings took place with US officials, the cost to the UK of running the British Zone, the planning for the future of the German economy and the pooling of cereal supplies to the British and US Zones.

The following extracts give a flavour of what was said in Cabinet:

E.B.

Hampered in B. Zone -
a) by R. refusal to treat G. as economic whole. They have taken heavily fr. current prodn & will continue up to $10 billions
b) U.S. policy was pastoralising (Morgenthan) until Stuttgart speech. They supported R. & Fr. case - to point of reducing steel prodn to 5.8 m. tons. And during Loan talks, cdn't oppose them too strongly.
c) Fr. policy - detach Ruhr: & decline any agreement w'out prior consent to that. Now generally realised our policy on that was correct.
d) At outset, I took the line - let's get in & put the Zone on self-supportg. basis. Was told this wd. spell disaster for W. Europe. Looking back, not sure it was right to let this political considn outweigh the economic arguments. I refer to coal exports fr. Ruhr.
Looking back it's obvious this policy wd. rundown economy of B. Zone. In Paris, at CFM time, tried to get B. Zone on self-supportg. basis. Fr. then wdn't play because of c) above. Then announced tht., failing agreemt. to treat G. as a whole, we shd. be forced to make our Zone self-supporting. Next Day, U.S. agreed we cdn't be expected to go on making contn at £80-100 m. p.a. They forced us to 5.8 m. - but all experience has shown we were right on APW Cttee in our figure of 11 m. Molotov then said they wd. accept increase of level of industry - but subject to unacceptable condns. U.S. proposal to merge Zones. We knew it wd. cost us more for a time. When estimates worked out, figure was larger than assumed. Conference held in Paris - after long discns have now submd memo. Before this was completed I had seen Byrnes (before Stuttgart speech) & asked wtr. this meant he wd. overthrow Morgenthau policy. He said yes - with Truman's authy. Later saw him & took him thro' all points in my memo. Asked H.D. to raise it in W'ton: viz., division betwn. U.S. & U.K. H.D. suggd to Snyder 411. Not a hostile reception. Must tackle Ruhr comprehensively & quickly. Vital thing = cut out bottle-necks. Asked Berlin to give me list of priority needs (given coal) for machinery etc. - with view to getting it from U.S. on loan. Even 50/100,000 t. of steel wd. help to break down bottle-necks. This wd. remove diffies over U.S. appropriations. Another diffy - Fr. elections, wh. prevented us from making big cut in coal exports before Nov. Have told Bidault we will do what we can up to Nov. - but tht. after that we must take the pledge. Fr. might be helped with coal fr. S. Africa. U.S. can't help because of high price & shipping in winter. German exports. In Coalition days we went too quickly along line - ruin G.'s export trade & clip her wings. cf. H.M.'s memo. To save our money we shall have to allow her some (less important) exports.
Housing. A v. gt. problem in B. Zone. Due to diffy. of coal & labour. Definite decision needed on ownership of industry - if we are to get good will of G. workers. Believe we must come down firmly (to-morrow) in favour of policy of socialisation - particularly of heavy industries. [Agreed. Can't hope to withstand growth of Communism unless we support social democrats. (Christian democrats have no solid econ. foundation: mainly anti-Communist like MRP. in France.) Constitutional development - going fwd. on sound lines. This memo. outlines a policy - proposes early discn in U.S.A. (readiness of U.S. officials to grapple with it now). Now is our opportunity.

H.D.

Tired of cost to B. taxpayer. £120 m. = 1/= in £ on income tax. A bit much! Ques. is how we can end it? Have we extracted enough in exports? e.g. timber. Not only a ques. of money. $160 million in food for Germany - & that amount less in food for U.K. Discussed with Clayton & Snyder. They are sympathetic. Want sharp reduction in charge on U.S. Budget. 4:1 propn not rejected. That was UNRRA. propn. Promised to consider it. £250 m. more in 3 years - capital investment required. So far, a dole not an investment. If the latter, we shd. look at it differently. It shd. be primarily by U.S. - as a loan. That wd. be much better if it cd. be arranged - either U.S. Govt. or Reconstrn Confn. If they can't cover it all, bring in some neutrals. Mainly dollars, v. little sterling.
Don't expect to get back the £80 m. Broad agreement with E.B.'s memo. - subject to above. Hope additional points in my memo. may also be considered. Clayton believes G. cd. export more if control lifted from innocuous products like toys, textiles etc. This cd. be examined as part of H.M.'s memo.

H.M.

Broad agreemt. with E.B.'s memo. Diffy: when do we get a return on this huge investment. If it's 5 years, will G. be so independent by then tht. we can't control re-payment. Socialisation. Not merely taking over by C-in-C. - but a deliberate policy of ownership by German State subject to international control.

E.B.

assenting - good: puts H.M.G. on the Left, where we shd. be. Shd. like to see with it a promise of early action to that end. With economic unity of G. secured later, we cdn't do it so easily.

R.S.C.

Agree with general policy. Only doubts are on manner of implementing it. We shd. do it in way that helps us most. E.g. a) if we supply G. with up-to-date U.S. machinery why not send our surplus machine tools to G. & get the new U.S. ones into U.K.? b) Destination of G. exports. Two plans. First, let them go free. Second, take them ourselves & export ours in lieu. B. purchasing agency in G., with authy to order £10 m. - so far less than £50.000 placed - thus, plenty of room! What if R. doesn't agree to our condns re unity. We want them to continue exporting to E. Europe - wd. suit us better & is the natural flow of trade. Awkwardness of bldg. up Germany. E.g. G. housing: needs G. timber: & we shan't get it. Must balance needs of U.K. v. Germany in these matters. Need for careful study. Reparations machinery. Memo. for O.R.C. (not taken). Position is desperate. Must take a firm line - even tho' amount is smaller because decision to increase level of G. industry.

A.V.A.

Socialisation. Will be asked under what conditions? Plebiscite? Unilateral action of C-in-C.? We shd. be clear on that, before we announce.
Investment up to £250 m. Believe it may be more than that. Before we negotiate in U.S., be sure we've put it high enough. Is it essential to do it by straight advances from U.K. & U.S.? Cdn't it be done by international means - e.g. the Bank?

P.M.

Be sure which leg you stand on. Take care of criticism - bleeding B. taxpayer to save Germany.

E.Sh.

Don't make a 2nd mistake in policy (cf. E.B.'s (d)). Gt. care now. The pol. arguments then outweighed the economic. This is most important memo. we have had. Says - R. shd. implement Potsdam. This is unrealistic. If we face fact we shan't get economic unity, then it's a new situation. Decide which leg you stand on. Level of industry plan has never worked. What is the problem of Germany? Coal: wh. is fundamental to all G. recovery. Current cut in exports doesn't help. Report of Expert Cttee (Annex). Conclns are most unrealistic - because you can't get more food, houses, miners. Right solution: plough back coal into G. industry. Exports. Can't understand what exports are intended. Timber & machine tools are all you can get, I think. Machinery for repns will impede recovery. Socialisation. T.U. leaders in G. aren't satisfied with people running G. industry or with denazification measures. Who will run socialised industry? We can't spare experts. Germans will have to do it - will have to be organn for it. L.P.'s memo. - long-term policy only: no immediate benefits can accrue. H.D.'s memo. Do you really think U.S. will pay 4/5ths & leave you to call the tune? They will dictate the policy. Proposal: Make serious effort to get coal prodn right & plough the coal back into G. industry. End Br. military control over economic affairs. Civil adminn with max. freedom to Germans.

J.B.H.

De-nazification. Based on 3 mine managers' advice - of whom 2 were Nazi's. "Mil. control." It isn't so. Cecil Weir controls it. And it is our policy to give G. more share in adminn. On the memo. Choice a) Quit b) Self-contained with dollars for exports c) fusion of U.K. & U.S. Zones subject to conditions. i) Revision of level/industry ii) coal revival & retention iii) U.S. share in cost. iv) pooling of all resources incldg. wheat. Cd. get agreement in Berlin cd. we get it in W'ton. Socialisation. Final draft slides over consequences of favourable financial agreemt. with U.S. - they wd. try to call the tune. I wd. advocate flat decln of policy & burn bridges.
SPD. 900.000 } Results of Elections in Berlin.
400.000 }
Chr.D. 300.000 }
But remember CDU. are in majority in our Zones. (B. & U.S.) Exports. Low level due to limitns (because of foreign policy) on coal & food. Imports of raw materials as well as food required. Repns policy will also have to be reviewed.

J.W.

Genl. support of memo. Get steel out of G. but only in conformity with B. steel policy. Reparations machinery - urgently needed for defence work. Deliveries stopped by U.S. action v. Russia. Clay's policy. E.B. willing to go on delivering fr. B. Zone to U.K. on the g.t. Dangers of allowing G. industry to get modern equipment while ours is old. The whole development of G. export p'mme must be watched qua war potential.

E.B.

There is our expenditure in G. not partly for our security & our trade. If limns imposed by M/S. & B/T. in our interest, then I can't be blamed for the whole of the expense. And beware of inconsistency. Also how much does Ty. gain by p.o.w. labour? We are charging reparations labour in Russia v. R. reparations account. Want both points analysed before this comes up at C.F.M. Also economic value to G. of bldg. up export connns before we were exporting. Shdn't cost of preventing that be also offset? Will B/T. and M/S. tell me what G. can export w'out harm to U.K. interests.

P.L.

In 1919 vast reparations proposed - & in the end we lost by it. This time - attemptg. to destroy war potential & restoring economy. Believe we must emphasise second point. We must get G. on her feet. Are we prepared to do that? If not, she will be a charge on us for ever.

J.S.

As in memo. Include among repns to U.S. Govt. pooling of food supplies for the 2 Zones. They will try to ride out on long-term Can. contract. But in fact no help fr. there.

E.B.

Agreed. Let M/F. give me facts & I'll take it up at once in W'ton. Agreed.

H.M.

Quoted fr. agreed statement at end of his W'ton discns. Endorsed common ration standards in 2 Zones. This allocn is inconsistent with the principles then agreed & announced.

P.M.

Agreement with general conclusions in memo?

T.W.

Socialisation - steel. What Oppn re-action to announcement, when it is known we have had to p'pone it here?

E.B.

I wd. put it tht. G.'s war potential founded on Ruhr industrialists. We have vested them in C-in-C. We can't go on holding it. Can't give it back. Shall give it to German people?

P.M.

Is there agreement with general conclusions? Agreed. E.Sh. points. We accept posn tht. coal is vital. And after Fr. elections we shall plough coal back into G. industry.

P.M.

L.P.'s memo. Was proposing new Cttee on Overseas Ec. Policy. Cdn't that do it? Get this examined by officials first. Then to Cab. thro' O.E.C. Agreed

Taken from C.M. 89(46) - Meeting held on 21 October 1946