A Decade of American Foreign Policy 1941-1949
Fifth Meeting of the Council of Foreign Ministers, London

FIFTH MEETING OF THE COUNCIL OF FOREIGN MINISTERS, LONDON, NOVEMBER 25-DECEMBER 16, 1947 Report by Secretary Marshall, December 19, 1947

The result of the recent meeting of the Council of Foreign Ministers in London was disappointing. I realize that the many lengthy statements and the frequent and fundamental disagreements were very confusing to the general public. Also, the continuous accusations against the good faith, the integrity, and the purposes of the governments of the western powers, particularly the United States, necessarily added greatly to the confusion. This was, as a matter of fact, one of the purposes of these attacks.

I anticipated great difficulty in reaching a comprehensive agreement, but I did have a hope that we might take three or four fundamental decisions which would permit immediate action by the Four Powers to alleviate the situation in Germany this winter and greatly improve the prospects for all of Europe. That we failed to reach any such agreements is the greatest disappointment.

The United States Delegation went to London with an open mind as I had stated we would in Chicago, but we went with a strong determination to bring to an end the division of Germany which has existed since the German capitulation. We were also determined that any agreement reached at London should be a genuine workable agreement, and not one which would immediately involve obstruction and frustration in the Allied Control Council when it came to be put into effect in Germany.

I shall review only briefly the interminable discussions during the weeks of debate at London. To us it was but a dreary repetition of what had been said and re-said at the Moscow conference. I shall endeavor, however, to point out the main issues on which the Conference deadlocked and give you my estimate of the underlying reasons.

The basic issue, as we saw it before the opening of the London conference, was whether or not the Allies could agree among themselves to reunite Germany.

The issue in regard to the Austrian treaty was even simpler and :had already emerged clearly at the Moscow conference.

Because the two main issues which I have outlined would be the controlling factors in our discussions, three of the delegations had agreed that the Austrian treaty should be considered first and the economic principles to govern the treatment of Germany as an economic whole should come second. We felt that this order was logical and necessary if we were to debate with any prospect of success the remaining items on our agenda. The Soviet Delegation held a different view and insisted that questions on the preparation of a German peace treaty should be given precedence over the questions regarding immediate economic unity for Germany.

In order to get the Conference started, it was finally agreed to accept the Soviet request that the preparation of a German peace treaty should be item two on the agenda. As a result, with the exception of one day of discussion of Austria and the Austrian treaty, it was not until after 10 days of meetings that the Conference really reached the heart of the German question. These first 10 meetings were devoted to futile and somewhat unreal discussion of the mechanisms for the preparation of an eventual German peace treaty before the question of whether or not there was to be a united Germany had even been considered. There was one question, however, of real substance during this phase of the discussion which had a direct application not only to a German peace treaty but also to the immediate situation in Germany. This was the question of the present and future frontiers of the German state. No serious consideration of a peace treaty could be undertaken without first considering what was to be the area of the future German state. Three delegations had already expressed their agreement that the area of the Sear should be separated from Germany and integrated into French economy. Mr. Molotov refused to commit his Government on this point.

On this vital matter of frontiers, three delegations agreed to the establishment of a frontier commission or commissions to make an expert study of any proposed changes from the prewar frontiers. Mr. Molotov refused to agree. It was impossible for me to reconcile his urgent insistence upon the necessity of expediting the preparation for a German peace treaty with his categoric refusal to agree to the appointment of boundary commissions, which three delegations considered to be an absolutely essential first step in any serious preparation for a future German peace settlement.

Many other questions concerning the actual preparation of any peace treaty were discussed without agreement.

It was during this stage of the debate that Mr. Molotov insisted that the Four Powers should agree upon the immediate establishment of a German central government. Although the United States had been, I believe, the first of the four occupying countries to suggest at Moscow the desirability for the earliest possible establishment of a German provisional central government, it was obvious that until the division of Germany had been healed and conditions created for German political and economic unity, any central government would be a sham and not a reality. This view was shared by the other western delegations but to Mr. Molotov was completely unacceptable. This was the first clear evidence of his purpose to utilize the meeting as an opportunity for propaganda declarations which would be pleasant to German ears.

After several days of consideration by the deputies, the Austrian treaty was again brought to the conference table on December 4. The sole issue discussed was the determination of what were the true German assets in eastern Austria to which the Soviet Union was fully entitled by the Potsdam agreement. This had been the stumbling block in reaching final agreement on the treaty draft, and it was an issue which would determine whether or not Austria would be under such complete economic domination by the Soviet Union that it would be virtually a vassal state.

The French had endeavored to break the impasse by submitting a compromise proposal, but this was categorically refused by the Soviet Delegate. In the last hour of the final session of the Conference Mr. Molotov indicated an apparent willingness to accept a percentage reduction in the Soviet claims, without specifying the actual amount involved in his proposal. The matter was immediately referred to the deputies, and I was informed just prior to my departure from England that the Soviet Government would submit later a detailed proposition.

It was not until the tenth meeting that the Conference finally came to the heart of the problem-to a consideration of the harsh realities of the existing situation in Germany.

Several more days were to elapse, however, before the Council really came to grips with these realities. Discussions of procedure of what document to discuss again intervened to delay our work. However, on Monday, December eighth, the procedural issues were resolved, and the Council began the consideration of the fundamental issues which eventually led to the adjournment of the session without agreement.

I shall endeavor to indicate briefly what those issues were without reciting the involved and prolonged discussions over individual items.

The general issue was simple. It was whether or not Germany was to continue divided or whether the Allies could agree to recreate a unified Germany. Unless this could be achieved, all other questions relating to Germany would remain academic.

What then were the particular obstacles to the achievement of German economic and political unity?

The United States Delegation considered that there were certain fundamental decisions which the four occupying powers should take if German unity was to be achieved. These were:

1. The elimination of the artificial tonal barriers to permit free movement of persons, ideas, and goods throughout the whole territory of Germany.

2. The relinquishment by the occupying powers of ownership of properties in Germany seized under the guise of reparations without Four Power agreement.

3. A currency reform involving the introduction of new and sound currency for all Germany.

4. A definite determination of the economic burdens which Germany would be called upon to bear in the future, that is the costs of occupation, repayment of sums advanced by the occupying powers, and reparations.

5. An over-all export-import plan for all of Germany.

When these basic measures have been put into effect by the occupying powers, then the establishment under proper safeguards of a provisional government for all Germany should be undertaken.

Reparations soon emerged as a key issue. For the benefit of those not fully familiar with past negotiations on this subject, I wish to explain that a definite agreement had been concluded two years ago at Potsdam that reparation payments would be made by the transfer of surplus capital assets, that is, factories, machinery, and assets abroad, and not by payments from time to time out of the daily output of German production. One reason for this decision was to avoid an issue that would continue through the years between Germany and the Allies and between the Allies themselves concerning her ability to pay and the actual value of payments which had been made in goods. Also, it was clearly evident that for many years Germany would be involved in a desperate struggle. to build up sufficient foreign trade to pay for the food and other items on which she will be dependent from outside sources. The best example of this phase of the situation that I can give is the present necessity for Great Britain and the United States to pay out some 700 millions a Year to provide the food and other items to prevent starvation and rather complete disintegration of that portion of Germany occupied by our forces.

In other words, reparations from current production-that is, exports of day to day German production with no return-could be made only if the countries at present supplying Germany-notably the United States foot the bill. We put in and the Russians take out. This economic truth, however, is only one aspect of Soviet reparation claims. In the eastern zone of Germany the Soviet Union has been taking reparations from current production and has also, under the guise of reparation, seized vast holdings and formed them into a gigantic trust embracing a substantial part of the industry of that zone. This has resulted in a type of monopolistic strangle hold over the economic and political life of eastern Germany which makes that region little more than a dependent province of the Soviet Union. A very strong reason, in my opinion, for our failure to agree at London, was the Soviet determination not to relax in any way its hold on eastern Germany. Acceptance of their claims for reparations from current production from the western zones would extend that strangle hold over the future economic life of all Germany

The Soviet position was nowhere more clearly indicated than by Mr. Molotov's categoric refusal to furnish the Council of Foreign Ministers with information concerning the reparations already taken from the eastern zone or indeed any information at all concerning the situation there, until full agreements had been reached. In effect we were to tell them what has occurred in the western zones, which we had already done, and they tell us nothing. That refusal to provide information absolutely essential for decisions as to the organization of German unity would by itself have made any agreement impossible. A remarkable illustration of the Soviet position in this matter was their carping criticism of the economic procedure in our zones, which we freely publish for the world to read, while virtually in the same breath blandly refusing to provide any data at all concerning their zone.

It finally became clear that we could make no progress at this time that there was no apparent will to reach a settlement but only an interest in making more and more speeches intended for another audience. So I suggested that we adjourn. No real ground was lost or gained at the meeting, except that the outlines of the problems and the obstacles are much clearer. We cannot look forward to a unified Germany at this time. We must do the best we can in the area where our influence can be felt.

All must recognize that the difficulties to be overcome are immense. The problems concerned with the treaty settlements for Italy and the satellite countries were simple by comparison, since none of those countries were divided into zones of occupation and all of them had an existing form of government. Germany by contrast is subdivided into four pieces-four zones. No trace of national government remains.

There is another and I think even more fundamental reason for the frustration we have encountered in our endeavor to reach a realistic agreement for a peace settlement. In the war struggle Europe was in a large measure shattered. As a result a political vacuum was created, and until this vacuum has been filled by the restoration of a healthy European community, it does not appear possible that paper agreements can assure a lasting peace. Agreements between sovereign states are generally the reflection and not the cause of genuine settlements.

It is for this very reason, I think, that we encountered such complete opposition to almost every proposal the western powers agreed upon. The Soviet Union has recognized the situation in its frank declaration of hostility and opposition to the European Recovery Program. The success of such a program would necessarily mean the establishment of a balance in which the 16 western nations, who have bound their hopes and efforts together, would be rehabilitated, strong in forms of government which guarantee true freedom, opportunity to the individual, and protection against the terror of governmental tyranny.

The issue is really clear-cut, and I fear there can be no settlement until the coming months demonstrate whether or not the civilization of western Europe will prove vigorous enough to rise above the destructive effects of the war and restore a healthy society. Officials of the Soviet Union and leaders of the Communist Parties openly predict that this restoration will not take place. We on the other hand are confident in the rehabilitation of western European civilization with its freedoms.

Now, until the result of this struggle becomes clearly apparent, there will continue to be a very real difficulty to resolve, even on paper, agreed terms for a treaty of peace. The situation must be stabilized. Western nations at the very least must be firmly established on a basis of government and freedoms that will preserve all that has been gained in the past centuries by these nations and all that their cooperation promises for the future.

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