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Enclosed, I forward to you a copy of the draft of the note on occupation costs, which corresponds to the decisions made in the meeting of the H.P.A. on 31 July, and which in the meantime has the consent of the Chief of the OKW. I request to forward the note now.By Order /S/ WIEHL.
By order of my government, I have the honor to inform you of the following:
1 According to Article 18 of the German French Armistice Agreement of 22 June 1940, the costs for the maintenance of the German occupational troops on French soil are to be borne by the French government. To carry out this term, an early settlement is necessary.
2 Considering the impossibility to calculate the coasts accurately at present, until further notice, daily installments of at least 20 million marks are necessary. These installments may be paid in French francs, Reichcredit checks [Reichskassen Scheinen] or other values, to be agreed on. The conversion of French francs has been fixed on a currency ratio at 1:30, subject to a later different settlement. The billeting of the German occupation troops on French soil is not included in the settlement of installments. The billet owners will be compensated for the billeting costs by the French government outside of the settlement of installments.
3 The settlement is in force from the period beginning 25 June 1940. The back payments are due with the settlement of installments. The further amounts are to be paid every time for a period of ten days in advance.
4 Certificates of requisition for material in kind, issued by the German occupation, exclusive of billeting, as far as they have been issued after the coming into force of the settlement of installments, will be registered as payment for the cost of the occupation by the French government. However, the certificates of requisition, which were issued by the German occupational troops before the coming into force of the settlement of installments, are to be redeemed by the French government without deducting it from the costs of occupation. I request my General to confirm to me the receipt of this note, and to notify me about the measures which the French government has made about the execution of the above settlement.
Permit me, My General, to express my utmost respect,PART 6
In your teletype No. 171 of 12 September, concerning occupation expenses, it is stated in number 2 that it is the wish of the Reich Finance Ministry to inform the French delegation explicitly "that the installments did not constitute a settlement by a lump sum, but that they would have to be adapted to the actual necessities arising from the current war situation and the current requirements of the occupation troops". I hesitate considerably, to communicate this request to the French delegation for the following two reasons:
In my notes of 8 August 1940-Del. W. 280 of 15 August 1940-Del W. 331-and of 20 August 1940-Del. W. 408, the idea of installments has always been expressed clearly. The idea of a settlement by a lump sum has never been discussed with the French. The French delegation has therefore no reason, up to now, to assume that the installments constituted a settlement by a lump sum. The instruction requested by the Reich Finance Ministry would, on the contrary, only arouse the idea of a settlement by a lump sum in the minds of the French, which I consider as disastrous.
General von Stuelpnagel informed me more officially, that numerous German Divisions have been transferred to the East from France. This fact cannot remain unknown to the French permanently. He draw my attention to that fact because he thought that this decrease of the armed forces in France would certainly influence the amount of the occupation expenses.
The transmission of the communication to the French delegation at present in the wording "as necessitated by the current war situation and the current requirements of the occupation troops" as desired by the Reich Finance Ministry, contains the further danger, that the French delegation would claim a reduction of the installments because of the decrease in the number of troops.
I ask you for your decision.Signed: HEMMEN
By order of my government I have the honor to communicate the following to you:
In a note dated the 12th of October, the German government answered a note of the 26th of August in which the French government had made a formal protest against the payments demanded from her to cover the expenses of the German occupation troops in France. The German government refuses all discussion, both on the distinction between "occupation troops" and "operational troops", and on the rate of exchange between Reichsmarks and francs.
It further refuses or denies the French government the right to watch and receive information about the way in which the sums paid for the costs of occupation are used, as well as about the requisitioning of lodgings and economic requisitions.
The French government profoundly regrets this reply. It considers, in fact, that events have fully justified the position it took up.
After having recalled once more the essential distinction which it makes between "occupation troops" and "operational troops", the French government pointed out to the government of the Reich the two considerations which, in its opinion, make a fresh examination of the problem necessary.
1. Facts have shown that the rate of exchange fixed for the conversion of the Reichsmark into francs was too high. This rate of exchange did not take into account the respective levels of prices in France and Germany at the time when it was fixed. It anticipated a very considerable rise in French prices, which the German authorities considered inevitable. Actually this rise did not take place and the buying power of the franc remains much higher, than that implied by the maintenance of the present parity.
The French government is all the more surprised at its protest against the rate of exchange between francs and Reichsmarks not having had any results, as it had itself suggested, in case the rate were modified, a formula allowing the pay and allowances received by the German troops for their expenses in France to remain at the figures at present paid in francs.
An immediate consequence of the rate of exchange of 20 francs to the mark is that the sum demanded on account, for the maintenance of the occupation troops, which is reckoned in Reichsmarks, is out of all proportion to the real expenses of these troops. As a matter of fact, the credit balance of the account opened by the Bank of France for the German military administration is enough to cover the costs of occupation for a long time to come.
2. It is obvious that the payments demanded by the government of the Reich should be reduced in proportion to the number of German troops in France. But it is clear that this number has diminished considerably since the daily payment was fixed.
The French government is all the more justified in arguing from the above facts, as it is faced by an extremely serious economic problem, owing to a lack of raw materials and insufficient means of transport, which have led to considerable unemployment. The result is that, if the level of the costs of occupation fixed in August is persisted in, the burden will become more and more difficult to bear as time goes on.
The French government therefore has to make a formal request for a revision of the present daily payment. This reduction is amply justified, both by the real needs of the occupation troops and by France's economic capacity. If it does not take place soon, the French government will inevitably be unable to continue its payments.
The French government, anxious to carry out the Armistice Convention which it signed, wanted to give the government of the Reich this loyal explanation of the position it is forced to take up. It appeals to the feeling of great comprehension of the German government and hopes that this sincere explanation will induce the latter to grant the revision requested in this note.I am sir,
I have the honor to communicate the following to you on the orders of my government:
Since the fixation of the daily indemnity by Germany, the French government has paid over 108 million as occupation costs.
The burden of this payment, aggravated as it is to this degree, can no longer be borne by the economy of this country without serious danger. There is a risk of its causing a disorganization of its social and political structure from which German interests would be the first to suffer.
The representatives of the German government have several times manifested their intention of dealing considerately with France's domestic order and her attempts at recovery.
It is the purpose of safeguarding the economic forces necessary for Franco-German collaboration that the government has the honor of setting forth the motives and objects of its request for the revision of the indemnity.
The total of the sums paid by France is so great that financing has to be covered by repeated appeals to the Bank of France.
As a result, the monetary circulation is increasing at an exceptionally dangerous rate.
In January 1939 it did not exceed 110 milliards. In January 1941 it had already been doubled. At the present rate it will soon reach three times its pre-war volume.
This enormous mass of buying power weighs down an impoverished country, whose reserves have been exhausted by war and whose production is cramped by the lines of demarcation. It can not be reabsorbed by taxes, since budgetary recoveries, which already represent a very heavy burden on the taxpayer, do not exceed 60 milliard francs. It can not be absorbed by loans, since subscriptions to treasury bonds only just cover the expenses of the French state.
The mass of currency thus exercises considerable pressure on prices, so that it is difficult to prevent them rising.
This is particularly the case owing to the fact that, all holders of francs are showing an increasing propensity to fly from money. The rise in the rate of interest on shares, hoarding by merchants and individuals and rise in real estate prices reveal the progressive depreciation of the national currency.
The fall of the franc was considerably accelerated when, the State's Fourth Convention with the Bank of France (20 January 1941) became known. It is to be feared that the publication of the Fifth Convention, dated the 20th of February, will be still more disastrous, unless it is accompanied by the announcement of a revision of the indemnity.
1. Reduction of the indemnity
The indemnity was fixed at 400 million francs per diem, as the result of a decision by the German Armistice Commission for Economic Affairs on the 8th of August 1940, to meet the expenses of the occupation troops.
But these troops have decreased in number since the armistice, and one must reintroduce the distinction between operational troops and occupation troops, the latter being the only ones who were to be supported by France, according to the Armistice Convention.
Furthermore, the debits actually entered on the account of the Reich Credit Bank [Reichskreditkasse] with the Bank of France have been used to cover other needs than that of supporting German troops.
Finally, in spite of these non-military uses to which the indemnity has been put, German expenses have not absorbed the credits which were opened.
Thus it came about, that on the 12th of March 1941 the payments made by France amounted to 108 milliards, while the Germans had only drawn up to half this figure.
It would therefore only be fair, to reduce the daily payment of 400 millions by a very considerable fraction.
2. Incorporation of all French obligations into the indemnity
The present indemnity does not include all the obligations which France has to meet.
The French State meets the expenses of lodging and billeting separately.
The fiscal exonerations which Germany recently decided her purchases in France should enjoy, deprived the French Treasury of a considerable income.
It would only be fair that the new payment should cover all the obligations falling on France as a result of the occupation.
3. Reduction of the rate of exchange of the mark
The rate adopted for the mark, as a result of the decision of the 8th August, is 20 francs to the Reichsmark, whereas the official parity between the two currencies is 17 francs, and real parity, based on a comparison of their buying power, is still lower than this figure.
This over-valuation of German currency does not have as its only effect a considerable aggravation of the burden of tribute. It also exerts an upward pressure on French prices which tend to adjust themselves to German prices, on the basis of the excessive rate of exchange of the mark.
The parity between the two currencies should therefore be brought back to a level which stands in a closer relationship to economic realities.
4. Alteration of the method of payment
The habit of making payments in currency in settlement of the requisitions supplied to the occupation authorities is the principal cause of the exaggerated monetary circulation.
It is therefore essential that the needs of the German occupation troops be met, in principle, only by requisitions in kind;
that the methods used in the Rhineland from 1919 onwards be taken as an example and the French authorities be made responsible for obtaining these requisitions and debiting the occupation account with the value of the products and services provided in France;
that payments in currency be limited to a few purchases direct from commerce and industry made by soldiers of the German army out of their pay;
that payment for purchases in Germany for the maintenance of the occupation troops in France be met by the Reichsmarks which the French Compensation Office holds in Berlin. The cost of these supplies would be debited to the account opened to follow the use of the daily indemnity.
The French government strongly hopes, that the reasons for her preoccupations will be understood. It urgently requests, that talks be begun rapidly, so that the indemnity can be readjusted before the currency has lost its value completely. It counts on the German government agreeing to no new payments being made, until the necessary negotiations have been completed, as the needs of the occupation troops are covered for many months by the money at present credited to them in the Bank of France".I am, Sir, etc.
After extensive examination of the situation, I would like to suggest urgently, in reference to our dilatory treatment of the occupation costs, ordered by the telegram from there of 2 Aug 1941-No. 3863-and strictly complied with up to now, to make a new appeal to the Reichsminister for Foreign Affairs, to authorize me to sign the agreement over the reorganization reached with the French delegation, according to my telegram of 22 July 1941, Del. W. No. 372, and to put it into force.
In fact, it absolutely complies with Ambassador Abetz's opinion, forwarded there in his telegram of 15 Aug 1941, paragraph 1, that our consent for a fundamental readiness to decrease the occupation costs has been given to Admiral Darlan on 7 May 1941 for the concessions, granted us in Syria. As it is reported to me, General Huntziger has represented the opinion to De Boisanger, that there may be a misapprehension or incomplete notification of German agencies, if now the settlement of the occupation costs are brought up in connection with the North African questions.
I further point, out, that the present arbitrary de facto settlement of the payment of 15 instead of 20 million RM daily, already extends over 4 months, and that this represents for France the practically most favorable situation, and probably pleases more than the new regulation for 10 million RM credit plus 3 million RM transfer daily. It is still more important, that with a further delay of the settlement of occupation cost, a series of important questions, which are regulated with the reorganization simultaneously, remain further unsolved at the same time, and disadvantages for us come about from this:
1. The purchase of further French interests abroad is obligatory in most cases because of war-economical reasons. However, the reorganization, agreed to, cannot be taken up for that, as long as a total solution is still uncompleted The Reichsministry for Economy reports that the negotiations are practically at a standstill at present for this reason. Therefore, the disadvantage lies with us alone in these subjects, while 60 million RM for the purchase of interests with the coming into force of the reorganization.
2. The execution of armament deliveries from France always presents to our armed forces authorities difficulties, which result from the payment. An immediate coming into force of the transfer of goods would directly result in favor of our war potential.
3. I can secure the final appointment of the German foreign trade commissioner at the same time, for which especially the Four Years' Plan and the military commander show a lively interest.
But the stoppage also has a disadvantageous effect on the other work of the delegation. I am forced to approach the French government every week with new demands, mostly war-economically important, among them the construction of a German-French clay factory in France for deliveries of additional 100,000 tons of clay per year, the renting of several thousand trucks with French drivers, and the purchase of 15,000 French trucks, converted to woodgas for transports to Russia.
Everywhere the energetic cooperation of the French government and in part serious pressure by the government on its own economic circles are necessary for the execution of these problems. Because of the well-known tendency of the French government to hide themselves in case of such economic desires behind the general political situation, my efforts now ran against continually increasing difficulties. It is therefore desired to reinstitute the previous status as soon as possible, and to keep the field of endeavor of my delegation free and independent of the prevailing political constellations, as much as possible.
For these reasons, I recommend, that the present uncertain situation of the occupation cost question, which can only have a disadvantageous effect on us ourselves, be ended soon, and that the new settlement be ordered by us now.
[In ink] Ambassador Abetz has been informed of this telegram before it was forwarded./s/ Hemmen
Dear Mr. Hemmen,
I have received your letter of 29 September 1941-Del. W. No. 10093 P.
The Reich Foreign Minister does not consider it appropriate to approach the Fuehrer with the regulation of the occupation expenses at the present.
With friendly greetingsHeil Hitler
In execution of the decisions taken by the German government with regard to the payment of the costs of occupation, the French government has, since August 1940 made periodic payments which, on the 31st October 1941, totalled 183,200,000 francs. It was also obliged to defray certain expenses (particularly the lodging of troops) directly-expenses which amounted at this same time, to nearly 8 milliards and to cover the deficit in the Franco-German clearing account, which is, at the moment, in the neighborhood of 11 milliard francs.
The French government protested several times against the size of this imposition, drawing the attention of the German Government to the grave dangers it entails, both from the financial and from the economic point of view.
Its fears on this point are unfortunately being shown to be better founded every day.
The expenses resulting to the French Treasury from the occupation alone are as high as the expenses of the State itself. The sums paid towards the costs of occupation are also often used to a large extent to defray expenses which have nothing to do with the maintenance of troops.
It is clear that such burdens are disappropriate to the present resources of France and that they can be covered only by treasury expedients.
The national revenue is diminishing continually. If the efforts made in the field of agriculture result in an increase in the productivity of the soil, industrial activity slows down. An increase in taxation would produce a hardly noticeable result, and one must, on the contrary, expect the product of these taxes to diminish more or less rapidly. One is therefore forced to borrow at short call, either from the Bank of France or from individuals and credit establishments, up to 70% of the needs. In this way the public debt and the advances from the fiduciary swell at an alarming speed, whatever the effects may be of the measures taken to manipulate certain elements of this debt and to make it less onerous (conversion, consolidation, reduction of rates of interest).
The mass of means of payment created to deal with the expenses resulting from the occupation, seriously imperils economic equilibrium. Inflation takes place in spite of the efforts of the government to limit its volume and its consequences.
The prices of foodstuffs of daily use and of industrial products are maintained by rationing and taxation, but nevertheless tend more and more irresistibly to rise, and each day it is harder to prevent too rapid a rise in the cost of goods and property.
The increasing abundance of money available is shown both by the increased circulation of bank notes and by the increase in stocks held in private and public institutions.
The monetary circulation, which was about 160 milliard francs in June 1940, has today reached the figure of 250 milliards, in other words, it has increased by over 56%. During the same period bank deposits increased by about 50%.
The smallness of the quantity of goods offered is at the same time accentuated by supply difficulties and by the extent of the requisitions carried out in the occupied zone.
This development is leading to a catastrophy like that suffered by Germany 20 years ago.
When the French government signed the Armistice, it firmly intended re-establishing the economic situation. All its efforts since then have aimed particularly at keeping the monetary situation under control, in spite of difficulties of all kinds and, particularly, in spite of the enormous costs of occupation.
The French government is resolved to persevere in this path, but it cannot do so usefully if the payments imposed by the German government continue to render all its efforts useless in advance. It wants to warn it once more.I am, Sir etc.
1. Reich Foreign Minister has ordered on 16 February that you orally transmit to the Governor de Boisanger that the German Government considers the letter of Finance Minister Bouthillier to the Reich Minister of Finances only as a personal statement, not as an official communication of the French Government. In case the French government wishes to make a statement concerning the question of occupation costs this should be directed by the authorized French chief of negotiations to the authorized German chief of negotiations. In connection with this communication you are to warn Mr. de Boisanger regarding the end of Mr. Bouthillier's letter emphatically against an arbitrary discontinuation of the payments for occupation costs by the French Government and to point out to him that such a discontinuation would create a serious situation and result in corresponding German counter measures.
2. The Reich Minister of Finance has on 17 February declared that he approves these steps and that he is not going to answer the letter. However, he has suggested an internal discussion of the question of occupation costs to which the Reich Foreign Minister also agreed regarding the report of the OKW on the actual daily expenditures. The discussion will take place soon in agreement with the competent department and your reports mentioned in the beginning will also be discussed.
3. Reich Foreign Minister, by the way, has issued for all your negotiations the general directive, considered at an earlier date, that you are to break off negotiations and depart for Berlin in case the French assume an attitude which is not becoming to them as the conquered ones.Wiehl.
I have the honour to inform you of the following by order of my government.
Ever since August 1940 the French government has continuously drawn the attention of the German Government to the extremely grave consequence which must necessarily accrue to French economics and finance from payments towards the costs of the occupation.
The French delegation to the German armistice delegation, for economic affairs has time and again made personal and written representations on this point; the question has also been taken up regularly by members of the French government and their representatives every time they had a chance to discuss Franco-German problems with the German authorities; lastly, the French finance minister considered it his duty, in view of the seriousness of the situation, to make a direct appeal to the German finance minister.
The French government declared, as soon as it was informed of the German Government's demands, that it only agreed under duress to make payments out of proportion to the obligations accruing to it out of the armistice agreement; it has protested against the German refusal to differentiate between occupation and operational troops and against the rate of exchange imposed between the franc and the mark, which enabled the German army, by reason of the very low level of French prices, to effect enormous requisitions in the occupied territory. Finally, it has proved again and again that the daily payments of 20 million Reichsmarks exceeded the total requirements of occupation and operational troops, since the sums placed at the disposal of the German authorities were never sent in their entirety, although they were even used otherwise than for the expenses of the German army in France (purchases of goods by the Reich, purchases of stocks and shares, etc.).
These representations remained without effect, and those protests were never accepted. Only one series of discussions was opened in May 1941; it continued for over three months and had no other result than the reduction of the daily payments to 15 million Reichsmark and an admission by the German government that this amount could very well be reduced a lot more. Even these concessions were made dependent by the Germans on extremely heavy compensations in the form of transfers which the French Government only accepted for a limited period and in order to facilitate an agreement.
More than seven months have gone by and this question is still outstanding. It is now impossible to put off a decision any longer, since the effects on French economics and finance of the payments exacted under occupation costs are now fully visible.
On February 28th, in other words after 20 months of occupation France will have paid 219,200,000,000 francs and another 9,000,000,000 odd under the heading of military accommodation costs. Payments for the year 1942 based on present facts and exclusive of accommodation costs will reach 110,000,000,000, which is considerably more than the total fiscal receipts of the French state.PART 30
With the approval of the Reich minister for Foreign Affairs all the departments took up again the question concerning the occupational costs.
According to the opinion of all the ministries expressed unanimously, negotiations with France concerning the occupational costs have become necessary, because a suspension or diminution of the payments on the part of the French was to be feared on one hand (Bouthillier-letter) and because the OKW on the other hand protested again with determination against the, in July 1941, proposed reduction of the installments to 10 million RM's per day because of its current needs in France.
After careful deliberation of the question, all departments, the Armed Forces included, took the point of view that the reduction to 10 billion RM's should not be conceded to the French as a final settlement on the occasion of new negotiations, but that they should be granted a breathing spell of about 6 months, from 1 April 1942-1 October 1942, which should exclude any further discussion of that question until that date. This is insofar of tactical importance as in that manner the old amount of the installments of 15 to 20 million RM's is being maintained and thereby the important concession of a reduction to 10 million RM as a political concession is left open.
It has been agreed upon, that:
1. A current transfer from the existing credit amounting to 2 million RM per day in merchandize and 1 million RM in securities (stocks) and participation must be insisted upon for the meeting of the so-called external occupation costs.
2. The French Government should see to it that the expenditures for the occupational costs figure in the budget in a lawful manner.
3. A general regulation of the absolutely necessary tax-, wage-and price-reform and other measures for the prevention of the danger of an inflation must be demanded simultaneously.
The decision proved indisputably that we had no real efficacious counter-measures at our disposal in the case of an arbitrary suspension or diminution of the occupational costs by France. To make ourselves paid by sequestering the bank-note reserve of the Bank of France or by sequestering French State- or private property would only be of temporary efficacy, not to mention the political effect of such a measure of force. This would direct itself very soon against the proper German interest, because the present efficacious French cooperation in the execution of great armament orders and the distribution of orders would suffer strongly by it.
Considering these view-points, I ask for the authority to instruct the German Armistice delegation for economy in Paris to conduct the negotiations with the French delegation in that sense.
Hereby submitted to the Foreign Minister of the Reich through the State secretary.signed: Wiehl
I. In addition to the suggestions of the German armistice delegation for economy in its above-mentioned report and for the preparation of the execution of the decision of the HPA of the 7 September 1942 in the question of occupation costs, the following suggestions are made:
If one starts out, that because of political and financial reasons the French government does not find itself ready for the continuous advance of the occupation cost account above the daily installment of 15 million RM for the purpose of retention of a minimum amount of the account, because it will mean an increase of the cost of occupation, then it will depend during the coming negotiation with the French government upon getting its agreement to the suggestion of the German armistice delegation for economy, to settle the expenditures, unrelated to the occupation, which have been paid thus (or from occupation cost funds, via the clearing, to retain the occupation cost funds for their proper purpose)
1. In connection with this suggestion, it must be attempted to solve two questions:
a. One single transfer of a larger amount via clearing to the occupation cost to equalize at least partly the expenditures, unrelated to occupation costs, already paid in the first half year of 1942 from occupation cost funds;
b. Continuous monthly transfer via clearing of funds from Germany, which are necessary for the settlement of expenditures, unrelated to occupation costs.
At first it will depend upon making it clear to the French that we are forced to make a difference between expenditures for occupational purposes, and expenditures, unrelated to occupation costs. It is yet to be considered in detail, which instances are to be mentioned to the French as examples of expenditures, unrelated to the occupation costs. Without doubt, these will include in the past the funds out of which the compensations were paid for the requisitioned horses, and in the future the expenditures for food and fodder deliveries consigned for Germany. However, there are strong doubts about mentioning the black market purchases here also. At the end, the only thing to do will be to justify the distribution to the French by generally military reasons, which cannot be described in detail. Of course, such a basis for negotiations makes the accomplishment of the new German demands for the transfer via clearing of the continuously necessary funds of 150 million RM monthly more difficult, because the French will recognize that therewith additional purchases of goods outside the contingencies agreed to are to be paid.
Since the costs of the occupation have increased greatly especially since the beginning of the year, there is a definite reason to demand from the French that they also agree for the past to the settlement of at least a part of the expenditures, unrelated to occupation costs, in such a form that an amount as big as possible, is paid in via clearing and transferred by France to the occupation cost account. In that manner, it could be accomplished that the occupation cost account will again be replenished by this amount. In the first half year of 1942, 280 million RM have been spent for the purchase of horses, and 600 million RM for the purchase of the Raw Material Trading Co. Ltd. (Roges). Of course, it will not be possible to get from France the consent for the transfer of an amount of that size.
In case of the one single payment as well as in case of the future continuous monthly payments for expenditures, unrelated to the occupation costs, the French authorities will neither be informed about the distribution of the accounts, the latter of which are to be paid as lump sum payments at the end of each month, nor about the purpose.
It is a pre-requisite for the settlement, that the procurement of funds in Reichsmarks is secured in the past as well as in the future.
3. This type of settlement of the question of occupation costs secures the procurement of French funds in a simple practical form, and fits into the frame of the German-French financial transaction. Naturally, it amounts to a further considerable financial burden on French economy; but it does not appear in the form of an increase of the occupation costs.
The idea to balance this internal account at the final settlement of the occupations at the conclusion of the peace can be combined at the same time with the special internal bookkeeping of these expenditures, unrelated to the occupation costs, separate from other clearing transfers.
II. The fact that in the meeting of the HPA it was not finally given up to increase the amount of francs of the installments by change of the exchange rate, causes the German armistice delegation once more conclusively to take a standpoint to this question.
However, a new evaluation of the Franc by 50% does not lie in the German interest. The present economical situation of France can no longer be compared with the one of 1940, where the interior purchasing power of the Franc was about in the ratio of 1 RM=10 Francs.
The account has dropped since 1 July 1942 until 15 October 1942 from 2,476 billion Rm to 1,532 RM./s/ Hemmen
I. For your information: Reich Minister for Foreign Affairs has ordered, as there might arise political objections against increased demands from France, more exact explanation how in detail the increase of daily expenditures for occupation has been brought about, in particular, who is responsible for the fact that from the account of occupation costs demands have been satisfied which do not represent actual occupation costs. OKW, Department of Wehrmacht Budget and Administration, declare themselves not to be in a position to explain more fully the use of occupation cost amounts and expenditures unrelated to occupation costs.
II. Therefore I ask you to contact the bookkeeper of occupation cost account, get the necessary documents and vouchers and wire back. What matters is to get a survey of amount and purpose of the issue of green checks to the various authorities entitled to make demands [Bedarfstraeger] since the beginning of this year which should easily appear from the books of the issuing office. Greatest speed is demanded as these documents are needed for another submission to Reich Foreign Minister./s/ Wiehl
1. How large is the part administered by v. Lenz? How large is the part administered by Berlin? Who gives to Roges. To whom else does Berlin give allotments.
2. How far does Lenz know for that purposes the amounts are used which he allots to branches of the Wehrmacht, etc.
3. What are green checks?PART 34
The Chief Intendant with the military Commander in France has reported that in the past deliveries have been made amounting to a total of 90,000,000 RM monthly which could have been paid by way of the German-French clearing system, because the procured goods were exported from France. The following figures have been obtained from the present monthly average of the year 1942 but they can only serve as a conjecture because the elimination of those goods which were not procured for the requirements of the units of the German Wehrmacht stationed in France is very difficult on basis of the available documents. The following items are involved:1. Food supply and forage .......... ca. 11 mill. RM
These procurements have been transacted at the prices resulting from the general increase of prices in France. As the procurements were made for service branches outside of France, payment by way of the German-French clearing system is permissible as a matter of principle. Funds of occupation costs have been claimed so far, because the final customer of the goods in most cases is not known at the time of procurement. The payment and final entry into the books of these expenditures is the duty of the procurement office in France.
The amount of 150 mill. RM provided so far for carrying out the flat clearing process [Pauschalclearingverfahren] with France can be reached only by including the purchases made by the Roges "Raw Material Trading Company Ltd." [Rohstoffhandelsgesellschaft m k H] on the black market. Objections have been made hereto, because resale of the goods bought on the black market ["S-Markt"] is practicable only with subsidies to reduce the prices granted by the Reich Minister of Finances, and it is irresponsible to incur a commercial debt in the amount of these subsidies given by the Reich Minister of Finance, in order to procure goods which bring a considerably lower price than that expended. Payment of the procurements on the black market should be possible, however, at least to the amounts actually obtained by the Roges through resale. The amount of 150 mill. RM would almost be reached if the Roges were required to transfer by way of the German-French clearing the proceeds obtained by resale of the goods with exception of the Reich subsidies for price reduction.
If this settlement should not be practicable carrying out of the flat clearing process could be restricted to the amount of 90 mill. RM per month. In this case, the French Government in accordance with the suggestion of the Reich Minister of Finances of 27 October 1942 should be obliged to provide in form of occupation costs the surplus amount missing from the 150 mill. RM.
The excess consumption of occupation cost funds in 1942, as already thoroughly pointed out in the last meetings of the Committee for Trade Policy, is primarily due to the decrease in purchasing power of the franc, and it is to be assumed that this decrease compared with 1940 is at least one third. In addition, payments to a considerable extent had to be made from the occupation cost funds which were not allotted to meet the demands of those units of the German Wehrmacht stationed in France. On 15 January the B account of occupation costs was approximately 3 bill. RM. The reason for the decrease appears from the following compilation:a for procurement of goods exported from France during the period of 1 Jan. - 31 Oct 1942 an estimated 10 x 90 mill. RM ..... 900 mill. RM
Therefrom it appears that the decrease of reserves of occupation cost funds amounting to 3000 mill. RM on 15 January 1942 is primarily due to expenditures for purposes unrelated to the occupation. Also in the above compilation are not included the bills issued by the Reichskreditkasse imported into France. Of these probably a not immaterial part has been imported by troop units transferred to France, but to carry out procurement of goods destined for export from France. Consequently, it may be assumed that the requirements of the Wehrmacht units stationed in France up to now could have been approximately satisfied from the installments of 450 mill. RM made available every month by the French Government. It is further pointed out that a considerable part of the above-listed expenditures unrelated to occupation, in particular the expenditures for purchases on the black market (S-Markt) and for French food deliveries not destined for the occupation troops proper, have not been caused by the OKW.The Chief of the OKW
Reich Minister for Foreign Affairs has ordered the submission of a vote with reasons, whether the French potential can bear the increase of occupation cost payments, demanded by us. One must if possible gain clarification before a decision, whether for instance as result of black market purchasing actions, a development would be started, which would lead to Greek conditions.
Request by return that documents and standpoint, necessary for vote, is wired, if necessary in connection with military commander and Embassy./s/ Wiehl.
According to instructions, I submit in the annex a note of delegate Hemmen about the financial capacity of the French to pay the increased expenditure rates of the occupation as well as about the dangers threatening French finances arising from the payments of occupation costs and about the methods to meet these dangers. Delegate Hemmen comes to following conclusion.
1. The increased payments of 25 million RM daily (yearly 182 billion francs) are bearable and by no means dangerous for the French finances. The yearly French national income amounted to 432 billion francs for 1942. The daily per capita war expenses are at present in Germany 2.90 RM and thus 6 times as high as in France with 0.40 RM.
2. The danger point for the French finances lies in the fact that the French government has done nothing until now to counteract the threatening inflation which is due to the war expenditures, so that a price increase of 50-60 per cent and a devaluation of the franc of about one third took place.
3. Therefore it is necessary to raise simultaneously with the demand for increased occupation costs the demand for effective French financial, monetary and price regulations and to secure their strictest execution under German guidance and control.
This result on the whole corresponds to the decisions of the HPA which were laid down in my former note. As suggested there, it can be demanded from the French to increase the daily part-payments from 15 to 25 million RM; however, as it has been also suggested there, it is to be insisted that the measures which are needed against further price increase should be carried out without delay and in an absolutely effective way. The investigations which were conducted by the OKW and by the Reich Ministry for Finance come to the same conclusion.
In doing so, it is not sufficient to leave this to the French government alone, but we ourselves have to intercede. The nomination of a special commissioner with similar tasks as in Greece will at present not be necessary and not even feasible in France, for the simple reason that it would be unwise to entirely unburden the French government of its own responsibilities to maintain the order of economics and finances. But it seems necessary to persuade the French government to accept a collaboration with one or more German advisors in order to introduce and carry out the necessary measures. This function could be assigned to the delegate Hemmen and to his delegation in such a manner that the negotiations they have conducted until now would be changed into a collaboration with the corresponding French governmental agencies. The necessity for this could be presented to the French government with the double motivation that, as an occupying power, our interest is not only in that further inflation should be prevented in France and that we can demand this in our capacity as receiver of the occupation costs on the basis of the armistice contract, but that we also have the same interests on account of the far-reaching interweaving of the French and German industries which was achieved through mutual free negotiations.
Furthermore, the German side has to do its share that nothing should happen in the further course which would enhance the inflationary tendencies in France. I have agreed with State Secretary Koerner that the Foreign Office and the Four Four Years' Plan should most closely follow further development in this respect and intervene as soon as necessary. State Secretary Koerner has told me that the Reich Marshal announced his decision to curb and, if necessary, to stop the black market action if it should become apparent that it has undesirable consequences in this respect. Also, further liaison will be maintained by the Foreign Office with the OKW which has already taken provisions to reduce the military expenditures to the absolutely necessary minimum in order to observe permanently this point of view.
In this way both on French as well as on German sides everything will be done to prevent the possible dangers of the payment of increased occupation costs.
Herewith submitted via the State Secretary to the Reich Foreign Minister with the request to approve the planned procedure.signed Wiehl
On the 15th December 1942 the German government asked me through you to increase the payments towards the costs of occupation by 10 million RM (200 million French francs), which would bring the daily total of payments to 25 million RM, as against 15 millions, or 500 million French francs as against 300 millions.
During our conversation of the same day, the 15th December, at the German Embassy, I pointed out to you:
On one hand that these payments exceeded France's ability to pay; that they would oblige the French government to cover this increase by advances from the Bank of France, and would in consequence risk compromising the French currency irretrievably;
on the other hand that the French payments exceeded the concept of occupation costs and really constituted a French contribution to the common defence of Europe;
that, wishing to collaborate and to render effective aid to the German war-effort under existing circumstances, I accepted these extra payments.
In formulating your request for an increase, you declared that close cooperation should be instituted between our two countries, with the purpose of seeking and applying common measures intended to ensure the stability of the French currency and of French economy. You mentioned, on this subject, that the German government would appoint a plenipotentiary to the French government, whose mission would be to advise the French government.
I declared myself ready to cooperate closely in the financial field as in all others, but I formally rejected the appointment of a financial adviser, as this would undermine the authority of the French government and risk ruining the confidence of investors.
It is in fact necessary to point out that the daily payments which are the object of your request of the 15th December for an increase, do not represent the total of the financial burdens on my country. Besides these payments, France bears the lodging and billeting expenses of the German troops in the occupied zone, as well as the advances made for the functioning of the Franco-German clearing agreement.
I had also pointed out to you, in our conversation of the 15th December, that a demand from the Italian Government could be expected. Since then, although the Franco-Italian Armistice Convention does not put part of the costs of maintenance of the Italian occupation troops on France, the Italian government has requested advances.
Finally, I consider that the daily payments should, from the day that they are raised to 25 million RM, i.e., 500 million French francs, include all obligations falling on France as a result both of the occupation and of the Clearing agreement, and should take into account any advances which may eventually be granted to the Italian government.
It has not been possible to hold any conversations since December; I consider that negotiations on these various points are essential and should be pursued without delay.
While waiting for these negotiations to end up the necessary agreement, I inform you that I accept from now, under the conditions I have just described, a provisional increase in the daily payments as from January 1943, to 25 million RM, i.e., 500 million French francs.
The French government will immediately take steps to meet, on this basis, the new payments which have been demanded from it, and particularly to make up the difference in the payment made on the 11th January 1943 at the old rate.I am, sir, etc.
All departments concerned attach the greatest importance to the continued payment of the French occupation cost payment, previously paid to Italy, because of the condition of the occupation cost and of the increased demand, which has been caused by the occupation of the Southern French area, which was up to now reserved for the Italian armed forces. I therefore request, to demand from the French government the transfer of all payments promised to Italy, to the Reich. If the French government should raise any legal objections then I request to point out without going into legal questions that the German Reich has taken over the protection of the areas occupied by Italy up to now. If necessary, certain concessions can be made, according to the suggestion by the Four Years' Plan; to which the Reich Minister of Finance has also agreed, in the question of the additional payment of 2.8 billion Francs for the previous additional demands of the Italians in the connection with war and occupation damages. The Reich Minister of Finance requests to point out to the French government also that its representatives themselves, during the negotiations of the delegate of the Reich cabinet (Reichsregierung) for economic and Financial questions, always have entered the Italian occupation costs as debit items. Request report on the acceptance of your demarche.Dumont
I have the honour to confirm the conclusions reached in our talk of the 21st June.
The Payments towards the costs of occupation, which have till now been made every 10 days and in advance, will provisionally, to fit in with present circumstances, be made monthly and in advance, on the 21st of each month.
On the 25th of June next a settlement will be made, which will cover the monthly period from the 21st June to the 20th July, taking into account the payment made on the 21st June. From the 21st July, monthly payments will be made in advance at the rate previously agreed.
These new regulations for the payments were adopted owing to the exceptional circumstances which justify the request you addressed to me in the note of the 19th June. They impose new burdens on the French Treasury at a time when, as you know, the monetary situation fills me with the liveliest apprehension.
I therefore count on the system of making the payments every 10 days being reintroduced as soon as possible.I am, sir, etc.
I ask for the consent of the Reich Minister for Foreign Affairs to enter negotiations with the French government on the following basis:
1. The OKW demands an increase of the French occupation cost payments from 25 million RM a day or 750 million RM a month plus 50 million RM for Italian occupational costs to 33.3 million RM a day or 1 billion RM per month and proposed to the Foreign Office to instruct my delegation to enter negotiations with the French Government to that effect. The RFM (Reich Finance Ministry) and the Four Year Plan agreed to that demand.
The expenditures for occupational cost have since the beginning of the year constantly exceeded the income because of the increasing preparations on the Atlantic coast, made necessary by the war. Those excess expenditures were covered by using the remaining credits on the account of occupational costs and by a payment of one month of occupational costs in advance which we demanded a short time ago.
These expenses increased to an even larger extent during the last few months, especially since the beginning of the invasion. While they still amounted to 900 million RM in May, they increased to 950 million RM in June and will reach 1100 millions in July. All reserves which were available up to now will be exhausted by the middle of august at the latest. new means for the conduct of war in France must therefore be procured until then according to the demand of the OKW.
2. The income of the French Government from Tax-Sources, and mainly the raising of money through loans and short term bills of exchange has on the other side decreased considerably since the extensive paralyzation of the economic life, the industries and the transportation system in France. The French Government consequently has been forced for the last few months to use the advances of money of the Bank of France at an everincreasing rate. Those advances increased from about 10 billions of F. Frs. to 18 billions of F. Frs. in May and 25 billions F. Frs. in June. The newly demanded payments will also have to be raised through the use of the bank-note credit, that means, through the printing of bank notes.
The French Government can on the other hand hardly be surprised, considering the actual circumstances, if we approach them with the demand for increased payments.
We know from confidential sources that Laval and Finance Minister Cathala already expect such a demand.
3. Considering, however, the political necessities and the already mentioned difficult financial situation of France, and in appreciation of the fact that the French Government has kept its financial obligations for 4 years without interruption, I propose the following:
1. to designate the new increase of payments which has now become necessary, as temporary and to leave open the possibility of our readiness to reopen negotiations for an eventual re-diminution, as soon as the military situation in France permits.
2. Not to designate that new demand as an increase of the occupational costs in the spirit of the Armistice treaty, because that demand, which was explicitly motivated by the OKW, as to cover the increased expenses for our conduct of war in France, could only with difficulty be reconciled with the obligation to pay the "cost for the maintenance of our occupation troops", as based on the Armistice-treaty. I recommend rather to present it as special contribution of the French Government and the French people for the repelling of Bolshevism (original version reads: "repelling of the Anglo-Saxon invasion of Europe" but it has been changed in pencil to read as above) and the defense of Europe. Such a formulation lies in the political line of Laval and his repeated declarations. This does not change the fact, that those payments, like the previous increase, will also be made through the account of occupational costs and will thus continue to be treated as such.
3. In order to provide also an exterior character to that idea, I propose to negotiate about a single additional effort of 1 billion RM to be paid in monthly installments of 200 million RM each. At the expiration of 4 months a further contribution by France could eventually be negotiated again, according to the then prevailing military situation.With the consent of the embassy.
Following a special order of the Reich Cabinet, I have the honor to communicate the following to you:
According to Article 18 of the Armistice treaty the French Government has to defray the expenses for the support of the German occupation troops on French soil.
The daily occupation expenditures for the Wehrmacht in France are at present more than 35 million RM. Since 11 November 1942 the French Government has paid daily installments of 25 million RM to the occupation costs. Due to the deficit thus resulting every month the last reserves from the occupation cost account have been used up in the meantime as you repeatedly had occasion to notice for yourself. By my exchange of notes with Minister Cathala on the future monthly advance payments of occupation costs of 19 and 23 June 1944 the necessarily resulting insolvencies could be overcome, however, the existing deficit could not be removed. I therefore request the French Government now to increase the installments of occupation costs effective on 1 August of this year to 35 million RM daily.
In accordance with the said exchange of notes of 19 and 23 June 1944-No. 2076-the installments are to be paid monthly in advance on the 21st of the preceding month. The additional amount of 200 million RM for the period of 1 to 20 August has therefore become due and is to be paid before 15 August 1944.
I request you, Mr. Governor, to acknowledge receipt of this note and to inform me of the orders given by the French Government in order to carry out the above demand of the Reich Cabinet.
Please accept, Mr. President, the expression of my deepest respect.s. Hemmen
As I reported on 12 August the 8 billion-rate promised by President Laval for 12 August has finally been paid on time after considerable difficulties had been overcome (compare my report of 16 August). There was an unmistakable tendency to put off this payment until after the approaching bank-holidays to the 16th in the hope that by that time the development of the military situation would prevent the payment (American tanks had already been reported in Chartres).
In addition to the increase of occupation cost payments I negotiated since 7 August upon suggestion of our military agencies with the Governor of the Bank of France, de Boisanger, about transport for safeguarding of the large reserves in bills in Paris (60 billion F. frs.) and Clermont Ferrand (80 billion F. frs.) to eastern France.
Readiness of the Bank of France to do so was undoubtedly present, the existing transport facilities and the requisite military protection however extremely slight. A first transport of 25 billion from Paris to Nancy was scheduled for 12 August; simultaneously also the installment of 8 billion due on the 12th was to be sent off because there would be no other transport opportunity for it. This transport was carried out. For a second transport of 25 billion the military could no more make available any trucks. Railroads are also out. Therefore, the German Bank commissioner tried to transfer 10 billion F. frs. on 2 trucks of the Bank of France in another transport about the completion of which there is no report yet.
Still greater were the difficulties of transport and protection for the transfer of 80 billion reserves in bills from Clermont-Ferrand to Dijon and Lyon, because there direct transport is being obstructed by Maquis and transport therefore had to be directed via Paris.
Ten billion of these did arrive. Further transports are improbable in view of the development in the meantime.
However, on the morning of the following day, 17 August, I again negotiated orally with Minister Cathala and Governor de Boisanger about our demand for increase of occupation costs. Cathala at this opportunity declared as per order of President Laval that the French government now definitely refuses the demanded increase for reasons already stated. I stated that therewith I had to consider our negotiations as definitely frustrated and therefore reserve subsequent decisions to my government. At I had learned in the meantime that the convention in the Bank of France necessary for the installment of 8 billion due on 21 August had not yet been applied for, i.e., that on the due date new difficulties for the payment had to be expected, I expressed the definite expectation of the Reich Cabinet that order to pay the balance will be issued on time by the Ministry of Finances, Cathala thereupon declared that the French Government for a period of more than 4 years always fulfilled its obligations promptly. As long as he functioned as minister of Finances he always considered it his special duty to fulfill the obligations contracted by the French Government; he would act the same way now in case he should still be in office on the 21 August. By saying so he distinctly alluded to the pending plans for a change of government and the present serious situation of President Laval.
[Note: The original shows numerous corrections in ink. Translation followed the corrected version.]PART 51
The French government has not yet paid the 2nd September installment of the occupation costs which were due 21 August. For the securing of the French for the armed forces, stationed on French soil, I order the following.
The administrative headquarters [Feldkommandaturen; FK] mentioned in the distribution, will confiscate at once half of the cash amounts of francs at the branch of the Bank of France, located at their official station, and will cause the removal under military guard to the following Reichskreditkassen: Belfort, Colmar, Muehausen, Strassburg, Saargemund, and Saarlautern. According to the situation of end of July, the following cash amounts were with the branches of the Bank of France: Belfort 698 million francs, Besancon 642, Epinal 853, Luneville 93, Nancy 1,411, Nevers 1,016, Saint Die 181, Vesoul 227.
Furthermore, 2 billion francs in thousand-franc notes are in the vault of the Bank of France in Nancy or Epinal, which were brought via transport in the middle of August from Paris to Nancy. Those 2 billion francs are also to be confiscated and to be removed./s/ Kitzinger
The French moneys in the amount of frs 2,931,000,000 deposited with us by the military commander in France have been accounted for by us with the Bank of France, Belfort branch, as per our letter of 25 October 1944, photocopy of which is enclosed.Chief Administration of the Reichskreditkassen
Nazi Conspiracy and Aggression Volume IV
Office of the United States Chief Counsel for Prosecution of Axis Criminality
Washington, DC : United States Government Printing Office, 1946