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In discussion, there was general agreement that no decisions on force withdrawals should be taken before the tripartite talks and that in discussions with the Americans and the Germans our aim should be to obtain
the greatest possible financial assistance. We should, however, avoid giving any impression that we might accept any solution less than the full
coverage of our foreign exchange costs. Even if we withdrew a third of our combat formations and made the logistic and administrative economies already proposed, it appeared that, on the assumption that the German contribution would be on the lines they had indicated, the burden of our forces in Germany to the balance of payments would be greater than ever before.
On the other hand, withdrawals larger than two brigades could not be made before the autumn of 1968 whether or not we were willing to accept the political and military consequences, since the additional units could
neither be accommodated in the United Kingdom nor disbanded until after that time. In the absence of any offset payments from the Germans we should be bound to incur substantial expenditure on foreign exchange unless we withdrew not only all our combat forces from Europe but also all our facilities. A withdrawal on anything approaching this scale would have profound consequences for our national security and for the whole of our external policy including our approach to the European Economic Community,
and the implications would require the most careful study against not only
our economic situation, but also our expenditure in other theatres. The
consequence of a release from our commitments under the Revised Brussels
Treaty for the similar release which would thereby be involved of the
restraint on the German manufacture of nuclear weapons must also be borne
in mind. Defence expenditure overseas would receive particular attention
in the current Defence Expenditure studies, and the force levels we should
maintain on the mainland of Europe should be considered as part of these
wider studies. There might also be advantage in considering in more detail
the balance of economic advantage between the maintenance of forces in Germany and their deployment to the United Kingdon against the strategic
background, especially the ability to return forces to Europe in an
emergency.
Summing up the discussion, THE PRIME MINISTER said that planning for the withdrawal of two brigades and four RAF squadrons as soon as practicable after 1st July 1967 should continue, and expenditure should now
be incurred on accommodating the troops and their families in the United
Kingdom within the limits mentioned by the Defence Secretary and subject
to the necessary Treasury agreement on individual projects. The Committee
should consider after the tripartite discussions, in the light of what we might have obtained from the Germans, what further action might be required
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