CAB129-52 — Page 102

SECRET

C. (52) 185

Printed for the Cabinet. June 1952

CABINET OFFICE RECORD COPY

Page 102

Copy No. 76

9th June, 1952

CABINET

GERMAN FINANCIAL CONTRIBUTION TO DEFENCE

MEMORANDUM BY THE SECRETARY OF STATE FOR FOREIGN AFFAIRS

The Cabinet will wish to know the result of the negotiations on the above subject which I last brought before them on 15th May in my paper C. (52) 162. It quickly became apparent in these negotiations that we should only be able to reach agreement on the division of the total German contribution of DM. 850 million a month on a basis which provided a progressively increasing amount for the German contingents to the European Defence Community (E.D.C.) to match their increasing rate of expenditure and so a progressively declining amount for the Allied forces. With the agreement of the Chancellor of the Exchequer, the Minister of Defence and the Secretaries of State for War and Air, I authorised the United Kingdom High Commissioner in Germany to agree that the division should be worked out on this basis.

+

2. Agreement was eventually reached on the following division in the period between the entry into force of the agreements and 30th June, 1953:-

First six months Next three months

DM. million

DM. million

Remaining period (if any)

a month

Allied forces E.D.C.

551

299

Total

850

a month

319 ·

531

To be settled by later agreement

850

The Allied budget figures had required an average monthly figure of DM.566 a month, but we had accepted that this should be reduced by 10 per cent., i.e., to DM. 510 a month. The above arrangement would provide an average monthly figure of DM. 474 over the full nine months. But, as I explain below, it is unlikely that the period will in fact be as long as nine months, in which case we shall benefit from the higher figure for the six-month period. The detailed figures for the individual forces, including our own, are not yet available, but it has been agreed that the Allied total shall be distributed in proportion to the estimates of the forces. The figures for German costs which we accepted as a basis for the division were the lower (i.e., non-German) Paris Conference estimate for costs other than for heavy equipment, plus about half that for heavy equipment. (See paragraph 3 of Annex B to my memorandum C. (52) 141.)

3. The reduced Allied requirements will, therefore, be more than covered in the six months, and it will be possible to carry a surplus forward which would enable Allied costs to be met up to the beginning of the third month of the third quarter. Whether in the event our full requirements will be covered to 30th June depends, therefore, on the date when the agreement with Germany and the E.D.C. Treaty will have been ratified by all the signatories. It is impossible to forecast this date, since so much will depend on the course of events during the summer and autumn. It seems reasonably certain, however, that the French Government will not even submit the agreements to the French Parliament before the autumn, and

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