CAB148-30-Defence and Oversea Policy Committee Meetings Relating to 1967 Disturbances-1967 — Page 30

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3. FOREIGN EXCHANGE COST OF BRITISH FORCES IN GERMANY

(Previous Reference:

OPD (66) 46th Meeting)

THE FOREIGN SECRETARY said that, as he had informed the Cabinet on 26th January (CC(67) 3rd Conclusions, Minute 4), the German State Secretary, Herr Schutz, had told him and the Minister of State for Foreign Affairs (Mr. Thomson), early in the previous week of the

likelihood that the German Cabinet would shortly decide that the

Federal Government should make no further offset payments in respect

of our forces in Germany after the ending of the current agreement in

March 1967. The latest information was that when the German Cabinet

considered this matter on 26th January the German Foreign Secretary,

Herr Brandt, had argued strongly against a decision to offer no offset payments in 1967-68, and no decision on this point had been taken;

the German Cabinet had agreed to seek further tripartite talks with

the United States and ourselves in February in order to explain their

budgetary difficulties and in the hope of reaching a mutually acceptable

solution. The German desire for further tripartite discussions would

fit in with our proposal for a resumption on 21st February, which was

also convenient to the United States. We should bear in mind the

need to avoid bringing the dispute over the level of offset payments to

a head too near the visit which he and the Prime Minister were to pay

to Bonn on 14th-16th February as part of our series of exploratory

discussions about our possible membership of the European Economic

Community.

We

Thus, the prospect of immediate unilateral German action to suspend

offset payments appeared to have receded; and it was possible that before

the resumption of the tripartite discussions next month the German

representatives would come to the talks prepared to offer substantial offset payments in 1967-68. It was, however, more likely that they

would then withdraw their previous offer of offset payments of

£31 million in the forthcoming year on the ground that their budgetary

difficulties made it difficult for them to find any contribution.

should therefore consider before the tripartite discussions what should be our response if the Germans took this line, what our own proposals

should be, what pressures we could bring to bear and what we should do about activating the mechanisms of Western European Union (WEU) and the North Atlantic Treaty Organisation (NATO) for withdrawing forces from

Germany. The official Working Party within the Defence and Oversea Policy (Official) Committee framework should be convened to prepare an

urgent report on

(a) the line to be taken both at the tripartite talks and in

advance with the United States;

(b) the sort of solution for which we should work under various

hypotheses about what the Federal German Government would pay;

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Page 31 (c) any possibility of using the position to secure similar

reductions in the forces of the countries covered by the

Warsaw Pact;

(a) the additional planning beyond that already in hand to ensure

that any forces that have to be withdrawn from Germany in

the light of the new situation could be adequately accommodated.

As to our treaty obligation to maintain forces on the Continent

of Europe, the position was that we could obtain release from our

obligation, under the Brussels Treaty, to keep 55,000 men in Europe, if our proposal were not objected to by a majority (four) of our allies.

On this account, and in order not to jeopardise the United States

agreement to make defence purchases in the United Kingdom amounting to $35 million on condition that we did not withdraw combat troops from

Europe before July 1967, we were dependent on our allies;

it was

important that we should be circumspect, both in discussions with them

and in any public utterance on the subject which Ministers might make

at the present time.

THE CHANCELLOR OF THE EXCHEQUER said that the situation described

by the Foreign Secretary was of the utmost gravity. If the Germans

acted as we feared, the foreign exchange cost of our forces in Germany, at their present strength, would be of the order of £85 million in 1967-68 instead of the £25 million which we had expected and on the basis of which we had planned. The consequences for our balance of payments in 1967-68, and for the Government's reputation, were very

serious. In these circumstances he was concerned to learn that more

had not been done since last summer to prepare detailed plans for the withdrawal of forces from Germany. To consider now the consequences

of withdrawing two brigade groups, which would yield a foreign exchange

saving of only some £11 million, was insufficient; officials should

be instructed to prepare detailed plans for withdrawals, to begin in

July 1967, of forces up to the full number of our troops at present

stationed in Germany. We must envisage a total withdrawal if this

was necessary to cover our expenditure on foreign exchange.

(97792)