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order of £40-50 million; and in such circumstances it was reasonable to expect that by further pressure and by some limited withdrawals of forces
we could reach a position in which our foreign exchange expenditure was
offset in full. Now it appeared that we might obtain no offset payments
in future and that our foreign exchange expenditure could therefore only
be saved in full by our total withdrawal from Germany. Such action would
however leave Germany as the major military power on the continent with
consequent risk to our interests.
In discussion it was recognised that there were widely divergent views
among the coalition parties forming the Federal German Government on the policy which should be followed in this field. One strongly held view
was that it would be acceptable that there should be substantial United
Kingdom and United States withdrawals because this would leave Germany in
a dominant position in Europe. It was the general view of the Committee
that this would be grovely damaging to our interests and those of the
Western Alliance,
THE PRIME MINISTER, summing up the discussion said that the issues
involved in the paper before then would require further consideration and
discussion in Cabinet. At that stage it would be important to put before
them the full range of the economic considerations, on the lines indicated
in discussion. The Cabinet's consideration of the issues could most
suitably take place after the next round of the tripartite talks in
Washington.
The Committee
Took note of OPD(67) 15.
Cabinet Office, S.W.1.
7th March 1967
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