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block in reaching final agreement on the treaty draft, and it was an issue which would determine whether or not Austria would be under such complete economic domination by the Soviet Union that it would be virtually a vassal state.

The French had endeavored to break the impasse by submitting a compromise proposal, but this was categorically refused by the Soviet Delegate. In the last hour of the final session of the Conference Mr. Molotov indicated an apparent willingness to accept a percentage reduction in the Soviet claims, without specifying the actual amount involved in his proposal. The matter was immediately referred to the deputies, and I was informed just prior to my departure from England that the Soviet Government would submit later a detailed proposition.

It was not until the tenth meeting that the Conference finally came to the heart of the problem-to a consideration of the harsh realities of the existing situation in Germany.

Several more days were to elapse, however, before the Council really came to grips with these realities. Discussions of procedureof what document to discuss-again intervened to delay our work. However, on Monday, December eighth, the procedural issues were resolved, and the Council began the consideration of the fundamental issues which eventually led to the adjournment of the session without agreement.

I shall endeavor to indicate briefly what those issues were without reciting the involved and prolonged discussions over individual items. The general issue was simple. It was whether or not Germany was to continue divided or whether the Allies could agree to recreate a unified Germany. Unless this could be achieved, all other questions relating to Germany would remain academic.

What then were the particular obstacles to the achievement of German economic and political unity?

The United States Delegation considered that there were certain fundamental decisions which the four occupying powers should take if German unity was to be achieved. These were:

1. The elimination of the artificial zonal barriers to permit free movement of persons, ideas, and goods throughout the whole territory of Germany.

2. The relinquishment by the occupying powers of ownership of properties in Germany seized under the guise of reparations without Four Power agreement.

3. A currency reform involving the introduction of new and sound currency for all Germany.

4. A definite determination of the economic burdens which Germany would be called upon to bear in the future, that is the costs of occupation, repayment of sums advanced by the occupying powers, and reparations.

5. An over-all export-import plan for all of Germany. When these basic measures have been put into effect by the occupying powers, then the establishment under proper safeguards of a provisional government for all Germany should be undertaken.

Reparations soon emerged as a key issue. For the benefit of those not fully familiar with past negotiations on this subject, I wish to explain that a definite agreement had been concluded two years ago at Potsdam that reparation payments would be made by the

transfer of surplus capital assets, that is, factories, machinery, and assets abroad, and not by payments from time to time out of the daily output of German production. One reason for this decision was to avoid an issue that would continue through the years between Germany and the Allies and between the Allies themselves concerning her ability to pay and the actual value of payments which had been. made in goods. Also, it was clearly evident that for many years Germany would be involved in a desperate struggle to build up sufficient foreign trade to pay for the food and other items on which she will be dependent from outside sources. The best example of this phase of the situation that I can give is the present necessity for Great Britain and the United States to pay out some 700 millions a year to provide the food and other items to prevent starvation and rather complete disintegration of that portion of Germany occupied by our forces.

In other words, reparations from current production-that is, exports of day to day German production with no return-could be made only if the countries at present supplying Germany-notably the United States-foot the bill. We put in and the Russians take out. This economic truth, however, is only one aspect of Soviet reparation claims. In the eastern zone of Germany the Soviet Union has been taking reparations from current production and has also, under the guise of reparation, seized vast holdings and formed them into a gigantic trust embracing a substantial part of the industry. of that zone. This has resulted in a type of monopolistic strangle hold over the economic and political life of eastern Germany which makes that region little more than a dependent province of the Soviet Union. A very strong reason, in my opinion, for our failure to agree at London, was the Soviet determination not to relax in any way its hold on eastern Germany. Acceptance of their claims for reparations from current production from the western zones would extend that strangle hold over the future economic life of all Germany. The Soviet position was nowhere more clearly indicated than by Mr. Molotov's categoric refusal to furnish the Council of Foreign Ministers with information concerning the reparations already taken from the eastern zone or indeed any information at all concerning the situation there, until full agreements had been reached. In effect we were to tell them what has occurred in the western zones, which we had already done, and they tell us nothing. That refusal to provide information absolutely essential for decisions as to the organization of German unity would by itself have made any agreement impossible. A remarkable illustration of the Soviet position in this matter was their carping criticism of the economic procedure in our zones, which we freely publish for the world to read, while virtually in the same breath blandly refusing to provide any data at all concerning their zone.

It finally became clear that we could make no progress at this timethat there was no apparent will to reach a settlement but only an interest in making more and more speeches intended for another audience. So I suggested that we adjourn. No real ground was lost or gained at the meeting, except that the outlines of the problems and the obstacles are much clearer. We cannot look forward to a unified Germany at this time. We must do the best we can in the area where our influence can be felt.

All must recognize that the difficulties to be overcome are immense. The problems concerned with the treaty settlements for Italy and the satellite countries were simple by comparison, since none of those countries were divided into zones of occupation and all of them had an existing form of government. Germany by contrast is subdivided into four pieces-four zones. No trace of national government remains.

There is another and I think even more fundamental reason for the frustration we have encountered in our endeavor to reach a realistic agreement for a peace settlement. In the war struggle Europe was in a large measure shattered. As a result a political vacuum was created, and until this vacuum has been filled by the restoration of a healthy European community, it does not appear possible that paper agreements can assure a lasting peace. Agreements between sovereign states are generally the reflection and not the cause of genuine settlements.

It is for this very reason, I think, that we encountered such complete opposition to almost every proposal the western powers agreed upon. The Soviet Union has recognized the situation in its frank_declaration of hostility and opposition to the European Recovery Program. The success of such a program would necessarily mean the establishment of a balance in which the 16 western nations, who have bound their hopes and efforts together, would be rehabilitated, strong in forms of government which guarantee true freedom, opportunity to the individual, and protection against the terror of governmental tyranny.

The issue is really clear-cut, and I fear there can be no settlement until the coming months demonstrate whether or not the civilization of western Europe will prove vigorous enough to rise above the destructive effects of the war and restore a healthy society. Officials of the Soviet Union and leaders of the Communist Parties openly predict that this restoration will not take place. We on the other hand are confident in the rehabilitation of western European civilization with its freedoms.

Now, until the result of this struggle becomes clearly apparent, there will continue to be a very real difficulty to resolve, even on paper, agreed terms for a treaty of peace. The situation must be stabilized. Western nations at the very least must be firmly established on a basis of government and freedoms that will preserve all that has been gained in the past centuries by these nations and all that their cooperation promises for the future.



(a) Communiqué of June 21, 1949

The sixth session of the Council of Foreign Ministers attended by the Ministers of Foreign Affairs of France, Robert Schuman; of the Union of Soviet Socialist Republics, A. Y. Vyshinsky; of the United Kingdom, Ernest Bevin; and of the United States of America, Dean

1 Department of State Bulletin, July 4, 1949, pp. 857-864.

Acheson, took place in Paris from May 23 to June 20, 1949. During this meeting the German question and the Austrian treaty were discussed. The Council of Foreign Ministers took the following decisions.


Despite the inability at this session of the Council of Foreign Ministers to reach agreement on the restoration of the economic and political unity of Germany, the Foreign Ministers of France, the Union of Soviet Socialist Republics, the United Kingdom, and the United States will continue their efforts to achieve this result and in particular now agree as follows:

1. During the course of the fourth session of the General Assembly of the United Nations to be convened next September, the four governments, through representatives at the Assembly, will exchange views regarding the date and other arrangements for the next session of the Council of Foreign Ministers on the German question.

2. The occupation authorities, in the light of the intention of the Ministers to continue their efforts to achieve the restoration of the economic and political unity of Germany, shall consult together in Berlin on a quadripartite basis.

3. These consultations will have as their purpose, among others, to mitigate the effects of the present administrative division of Germany and of Berlin, notably in the matters listed below:

(A) Expansion of trade and development of the financial and economic relations between the Western zones and the Eastern zone and between Berlin and the zones.

(B) Facilitation of the movement of persons and goods and the exchange of information between the Western zones and the Eastern zone and between Berlin and the zones.

(C) Consideration of questions of common interest relating to the administration of the four sectors in Berlin with a view to normalizing as far as possible the life of the city.

4. In order to assist in the work envisaged in paragraph 3, the respective occupation authorities may call upon German experts and appropriate German organizations in their respective jurisdictions for assistance. The Germans so called upon should exchange pertinent data, prepare reports and, if agreed between them, submit proposals to the occupation authorities.

5. The Governments of France, the Union of Soviet Socialist Republics, the United Kingdom, and the United States agree that the New York agreement of May 4, 1949, shall be maintained. Moreover, in order to promote further the aims set forth in the preceding paragraphs and in order to improve and supplement this and other arrangements and agreements as regards the movement of persons and goods and communications between the Eastern zone and the Western zones and between the zones and Berlin and also in regard to transit, the occupation authorities, each in his own zone, will have an obligation to take the measures necessary to insure the normal functioning and utilization of rail, water, and road transport for such movement of persons and goods and such communications by post, telephone, and telegraph.

1 Department of State Bulletin of May 15, 1949, p. 631.

6. The occupation authorities will recommend to the leading German economic bodies of the Eastern and Western zones to facilitate the establishment of closer economic ties between the zones and more effective implementation of trade and other economic agreements.


The Foreign Ministers have agreed:

(A) That Austria's frontiers shall be those of January 1, 1938; (B) That the treaty for Austria shall provide that Austria shall guarantee to protect the rights of the Slovene and Croatian minorities in Austria;

(C) That reparations shall not be exacted from Austria, but that Yugoslavia shall have the right to seize, retain, or liquidate Austrian property, rights and interests within Yugoslav territory; (D) That the Soviet Union shall receive from Austria $150,000,000 in freely convertible currency to be paid in six years; (E) That the definitive settlement shall include:

(1) The relinquishment to Austria of all property, rights or interests held or claimed as German assets and of war industrial enterprises, houses, and similar immovable property in Austria held or claimed as war booty, on the understanding that the deputies will be instructed to define more accurately other categories of war booty transferred to Austria (with the exception of those oil assets and DDSG-Danube Shipping Company-properties transferred to the Soviet Union under other paragraphs of article 35 of the treaty indicated in the U. S. S. R. proposals of January 24, 1948, as revised, and retained in general under Austrian jurisdiction). Accordingly the assets of the DDSG in Bulgaria, Hungary, and Rumania as well as 100 percent of the assets of the company in eastern Austria in accordance with a list to be agreed upon by the deputies will be transferred to the U. S. S. R.

(2) That the rights, properties, and interests transferred to the U. S. S. R. as well as the rights, properties, and interests which the U. S. S. R. cedes to Austria shall be transferred without any charges or claims on the part of the U. S. S. R. or on the part of Austria. At the same time it is understood that the words "charges or claims" mean not only creditor claims as arising out of the exercise of the Allied control of these rights, properties, and interests after May 8, 1945, but also all other claims including claims in respect of taxes. It is also understood that the reciprocal waivers by the U.S. S. R. and Austria of charges and claims apply to all such charges and claims as exist on the date when Austria formalizes the rights of the U. S. S. R. to the German assets transferred to it and on the date of the actual transfer to Austria of the assets ceded by the U. S. S. R.

(F) That all former German assets which have become the property of the U. S. S. R. shall not be subject to alienation without the consent of the U. S. S. R.

(G) That the deputies shall resume their work promptly for the purpose of reaching agreement not later than September 1, 1949, on the draft treaty as a whole.

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