ÜaHiiliiiallyäÜililäliMyi N^nMIUìf ^ Ì cIkk IKHi IHfl Hit jjj frli îffif iiìil&r âïî -if ;:jj European University Institute Firenze Department of History and Civilization HUBERT ZIMMERMANN DOLLARS, POUNDS, AND TRANSATLANTIC SECURITY ?img ïr.ïit:!:*S CONVENTIONAL TROOPS AND MONETARY POLICY IN GERMANY'S RELATIONS TO THE UNITED STATES AND THE UNITED KINGDOM 1955-1967 ♦' Ti; Thesis submitted for assessment with a view to obtaining the degree of doctor of the European University Institute Florence, January 1997 Examining Jury: Prof. Richard T. Griffiths (Supervisor}, EUI Prof. Werner Abelshauser, Universität Bielefeld I Prof. Wolfgang Eriecer, Universität Marburg .Prof. Alan S. Milward, EUI ;7--f : J - r > Prof. Gustav Schmidt, Universität Bochum i X t i : H iaSSSi EUROPEAN UWVERSITY INSTITUTE IIMlII.IIIilllMiM 111. U1 1 I .1 LI. 3 0001 0025 6848 5 i 3*3. o m F ■312. 2 i F B3B09 European University Institute Firenze Department of History and Civilization HUBERT ZIMMERMANN DOLLARS, POUNDS, AND TRANSATLANTIC SECURITY: CONVENTIONAL TROOPS AND MONETARY POLICY IN GERMANY' S RELATIONS TO THE UNITED STATES AND THE UNITED KINGDOM 1955-1967 Thesis submitted for assessment with a view to obtaining the degree of doctor of the European University Institute LIB 9 4 3 . 0 8 7 5 -F ZIM Florence, January 1997. Examining Jury Prof. Richard T. Griffiths (Supervisor), EUI Prof. Werner Abelshauser, Universität Bielefeld Prof. Wolfgang Krieger, Universität Marburg Prof. Alan S. Milward, EUI Prof. Gustav Schmidt, Universität Bochum LIST OF CONTENTS Key to abbreviations i Tables in the text H i Introduction p.l a) Research Goals p.l b) The History of the Negotiations about Troop Costs p.5 c) The Link between Monetary and Security Policy p.6 d) Offset and German Postwar Foreign Policy p.8 e) Sources p.ll PART I: THE TROOP COST PROBLEM IN BRITISH-GERMAN RELATIONS, 1955-1960 p.14 Chapter I: American and British Troops in Germany and the First Support Cost Agreement p.15 a) German Rearmament and Allied Troop Maintenance in Germany p.15 b) The End of the Occupation Regime and the Financing of Allied Troops p.19 c) The Influence of the Troops in Europe on tiie British Balance of Payments p.25 d) Foreign Troops and the German Payments Balance p.36 e) The Support Cost Negotiations 1955-1956 p.39 Chapter II: The German Rearmament Crisis 1956 p.45 Chapter III: The Support Cost Negotiations of 1957 and the British New Look p.55 a) The Origins of the British Defence Review p.55 b) The Support Cost Negotiations 1956/57 p.60 c) The British White Paper, April 1957 p.63 Chapter IV: Adenauer and "Perfidious Albion”:Troop Reductions, Support Costs, and the Integration of Europe, 1957-59 p.70 a. Anglo-German Discords p*70 b. Negotiations about British Troop Reductions 1957 p.73 c. A New Support Cost Row and further Reductions p.77 d. The Organisation of Europe and the German-British Crisis, 1959 p.84 Chapter V: Centurion and Other Gadgets: The Failure of British Weapons Export to the Federal Republic p. 92 PART II: TROOPS AND DOLLARS IN GERMAN-AMERICAN RELATIONS, 1955-67 p.104 Chapter VI: The Radford Plan: American Policy towards its Troops in Germany p.105 Chapter VII: The American Balance of Payments and the Security Commitment in Europe: The Response of the Eisenhower Administration p.116 a. A Turning Point in European-American Relations? p.116 b. The International Monetary System until 1958 and the Causes of the Dollar Problem p.118 c. The Debate on the Balance of Payments Deficit p.121 d. The Eisenhower-Administration and its Response to the Balance of Payments Problem p.126 e. The Anderson Dillon mission, November 1960 p.134 Chapter VIII: Offset and Monetary Policy during Kennedy's Presidency, 1961-62 p.142 a. The International Monetary Policy of the Kennedy Administration p.142 b. Military Strategy and the Balance of Payments p.146 c. Towards the First Offset Agreement p.148 d. Military, Political and Monetary Aspects of the Agreement p.161 Chapter IX: The Bargain Slowly Comes Unstuck: Troop Reductions, Offset, and the Balance of Payments, 1962-65 p.166 a. The Handling of the Offset Agreements p.166 b. The Second Offset Agreement and the Institutionalization of Offset p.171 c. The Troop Reduction Debate in the Kennedy Administration p.177 d. The Offset/Troop-Level Link p.187 e. Offset and the German Defence Budget, 1965 p.195 Chapter X: The Culmination of the Burden-Sharing Conflict: Chancellor Erhard's Visit to Washington, September 1966 p.199 a. The McNamara - Von Hassel Meeting, May 1966 p.199 b. NATO Crisis and International Monetary Problems in the Mid-Sixties p.201 c. British Offset During the 1960s p.208 d. Domestic Constraints in Washington and Bonn p.220 e. US Decision-Making prior to Erhard's Visit p.226 f. German Troubles p.232 g. The Erhard-Visit p.235 Chapter XI: The Trilateral Negotiations 1966/67 p.243 a. Fulfilling the McNamara-Von Hassel Agreement p.243 b. The British Problem Again p.247 c. The American Debate on the Trilaterals p.250 d. The Blessing-Letter and its Implications p.256 e. Conclusion of the Trilateral Talks p.267 f. Outlook p.272 Conclusions p.275 APPENDIX I: p.281 Table 1: Basic Figures on German Reserve Position and Federal Budget (Defence), 1950-1969 Table 2: Selected American and British Balance of Payments Figures, 1954-68 Table 3: Allied Troop Levels in Germany, 1954-68 Table 4: Estimated Foreign Exchange Cost of Allied Troops in Germany as Stated by the Sending Countries, 1955-69 Table 5: Military Transactions in the German Balance of Payments, 1952-1964 Table 6: Bundeswehr Expenditure for Material, Maintenance, R&D, 1956-67 Table 7 : Pre-Payment of German Postwar Debts APPENDIX II: Support Cost and Offset Agreements between Germany and the Sending Countries USA, United Kingdom, France Belgium, Netherlands, Denmark, Canada, 1955-1969 BIBLIOGRAPHY AND SOURCES ACKNOWLEDGEMENTS LIST OF ABBREVIATIONS AA Auswärtiges Arm AAPD Akten zur Auswärtigen Politik der BundesrePublik Deutschland add addition amemb American Embassy APUZG Aus Politik und ZeitgescHicHte (journal) BA BundesarcHiv, KOblenz BA-MA Bundesarchiv MilitärarcHiv, Frei bürg BAOR British Army On RHine BBA Bundes bank-ArcHiv BDI Bund DeutscHer Industrie BEA Bureau Of EurOPean Affairs (DOS) BGBL Bundesgesetzblatt BMF Bundesfinanzministerium BMVg Bundesverieidigungsmi nisterium BMW BundeswirtscHaftsministerium bn billion BPI Bulletin des Presse- und Informationsamts der Bundesregierung CAB PRO, Cabinet PaPers CDU Christlich DemOkratiscHe Union CEA Council Of EcOnOmic Advisers ch chapter Cmnd HMSO, COmmand PaPer CSU Christlich SOziale Union CY Calendar Year DAFR Documents On American Foreign Relations DDF DOcuments Diplomatiques Françaises DDRS Declassified DOcuments Reference System DEFE PRO, Defense Ministry Files DF Decimal Files, NA DOD DePartment Of Defense DOS DePartment Of Slate EA Europa-Archiv ECSC European COal and Steel Community EDC European Defence COmmunity EEC European EcOnOmic COmmunity EFTA European Free Trade Area EPU European Payments Union FAZ Frankfurter Allgemeine Zeitung fn footnote FO British FOreign Office FR Frankfurter RundscHau FRG Federal RePublic Of Germany FRUS Foreign RelatiOns Of tHe United States FT A Free Trade Area FY Fiscal Year HMSO Her Majesty’s StatiOnery Office IFZ Institut fQr ZeitgescHicHte, München IHT International Herald Tribune IMF International MOnetary FOnd JCS Joint CHiefs Of Staff JFKL JOHn F. Kennedy Library, Boston KCA Keesing’s COntemPOrary ArcHives KPPC Kennedy's Presidential Press Conferences LBJL Lyndon Baines JOHnsOn Library, Austin LES Ludwig Erhard Stiftung, BOnn m million MAAG Military Assistance AdvisOry GrOuP (US) MAC(G) Mutual Aid COmmittee - Germany (UK) MB Ministerbüro MC Military Committee MGFA Mil Militärgeschichtliches FOrs cHungs amt, Freiburg(ed), Anfänge westdeutscHer SicHerHeitsPOlitik, vois.l-III, MüncHen 1983-1993 MLF Multilateral Force NA National Archives, Suitland (MD) NHP Nuclear History PrOgram NL NacHlaß NPG Nuclear Planning GrOuP NPT NOn Proliferation Treaty NSA National Security ArcHive, Gelman Library, GeOrge WasHingtOn University, D .C NSAM National Security Action Memorandum NSC National Security COuncil NSF National Security File NYT New York Times NZZ Neue ZüricHer Zeitung OEEC Organization fOr EurOPean EcOnOmic COOPeratiOn OECD Organization for EcOnOmic COOPeration and DevelOPment OHI Oral History Interview PA-AA POlitiscHes ArcHiv des Auswärtigen Amts, BOnn POF President's Office Files (JFKL, LBJL) PP Public PaPers Of the Presidents Of the US PPP Pre-Presidential PaPers (JFKL) PREM PRO, Files Of tHe Prime Ministers4 Office PRO Public Record Office, LOndOn PSSD Public Statements Of the Secretaries Of Defense (micrOfilm editiOn) RAF Royal Air Force (UK) RAND Research and DevelOPment COrPOration (US) Ref. Referat (dePartment Of a German ministry) RG RecOrd GrOuP (NA) SACEUR SuPreme Allied COmmander EuroPe SF Subject Files, NA SecState US Secretary Of State SPD SOzialdemOkratiscHe Partei DeutscHlands SZ SüddeutscHe Zeitung T PRO, Treasury Files TAF Tactical Air FOrce telcOn telePHOne cOnversatiOn TIAS US Treaties and Other InternatiOnal Agreements VDB Verhandlungen des DeutscHen Bundestags, PrOtOkOlle VfZ VierteljaHres Hefte für ZeitgescHicHte vol vOlume VPSF Vice Presidental Security File (LBJL) WEU Western EurOPean Union ZBR Zentralbankrat (Bundesbank) i i i List of Tables in the Text: Table 1: Approximate Allocation of Occupation Costs paid by the Federal Republic after the Currency Reform p.21 Table 2: Local Foreign Exchange Cost of British troops in Germany as compared to Contributions received from Germany and to the British EPU position, 1954-59 p.31 Table 3: UK Current Balance, Reserves and Liabilities, 1953-58 p.33 Table 4: Development of German Balance of Services and DM Conversions by Foreign Troops, 1950-59 p.37 Table 5: Allocation of German Defence Funds, 1955-56 p.47 Table 6: Revision of Force Goals for German Forces, 1955-56 p.48 Table 7: US Liquidity Deficit and Gold Reserve Position, 1952-61 p.118 Table 8: Selected US Balance of Payments Figures, 1955- 1961 p.