GERMANY: Struggle on a Mountain

The new Western Germany, which bears a heavy share of Europe’s hopes, skimmed through an alarming crisis last week. The high commissioners of the three occupying powers (the U.S., Britain and France) got in a row over their first important decision. They patched it up by a crude compromise which embroiled them with the new German government of Konrad Adenauer. When Adenauer stood firm, the high commissioners partly backed down, and belatedly saved the situation.

The question was how West Germany should meet British devaluation; what mattered was the damage done in the search for an answer. Here is a play-byplay account of what happened:

From the Petersberg, the mountain-top headquarters on the Rhine of the Allied High Commission for Germany, Konrad Adenauer and his ministers descended to their capital at Bonn. At the federal chancellery they met with the directors of the Bank Deutscher Lander, West Germany’s central bank. There they agreed to cut the mark from 30¢ to 22 ½¢to bring it into line with sterling and other devalued currencies.

Back up the mountain road to the Petersberg drove Adenauer & Co. They told the three high commissioners—the U.S.’s John J. McCloy, Britain’s General Sir Brian Robertson, France’s Andre François-Poncet—that they were ready to make the 22½¢ rate public at once. But the commissioners, whose powers under the Occupation Statute give them control over foreign exchange, asked the Germans to wait.

A Straight French Face. The high commissioners disagreed. The battle between them began on the Petersberg, then shifted to the U.S. headquarters at Frankfurt. Unresolved, it was transferred by plane to Berlin, where the commissioners had a date to attend a Yehudi Menuhin concert. They had invited Lieut. General Vasily I. Chuikov, commander of the Russian zone, but Chuikov’s seat was vacant (see cut).

Despite smiles at the concert hall, François-Poncet became so enraged in Berlin that McCloy left, flew back to Paris to see François-Poncet’s boss, Premier Henri Queuille. Late getting back to Germany, McCloy landed at Wiesbaden, 45 minutes closer to the Petersberg than Frankfurt’s Rhein-Main airfield, and raced to a new High Commission meeting. It lasted 19 hours, from 11 one morning until 6 the next.

The split between the Allies was caused by French and British fear of German competition in export markets if the mark were devalued. François-Poncet argued with a straight face that he did not want the German people to lose faith in their money. Robertson, perhaps even more afraid of Germany’s competitive potential, sat snug as François-Poncet carried the ball for him.

McCloy stood alone: he wanted to give Germany a fair chance at world markets because the U.S. foots the bill for Germany’s excess of imports over exports.

McCloy said he would settle for a mark pegged anywhere between 20¢ and 24¢. After fevered cabling to their capitals, the French and British suggested 27¢. McCloy beat the British down to 24¢. Then the French proposed two conditions: 1) ending German subsidies that made for export dumping below cost, 2) freezing the price of exported German coal at the pre-devaluation rate. If Germany insisted on raising the export price of coal, then, François-Poncet insisted, the price of inland coal in Germany must also be raised; this would make Germany’s steel and other fabricated articles more expensive in the export market.

This proposal was almost impossible for McCloy to swallow, for Germany’s coal is sold abroad for dollars, and under the French scheme Germany’s loss of dollars would be large. As the all-day, all-night session went on, tempers fired up and threats emerged. McCloy threatened to use the U.S.’s veto on economic matters, which he is given by the High Commission Charter. François-Poncet threatened in turn to take the dispute back to his government.

In the end, with the commission’s prestige at stake, the French budged a little on the mark rate (to 23.8¢); McCloy agreed to the anti-dumping and coal clauses.

“Careful Now.” To the Bundestag next day, Adenauer read the Allies’ communique. He passed lightly over the 23.8¢ decision with the remark that it did not do justice to the “rightful interests of the German economy.” He also passed over the anti-dumping clause and the freezing of the price of export coal. But when he came to inland coal, he was sure and stern: “. . . The price of coal would have to be increased 25% … We will under no circumstances adopt this measure. I say this explicitly in the name of the federal government, so that any unrest in the German people will be stopped at once.”

Communist Max Reimann, who argues that Adenauer is the tool of the Allies, gibed sneeringly, “Careful, careful now!”

As the delegates recessed, a buzz of dismay filled the halls. Most disquieting was the shadow that had fallen over the supposedly generous Occupation Statute. Was the new German government going to be only a puppet, as the Reds charged?

The high commissioners forthwith did their best to repair the damage; they conceded the force of Adenauer’s firm but tactful outlining of the German reaction. It was agreed that Adenauer should announce the 23.8¢ mark rate, with no conditions attached; then the coal problem would be handed over to a German-Allied committee.

Probable outcome: coal export prices would stay the same; the U.S. would make up Germany’s dollar loss. Possible outcome: the three powers would learn that the tutelage of Germany required foresight and cohesion, that the job could never be done by high commissioners pulled this way and that by narrow considerations of advantage to their nations. If that lesson was not learned, the only gainer from the Bonn experiment would be the absent Russian General Chuikov.