Troops In Germany DRAIN ON WESTERN POWERS’ FINANCES

Press, Volume CI, Issue 29715, 8 January 1962, Page 10

Troops In Germany DRAIN ON WESTERN POWERS’ FINANCES

(By "LYNCEUS" o. (From ths “Economu

the "Economist”! “ Intelligence Unit)

London, December 22. —The seasonal spirit was absent from North Atlantic Treaty Organisation’s Christmas Ministerial reunion in Paris this year. The principle cause of gloom was General de Gaulle's icy disapproval of British and American plans for negotiations with the Soviet Union. But lesser causes of contention were not lacking either. One recurrent problem concerned who was to pay for the cost of Allied troops stationed in Germany, most of them British and American.

This is not basically a defence problem, although it has obvious percussions on the United States attempt to build up N.A.T.O.’s shield of

“conventional” forces. It is yet another important aspect of the free world’s shortage of liquidity. During the last three years the backing for the two principal trading currencies—the pound and the dollar—has been steadily draining away into the vaults of the central banks of continental western Europe, and particularly into the vaults of the German Federal Bank. Influx Continuing The German Government has made strenuous efforts to get these funds flowing back into the liquidity circuits again, by contributing to international aid funds, and by encouraging the export of capital. But although the influx into Germany has been slowed, it has not stopped. More and more funds are gradually being salted down by the West German Government.

There are a variety of reasons for the growth of the West German reserves. But the most important single cause is often overlooked. It is the foreign exchange brought into the Federal Republic by the N.A.T.O. forces from other countries. The United Nations Economic Commission for Europe stated last spring that "it is not too much to say that (Allied military expenditures] are almost wholly responsible for the present imbalance in West Germany’s balance of payments,” If these payments could be wiped out, the German surplus on current account, with all that it implies in the way of pressures on the free world’s useful liquidity resources, would disappear. Garrisons in Germany are now costing the United States and Britain respectively about £250 million and £7O million across the exchanges every year and the bill is going up. Until 1957, Federal Germany made a substantial contribution to this bill by way °u “ su PP°rt costs.” But as this was a relic of the occupation, it was more and more unpopular with the German electorate. With the growth of German rearmament, it was held that the justification for these payments as Bonn's contribution to the N.A.T.O. effort had disappeared. After much - haggling, the Bonn Government eventually agreed, in 1958, to make three further small support cost payments. Since the beginning of 1961, payments have ended altogether Expedients Various alternative expedients have been tried In 1958 there was an advance repayment of German debts, but this was a once-for-all operation. The German Government promised to buy arms in ° n J ain and the United otates. The scope here was obviously limited, and German Promises have not been fulfilled. Thus £5O million met . de P° sited London to 1958 in advance payments for arms orders to be placed in London; and in August. 1961. the German Defence Minister announced that his Government had already placed arms orders totalling £135 million in Britain and had contracted . an additional £55 million in the future. In reality however, about onehalf of the £5O million deposit made in 1958 is still outstanding. Bonn has now undertaken ’rmaments valued at £250 million from the United States this year, and an additional £250 million worth If this Promise is fulfilled—and on past per-

formance some scepticism is understandable—it will go far to eliminate the strain placed by the United States Armv in Europe on the United States balance of payments. But it rules out in advance the possibility of any serious contribution by way of arms purchases to the cost of the British forces in Germany. The British Defence Minister, (Mr Watkinson) predicted after the N.A.T.O. meeting in Paris that he would be able to screw some substantial arms orders out of the Germans in the New Year. Ho can scarcely be surprised if others do not share his belief. Economic Threat But even if some worthwhile orders for weapons are placed in London and Washington in 1962, the underlying problem will remain. The defence of the West, by draining reserves away from the trading currencies into the German reserves, is threatening the economic health of the noncommuniat ’world. The problem is complicated by the conspiracy of silence that cloaks the real motiyes of the Governments involved.

It is automatically assumed, in London at least, that the withdrawal of British and American troops from Germany would be viewed with eqqal dismay by the Bonn Government. The truth could be that, while the withdrawal of United States troops certainly would be viewed with dismay, the withdrawal of British troops would be viewed with equanimity. The German claim to several of the senior N.A.T.O. commands at present held by the British would then prove irresistible. In the last instance, the United States should be able to prevail on the German Government to reimburse the exchange cost of United States forces in Germany, and from the point of view of Western economic wellbeing, it is much to be hoped that America will do io. But the British Government is most unlikely ever to secure more than a token contribution. In these circumstances it is difficult to see why Britain should be expected to maintain forces in Germany at their present strength—still more, increase their numbers as it is being asked to do.