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measures for all four zones. The Allied Con-
Other important features of the currency
trol Council agreed on the issuance of a single
reform may be summarized as follows. All
currency, for the whole of Germany, to be
old currency was turned in. Each inhabit-
known as the Deutsche Mark. Adoption of
ant of the western zones was allowed to ex-
the plan on a quadripartite basis was blocked,
change 60 RM for 60 DM, and business en-
however, by the failure of the US and Soviet
terprises were granted a special allowance of
delegates in ACC to agree on a site for print-
60 DM for each employee in order to provide
ing the new currency. Whereas the US in-
cash for immediate needs. (Subsequently
sisted on having it printed in Berlin under
bank accounts were debited 540 RM, the dif-
close quadripartite supervision, the USSR
ference between the 60 RM surrendered and
wanted part of the total amount printed at
the 600 RM required for exchange of 60 DM.)
Leipzig, an arrangement which the US be-
Reichsmarks surrendered in excess of 60 RM
lieved would result in further unregulated is-
were credited to bank accounts. These ac-
suances of currency detrimental not only to
counts (which included both surrendered
the German economy but to the US financial
cash and old credit balances on deposit) were
position in Germany.
divided equally into two types-"Free" and
The apparent unwillingness of Soviet au-
"Fixed" accounts. Their RM value was con-
thorities to cooperate in reviving the German
verted to DM value at a rate of 10 to 1. The
economy and the pressing necessity of such a
"Free" accounts were made immediately
revival in the western zones to the success of
available for withdrawals; the "Fixed" ac-
the Marshall Plan finally impelled the western
counts were blocked until October 1948. At
Allies to break the currency reform impasse.
that time it was decided (over the protests
The western Military Government authorities,
of German financial authorities) to unblock
therefore, proceeded jointly in the three west-
20 percent of each of the "Fixed" accounts,
ern zones* with a currency conversion and re-
to destroy 70 percent, and temporarily to con-
lated financial reforms by three laws promul-
tinue blocking the remaining 10 percent.
gated within one week, that ending 26 June
Salaries and wages were made payable in
1948.
DM on the old RM scale (and wage increases
The first law introduced a new Deutsche
up to 15 percent were authorized). This
Mark and provided for the conversion of the
stipulation put businesses under pressure to
sell hoarded stocks of goods in order to main-
old coins and currency-Reichsmarks, Ron-
tain a liquid position. The bank accounts
tenmarks, and Allied Military Government
notes-into "Deutsche Marks" at the rate of
of public authorities were rendered void; pub-
10 RM to 1 DM. The second law established
lic expenditures were to be met out of cur-
the Bank of the German States as the Bank
rent receipts. Prices of a wide range of con-
of Issue and introduced reserve requirements
sumer goods were decontrolled, with the ex-
for all banks. The third, or Conversion Law,
ception of most foodstuffs and raw materials.
announced the all-important conversion rate
Clothes rationing was also reintroduced.
of 10 to 1 for bank accounts, private liabili-
The imposition of these reforms, was dam-
ties of all kinds, insurance policies, and the
aging to certain laboring and business groups.
like. A comprehensive tax reform was also
The reforms were, however, a necessary prel-
introduced. The thorny question of the dis-
ude to recovery as soon became manifest in
position of obligations of the old Reich was
the disappearance of black markets, the re-
settled by voiding them. Fiscal and bank-
appearance of goods in shops and markets, a
ing features of the reforms are discussed un-
decline in unemployment, and a sharp in-
der appropriate headings elsewhere.
crease in production. It was plain that the
western Allies had planned for an eventual
level of Deutsche Mark prices much higher
Reforms instituted in the western sectors of Ber-
lin are treated above: see page I-16-17. Discussion
than the prewar Reichsmark price level,
of the currency reform in the Soviet Zone is found
since the present note issue limit is equivalent
on page II-26.
to DM 220 per capita against RM 86 per
E C R E T
II-25
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"ocrText": "measures for all four zones. The Allied Con-\nOther important features of the currency\ntrol Council agreed on the issuance of a single\nreform may be summarized as follows. All\ncurrency, for the whole of Germany, to be\nold currency was turned in. Each inhabit-\nknown as the Deutsche Mark. Adoption of\nant of the western zones was allowed to ex-\nthe plan on a quadripartite basis was blocked,\nchange 60 RM for 60 DM, and business en-\nhowever, by the failure of the US and Soviet\nterprises were granted a special allowance of\ndelegates in ACC to agree on a site for print-\n60 DM for each employee in order to provide\ning the new currency. Whereas the US in-\ncash for immediate needs. (Subsequently\nsisted on having it printed in Berlin under\nbank accounts were debited 540 RM, the dif-\nclose quadripartite supervision, the USSR\nference between the 60 RM surrendered and\nwanted part of the total amount printed at\nthe 600 RM required for exchange of 60 DM.)\nLeipzig, an arrangement which the US be-\nReichsmarks surrendered in excess of 60 RM\nlieved would result in further unregulated is-\nwere credited to bank accounts. These ac-\nsuances of currency detrimental not only to\ncounts (which included both surrendered\nthe German economy but to the US financial\ncash and old credit balances on deposit) were\nposition in Germany.\ndivided equally into two types-\"Free\" and\nThe apparent unwillingness of Soviet au-\n\"Fixed\" accounts. Their RM value was con-\nthorities to cooperate in reviving the German\nverted to DM value at a rate of 10 to 1. The\neconomy and the pressing necessity of such a\n\"Free\" accounts were made immediately\nrevival in the western zones to the success of\navailable for withdrawals; the \"Fixed\" ac-\nthe Marshall Plan finally impelled the western\ncounts were blocked until October 1948. At\nAllies to break the currency reform impasse.\nthat time it was decided (over the protests\nThe western Military Government authorities,\nof German financial authorities) to unblock\ntherefore, proceeded jointly in the three west-\n20 percent of each of the \"Fixed\" accounts,\nern zones* with a currency conversion and re-\nto destroy 70 percent, and temporarily to con-\nlated financial reforms by three laws promul-\ntinue blocking the remaining 10 percent.\ngated within one week, that ending 26 June\nSalaries and wages were made payable in\n1948.\nDM on the old RM scale (and wage increases\nThe first law introduced a new Deutsche\nup to 15 percent were authorized). This\nMark and provided for the conversion of the\nstipulation put businesses under pressure to\nsell hoarded stocks of goods in order to main-\nold coins and currency-Reichsmarks, Ron-\ntain a liquid position. The bank accounts\ntenmarks, and Allied Military Government\nnotes-into \"Deutsche Marks\" at the rate of\nof public authorities were rendered void; pub-\n10 RM to 1 DM. The second law established\nlic expenditures were to be met out of cur-\nthe Bank of the German States as the Bank\nrent receipts. Prices of a wide range of con-\nof Issue and introduced reserve requirements\nsumer goods were decontrolled, with the ex-\nfor all banks. The third, or Conversion Law,\nception of most foodstuffs and raw materials.\nannounced the all-important conversion rate\nClothes rationing was also reintroduced.\nof 10 to 1 for bank accounts, private liabili-\nThe imposition of these reforms, was dam-\nties of all kinds, insurance policies, and the\naging to certain laboring and business groups.\nlike. A comprehensive tax reform was also\nThe reforms were, however, a necessary prel-\nintroduced. The thorny question of the dis-\nude to recovery as soon became manifest in\nposition of obligations of the old Reich was\nthe disappearance of black markets, the re-\nsettled by voiding them. Fiscal and bank-\nappearance of goods in shops and markets, a\ning features of the reforms are discussed un-\ndecline in unemployment, and a sharp in-\nder appropriate headings elsewhere.\ncrease in production. It was plain that the\nwestern Allies had planned for an eventual\nlevel of Deutsche Mark prices much higher\nReforms instituted in the western sectors of Ber-\nlin are treated above: see page I-16-17. Discussion\nthan the prewar Reichsmark price level,\nof the currency reform in the Soviet Zone is found\nsince the present note issue limit is equivalent\non page II-26.\nto DM 220 per capita against RM 86 per\nE C R E T\nII-25"
}