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I-17
Zone, as well as interzonal highway and barge
prices of producers in west Germany or of
traffic. This counterblockade intensified pro-
Soviet Zone producers is the chief cause of
duction difficulties in the Soviet Zone and
this continued decline, which has manifested
disorganized attempts there to achieve a
itself in growing unemployment and plant
planned economy. The resources of the satel-
shut-downs.
lite areas proved insufficient to compensate for
This economic paralysis has been paralleled
the loss of East-West trade. In an attempt
by the increasingly unhealthy condition of the
to regain the initiative by reestablishing con-
western sector municipal finances, resulting
tact with the Western Powers and at the same
from the sharp rise in expenditures especially
time relax East-West tension, the USSR agreed
for relief to the unemployed and to firms
to a simultaneous lifting on 12 May 1949 of
damaged by the blockade, during a time when
all restrictions on traffic imposed since 1
tax revenues could no longer be increased.
March 1948, and a return to the situation
The precarious finances of the Magistrat led
then existing.
the western occupation powers to insist upon
As a result of the Paris Conference of For-
a balanced city budget, which remains de-
eign Ministers in May and June 1949, which
pendent in large part, however, on loans and
did not itself achieve any definitive agreement
subsidies from western Germany and the US.
on the divided city, the Berlin representatives
Now that the new Federal Republic is operat-
of the four occupation powers were directed to
ing, demands are increasing among Berlin
confer periodically in an endeavor to bring
officials and the west German SPD that Berlin
about a normalization of conditions in Berlin.
be frankly recognized as a deficit area requir-
It was specifically stressed by the Western
ing new and greater subsidies. The Federal
Powers that such meetings would in no sense
Government is expected to provide continued
constitute a renewal of the four-power Allied
aid to Berlin, although probably not to the ex-
Kommandatura. Up to date, the meetings
tent desired by the Magistrat, but Bonn will
have produced agreement only on the recog-
demand closer supervision over city expendi-
nition by both sides of each other's postal
tures than the west Germans have previously
stamps for interzonal mailing purposes, and
exercised.
on a proposal that non-political experts from
both east and west Berlin should meet to
With the establishment of the Federal Re-
attempt a normalization of the city's public
public, the demand by the Magistrat and the
services, such as gas, electric light, and sewage.
SPD that Berlin be formally included as the
Despite the relative normalization of rail,
twelfth Land is likely to intensify. The con-
highway, and canal traffic between Berlin and
servative Government of the Republic may
western Germany since May 1949 (except for
be expected to resist or evade this demand,
the period of slightly over a month when the
even if the western occupation powers lift their
strike of the western sector rail workers
opposition to it, because inclusion of Berlin
paralyzed all rail traffic around Berlin), the
would involve greater Socialist representation
economy of the western sectors has continued
in the Bundestag, and because it would be
to deteriorate. The inability of western Berlin
likely to evoke a very unfavorable Soviet reac-
manufacturers to compete with the lower
tion.
SECRET
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Document data
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- Type
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Context sent to Scholar
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"ocrText": "SECRET\nI-17\nZone, as well as interzonal highway and barge\nprices of producers in west Germany or of\ntraffic. This counterblockade intensified pro-\nSoviet Zone producers is the chief cause of\nduction difficulties in the Soviet Zone and\nthis continued decline, which has manifested\ndisorganized attempts there to achieve a\nitself in growing unemployment and plant\nplanned economy. The resources of the satel-\nshut-downs.\nlite areas proved insufficient to compensate for\nThis economic paralysis has been paralleled\nthe loss of East-West trade. In an attempt\nby the increasingly unhealthy condition of the\nto regain the initiative by reestablishing con-\nwestern sector municipal finances, resulting\ntact with the Western Powers and at the same\nfrom the sharp rise in expenditures especially\ntime relax East-West tension, the USSR agreed\nfor relief to the unemployed and to firms\nto a simultaneous lifting on 12 May 1949 of\ndamaged by the blockade, during a time when\nall restrictions on traffic imposed since 1\ntax revenues could no longer be increased.\nMarch 1948, and a return to the situation\nThe precarious finances of the Magistrat led\nthen existing.\nthe western occupation powers to insist upon\nAs a result of the Paris Conference of For-\na balanced city budget, which remains de-\neign Ministers in May and June 1949, which\npendent in large part, however, on loans and\ndid not itself achieve any definitive agreement\nsubsidies from western Germany and the US.\non the divided city, the Berlin representatives\nNow that the new Federal Republic is operat-\nof the four occupation powers were directed to\ning, demands are increasing among Berlin\nconfer periodically in an endeavor to bring\nofficials and the west German SPD that Berlin\nabout a normalization of conditions in Berlin.\nbe frankly recognized as a deficit area requir-\nIt was specifically stressed by the Western\ning new and greater subsidies. The Federal\nPowers that such meetings would in no sense\nGovernment is expected to provide continued\nconstitute a renewal of the four-power Allied\naid to Berlin, although probably not to the ex-\nKommandatura. Up to date, the meetings\ntent desired by the Magistrat, but Bonn will\nhave produced agreement only on the recog-\ndemand closer supervision over city expendi-\nnition by both sides of each other's postal\ntures than the west Germans have previously\nstamps for interzonal mailing purposes, and\nexercised.\non a proposal that non-political experts from\nboth east and west Berlin should meet to\nWith the establishment of the Federal Re-\nattempt a normalization of the city's public\npublic, the demand by the Magistrat and the\nservices, such as gas, electric light, and sewage.\nSPD that Berlin be formally included as the\nDespite the relative normalization of rail,\ntwelfth Land is likely to intensify. The con-\nhighway, and canal traffic between Berlin and\nservative Government of the Republic may\nwestern Germany since May 1949 (except for\nbe expected to resist or evade this demand,\nthe period of slightly over a month when the\neven if the western occupation powers lift their\nstrike of the western sector rail workers\nopposition to it, because inclusion of Berlin\nparalyzed all rail traffic around Berlin), the\nwould involve greater Socialist representation\neconomy of the western sectors has continued\nin the Bundestag, and because it would be\nto deteriorate. The inability of western Berlin\nlikely to evoke a very unfavorable Soviet reac-\nmanufacturers to compete with the lower\ntion.\nSECRET"
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