REPARATION AND RESTITUTION POLICY TOWARD GERMANY
 
                                  Summary
 
1.  Nature of American Interest.
 
     A mistaken reparation policy may not only have adverse
effects on the future economic stability of Europe but may
jeopardize the political and economic objectives of this
country with respect to Germany.  For this reason German
reparation should be supported only to the extent that it
does not conflict with more important objectives.
 
2.  Policy Recommendation.
 
     a) Reparation should consist of the entire surplus
         above the output needed to maintain a minimum
         prescribed standard of living and to pay for
         relief, occupation costs and other prior charges.
         It should be made clear that the U.S. will not
         finance the transfer of reparation either directly
         or indirectly.
 
     b) To minimize interference with normal trade the
          reparation period should be short; if possible
          five years, and in any event not over ten.
       
     c) Reparation should be payable predominantly "in
         kind."  Labor services within reasonable limits
         should not be opposed provided a distinction is
         made in the treatment accorded to formerly active
         Nazis and politically passive Germans, respectively.
 
     d) The principal basis of apportionment should be
          damage to non-military property exclusive of
          current output.  A supplementary basis, admissible
          only at a lower weighting, should be occupation
          costs.  The reparation settlement should be con-
          sidered as clearing finally all claims against
          Germany arising out of the war.
 
     e) Germany should be obliged to restitute all identi-
          fiable stolen property.  Gold and unique objects
          (but not other property) should be replaced with
          equivalents from German stocks if lost or destroyed.
 
     f) United Nation should have the option of retaining
         and disposing of German property within their
         territories, the proceeds to be applied against
         reparation claims.