-2-
 
       The following recommendations with regard to rep-
aration are intended to be consistent with the proposals 
of the State Department for the economic treatment of 
Germany. l/ They make no assumption with respect to
territorial changes.
 
2. Reparation Policy Recommendations
 
     The most important elements of the German reparation
program will be (a) its "weight", (b) its duration,
(c) its form, (d) the allocation of payments.
 
          (a) In principle, the entire surplus above the out-
put needed (1) to maintain a minimum prescribed standard 
of living, and (2) to pay for occupation costs, relief, 
and other prior charges, should be appropriated for 
reparation.
 
     It would probably be desirable to make it clear to
the other interested powers that the U.S. will not 
finance the transfer of reparation either directly by 
extending loans or credits to Germany, or indirectly by 
assuming the burden of supplying at its own expense essen-
tial goods or equipment to Germany.
 
     In order to avoid difficulties with public opinion
in the Allied countries, which is likely to regard any 
given amount of reparation as inadequate to compensate 
for the damage and suffering inflicted by Germany, as 
well as for other reasons, the statement of the repara-
tion obligation in terms of a specific monetary amount 
should be avoided.
 
     (b) It is essential for the early recovery of
normal trade that the reparation program should be of 
relatively short duration. The uncompensated, one-way, 
transfers of reparation goods from Germany must neces-
sarily interfere with the export trade of other countries. 
The longer reparation lasts, moreover, the more strongly
                              is
 
1/ See Economic Policies Toward Germany, memorandum
dated January 11, 1945.