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The Reparations Settlement and Germany's Peacetime Economy: Statement by the U.S. State Department (Press Release of December 12, 1945)

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Department of State the Berlin Declaration is not intended to force a reduction in German living standards except as such reduction is required to enable Germany to meet her reparation payments. In effect, the Berlin Declaration merely provides that Germany's obligation to make reparation for the war damage which her aggression caused to other countries should not be reduced in order to enable Germany to maintain a standard of living above the European average. The Department of State further interprets the standard-of-living criterion to refer to the year immediately following the two-year period of reparation removals. For the purpose of meeting this requirement, German industrial capacity after reparation removals should be physically capable of producing a standard of living equivalent to the European average in, say, 1948. Given the difficult problems of administration and economic organization which the German peacetime economy will still face in 1948, it may be doubted that industrial equipment remaining in Germany at that time will in fact produce at full capacity, so that the standard of living realized in Germany is likely for some time to fall short of the European average.

6. It may be assumed that the European standard of living in 1948 would approximate the average standard of living over the period 1930–38. If this assumption be adopted, the German standard of living chosen as a basis for estimating industrial capital equipment to remain in Germany could be arrived at by use of German consumption data in a year in which the German standard of living as measured by national income indices most closely approximated the 1930–38 average in Europe. The German consumption standard in the year selected should be subject to adjustments upward or downward to compensate for any over-all difference between the German standard in the year selected and the European average. Past consumption records defined as suggested above are meant only as a general guide. They would require the following further adjustments:

(a) Provision for change in population between the year selected and 1948.

(b) Adjustment to allow for notable deviations in pattern of German consumption in selected year from normal pattern.

(c) Allowance to enable the German people to make good, at reasonable rates of reconstruction, the widespread damage to buildings in Germany and to the transport system as scaled down to meet the requirements of the German peacetime economy. It is suggested that sufficient additional resources beyond those required to provide the adjusted output of the selected year should be left to overcome the building shortage in twenty years and to effect repairs to structures on rail and road transport systems over five years.

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