My immediately preceding telegram.
The following views on questions of substance involved in the German settlement.
Principles of peace-making- 1. At the Paris Conference we outlined the fundamental principles which should govern our approach to any peace settlement.
First, we should adhere to our undertakings in the Atlantic Charter and the United Nations Charter and try to ensure that the principles set out in these Charters are given the fullest possible application in the Peace Treaties.
Second, we should ensure that our recommendations and decisions are based on an impartial and thorough examination of all the relevant facts affecting each of the questions raised.
Third, we should be careful not to impose such unjustifiable burdens and humiliations upon the peoples of ex-enemy States as will prevent the growth of genuine democratic forces and foster the resurgence of Fascism.
Fourth, our main object should be the attainment of a just and durable overall peace structure and not merely the settlement one by one of a series of particular and isolated claims by individual nations against their neighbours.
These principles must be borne in mind throughout.
2. Particular attention should be given to the fourth principle stated in paragraph 1. It is vital that we should consider the German problem in relation to the whole of Europe. Let it be clearly understood that it is not our desire to extend sympathy to the Germans. We believe that they are largely responsible for their present situation, and we would be betraying the great number of Australians who fought against Hitler's forces if we overlooked this fact. We are, however, gravely concerned by the poverty and distress of Europe as a whole. We think that the settlement of the German problem should be approached as to help to solve these overall European problems.
Potsdam Agreement- 3. In the absence of any other document, the Potsdam Agreement serves as a basis of discussion.  The Potsdam Agreement had two main purposes. The negative purpose was to ensure that Germany would never again threaten her neighbours or the peace of the world. The positive purpose is to give the German people the opportunity to prepare for the eventual reconstruction of their life on a democratic and peaceful basis. With both these purposes Australia agrees, but we urge that they should be enlarged to include the part which we expect Germany to play in the reconstruction of Europe as a whole.
Allied Control Machinery- 4. Paragraph 1 of the Potsdam Agreement concerns Allied control machinery for Germany. There are two features about the present machinery to which there is grave objection- (a) It lacks the sanction of the Allies as United Nations. This defect would, however, be overcome if Australian proposals for a new Interim Agreement are adopted.
(b) The present machinery is too exclusive, and denies substantial belligerents any share in the control of Germany. While it might not be desirable to enlarge the present Control Council, Australia would favour the establishment of a policy-making body for Germany on parallel lines to the Far Eastern Commission. This body would consist of representatives of all substantial belligerents, and would be responsible for general policy decisions made in implementing the Interim Agreement.
Demilitarisation and Disarmament- 5. Paragraph 3: With the principle of military disarmament Australia agrees. The question of demilitarisation by elimination or control of all German industry that could be used for military production o[r] all German industry that could be used for military production should be considered under economic principles.
Abolitions of Nazi Laws- 6. Paragraph 4: Human Rights clause should be included in Agreement as in peace treaty with Italy (Article 14) which reads-
'Italy shall take all measures necessary to secure to all persons under Italian jurisdiction, without distinction as to race, sex, language or religion, the enjoyment of human rights and of the fundamental freedoms, including freedom of expression, of press and publication, of religious worship, of political opinion and of public meeting.'
Further attempt should be made to secure effective enforcement of human rights clauses by establishment of suitable tribunal.
De-Nazification- 7. Paragraph 6: With regard to the denazification clause, two issues arise: first, the necessity for uniform measures throughout Germany and, second, the problem of rehabilitating ex-Nazis.
Australia thinks that where charges are pending against ex-Nazis they should be brought to trial and justice as soon as possible.
All Germans (including ex-Nazis) should be re-educated for a democratic way of life.
Education and justice- 8. Paragraphs 2, 7 and 8: The need for uniform measures throughout Germany based on thorough examination is emphasised. Australia regards education of the Germans for democracy as one of the most difficult Allied tasks. Yet, unless it is carried out on a uniform basis throughout Germany, the whole purpose of the Allied occupation may be undermined. It is noted that education is not proposed to be included among the matters to be controlled by central German administrative department. We consider this to be an error and suggest the creation of a central education department which should, under Allied directives, control education policy, although detailed administration should be left to local authorities.
Decentralisation- 9. Paragraph 9 of Potsdam Agreement lays down certain principles for the restoration of local self-government, encouragement of democratic political parties and the introduction of representative and elective principles into provincial and State administrations. Australia agrees with these principles but again draws attention to the need for their uniform execution. Potsdam Agreement also states that there will be no central German Government for the time being although certain central administrative departments were to be established immediately. The failure to establish central departments has undoubtedly aggravated many problems. Objections to this course have been based mainly on the fact that Germany's future frontiers were not delineated in the Potsdam Agreement. This objection should be overcome by the proposed interim agreement and there should be then no obstacle to the immediate establishment of such central departments.
The former Secretary of State for the United States has urged that the time has now come for the establishment of a provisional central German Government on certain conditions. In this regard two questions must be considered, first, the nature of such a central government, and second, the stage at which it is to be set up.
As to the type of Government we consider that it could not be stable unless it were in the long run accepted by the German people. On the other hand we do not consider it practicable at the present time for the type of government to be actually decided by the German people themselves. We consider that the German constitution should, in the first place, be outlined by Allied Control Authorities with the advice of responsible democratic Germans to the greatest degree possible. It should be the duty of the representatives of belligerents at these meetings to lay down the principles to be adopted by the control authorities in this task. For the purpose of formulating these principles we propose the immediate establishment of a special committee of the present meeting.
As to the timing we consider that speed in setting up a central government (as distinct from German Government Departments which are immediately necessary) is not desirable in itself. The Germans have not as yet proved themselves fit for democracy. Therefore, any such government as is set up should be provisional and fully subject to Allied direction and control. The Germans must by this means serve their apprenticeship in democracy. The question of timing should also be considered by the special committee which we have proposed.
It is fallacious for the conquerors to lay down rigid rules about union or federation or confederation for Germany. Decisions on constitutional provisions or framework must themselves be related to democratic developments. If the German peoples desire to return to confederation or loose union, the solution would be clear. To force such a solution could easily cause a resurgence of Fascism, the obvious and attractive slogan for the new Hitler being 'United Germany'.
Frontiers and Territorial Claims- 10. The major political issue omitted from the Potsdam Agreement which should be settled in the immediate future is that of German frontiers. In this connection three questions have to be considered:-
(i) what principles are to govern any decisions;
(ii) how the facts are to be ascertained; and, (iii) who is to decide on any claims for adjustment that may be made.
As regards (i) Australia adheres to the views expressed at Paris that decisions should as far as possible be based on the principles of the Atlantic Charter and of the Charter of the United Nations. In the case of Germany, there may be cases in the settlement with Germany where the claims of security should be regarded as of primary and paramount significance. However, the effect of any changes on the economy of Europe as a whole must also be taken into account.
As to (ii) we consider that all claims should be stated as soon as possible and that they should be considered by fact-finding bodies selected from the representatives of belligerents. It will be essential if these bodies are to function successfully that material should be made available, if required, from the Allied Control Authorities in Berlin. Australia would propose that representatives of the Council should be put at the disposal of committees for this purpose. If full reports are made many of the delays associated with the preparation of peace treaties with Italy, etc., would be avoided.
As to (iii) the final decision on all claims must rest with a full conference of belligerents.
It appears that the major German frontier questions will be the Polish-German frontier, the future of the Saar and the future of the Ruhr and Rhineland. Australia has undertaken no prior commitments on any of these questions and urges that without exception they should be decided by the methods just outlined.
The settlement should include renunciation by Germany of all claims to the colonies and Antarctic territory.
General- 11. The economic objectives of the Potsdam Agreement are in certain respects contradictory. Germany is to be economically disarmed, her war industries eliminated and other industries with a war potential severely limited. At the same time production and maintenance of goods and services in Germany is to be sufficient to meet the needs of the occupying forces and displaced persons and to maintain in Germany an average standard of living not greater than the average of European countries.
If economic disarmament were carried out to the letter the complete impoverishment of Germany would follow. As it is, the Level of industry Plan approved by the Allied Control Council in March, 1946 , represents an inadequate compromise between the opposing purposes of the agreement. It is inadequate because the effects of the present Level of industry Plan would undoubtedly be unemployment, poverty and loss of morale.
The economic purpose of the agreement also overlooked the part which Germany might be expected to play in the rehabilitation of Europe as a whole. Such paragraphs as No. 13 indicate that there is contemplated a change in Germany's traditional role in the economy of Europe. It appears that as a result of this change Germany will be expected to compete with other countries in types of production in which she did not engage before the war and in markets whose demand might not be sufficient to meet the added flow of goods.
If this is to be the case neither will Germany be able to pay her way nor will other European countries benefit.
Australia's economic policy for Europe was stated by the Minister for External Affairs at Paris. He urged there the consideration of economic problems not piecemeal but in relation to the problems of Europe as a whole, stating 'nothing can be more disastrous or more likely to lead to a resurgence of war and Fascist aggression throughout Europe than unemployment, poverty and low standards of living'.
Australia therefore proposes that the economic purposes of Potsdam can be restated in the new agreement in such a way as to make clear:-
(a) the need for a reasonable degree of prosperity in Germany in the interests of the world as a whole;
(b) the part which Germany should play in the economic rehabilitation of Europe.
Level of Industry Plan- 12. It is agreed on all sides that this needs revision. We are not prepared to consider the entire abolition of the plan because we believe it is a useful method of controlling the German economy so long as this should prove necessary. We support proposals for gradual upward revision of the plan. At the same time we consider that any revision should be qualitative as well as quantitative.
Allowance should be made for Germany's place in the economy of Europe.
Reparations- 13. Australia considers that the exaction of properly assessed reparations is reasonable and just, but assurance is needed that reparations now exacted will not create a situation of serious economic concern to Europe. Australia has already stated her agreement to reparation principles of Potsdam, namely, that they should be taken from industrial plant in Germany surplus to her democratic peace-time requirements.
We have observed certain internal disadvantages in the present arrangement. Difficulties of dismantling and transport involve considerable delays and thereby lessen the value of such industrial plants as may be received.
Treatment of Germany as an Economic Unit- 14. Australia advocates the adoption of this fundamental principle.
Germany's Trade Relations with Allied Countries- 15. At present these are governed by control authorities in their respective zones. These arrangements will be simplified if Germany is treated as an economic unit. Immediate detailed information should be given of all such arrangements, so that definite proposals may be made.
Revision- 16. The agreement should include provision for review, subject to safeguards against abuse.