Chapter 47

The War Minister and Supreme Commander of the Armed Forces No. 2001/36 Top Secret WH

4 copies—1st copy—draft2nd copy—Reich Air Ministry3rd copy—Reich Ministry for Finances4th copy—President of the Reichsbank

1. To the Reich Minister of Air and the Supreme Commander of the Air Forces General Goering

Berlin W 8Dear General Goering!

The negotiations conducted until now in the commission for foreign exchange and raw materials which is under your leadership, have already shown the necessity of dealing also with the financing of the armed forces there also. I believe the time has now arrived that the commission should take up the treatment of this problem.

As a preparation of such a discussion I suggest the following:

I.Overstepping of the 1936 budget.

It has been proven, particularly from the decree issued 7 March 1936, that the sum of about 10 billions of RM which was provided for the Wehrmacht for 1936 is not sufficient.

1. Additional expenses in thearmyare needed in first place for

a. the remilitarizing of the Rhineland

b. the fortification of the Rhineland

c. the setting up of all the 36 divisions already by 1 Oct 1936

d. the speeding-up of motorization, particularly the establishment of 4 fully motorized Infantry divisions.

e. the necessity of markedly increasing the reserve ammunition because of the increased number of divisions.

f. industrial preparations in a great variety of fields.

2. In thenavythe required faster increase of personnel, the building of a 4th entry to Wilhelmshaven and the refortification of Helgoland cause additional expenses.

3.Air Force

a. According to an order of the Fuehrer, the setting up of all air force units has to be completed on 1 April 1937. Therefore considerable expenditures have to be made in 1936 which at the time when the budget for 1936 was made, were planned for later years only. Special additional expenses are caused by the creation of sufficient ground force personnel.

b. In the air force the first introduction of new types has to take place in 1937. Therefore the required industrial preparations have to begin in 1936.

It follows that an additional sum of at least 3.6 billions of RM will be needed by the Wehrmacht for 1936.

Of this about 1 billion RM is allotted to Army and Navy together. In the case of the Army and Navy, the execution of the orders and, in consequence, the dead-lines for the payments of the deliveries lagged quite considerably behind the placing of the orders. Therefore it can be assumed that these 1 billion RM will not be neededin cashbefore 1 Apr 1937. However, the orders for these 1 billion RM have been placed and in the fiscal year 1937 these 1 billion RM will also be needed in cash.

In the air force the additional expenditures amount to 2600 millions RM. Here the execution of the orders from the budget funds of 1936 as well as of the orders for the additional requirements is in full progress. The 2600 millions RM for the air force have to be made available in the fiscal year 1936.

As yet it cannot be ultimately settled whether the introduction of the two years' service will lead to further additional expenses.

II.Requirements for 1937

The preparatory works for the budget of 1937 have not been concluded. At present the requirements for 1937 are estimated to be for:

Besides these 13.7 billions RM about 500 millions RM will be needed for the Reich defense requirements of the civilian departments.

III.Permanent requirements

According to a recently conducted survey, the component of the armed forces will have the following permanent requirement after the rearming is completed:

At present it is hardly possible to make an accurate estimate of the permanent requirements. In the case of the Army it is very likely that the amount for the permanent requirement will be considerably raised.

Later I will submit further material, particularly a statement about the requirements for the years until the completion of the rearming, as soon as the necessary inquiries are concluded.

I submitted copies of this letter to the Reich Minister for Finance, and to the President of the Reichsbank.

Heil Hitler!Yours,[unsigned]

2. To the Reich Minister for FinancesBerlin W 83. To the President of the Reichsbank Dr. SchachtBerlin SW 111Copy (of 1) for your kind information4. WV

2. To the Reich Minister for FinancesBerlin W 8

3. To the President of the Reichsbank Dr. SchachtBerlin SW 111

Copy (of 1) for your kind information

4. WV

Chief WA Chief WHsigned PRemark:

1. Major v. Wolff has given the letter addressed to General Goering to Lt. Col. Bodenschatz on 31 Aug.

2. I have personally handed the letters 2 and 3 to the President of the Reichsbank, Dr. Schacht, and to the Reich Minister of Finance, Count Schwerin von Krosigk, on Aug 31.

signed PCopy authenticated Hollender Ministerial Councillor30 Sept 36.

Note[initialed] B [Blomberg?][initialed] K 2/9 [Keitel]

President Schacht called me to him today at 1300 and requested me to forward the following to the Minister of War:

Schacht returned from the Fuehrer with the greatest anxiety, since he could not agree to the economic program planned by the Fuehrer.

The Fuehrer wants to speak at the party convention [Parteitag] about economic policy, and wants to emphasize there that we now want to get free with all our energy from foreign countries by production in Germany.

Schacht requests urgently that the Reichminister of War warn the Fuehrer from this step.

If the Fuehrer emphasizes in front of the masses in Nurnberg, he will receive a great amount of applause from the audience, but with it he will bring failure to the entire commercial policy. There is only one thing in our needy position:the promotion of export.Every threat against foreign countrieshowever, will show contrary results.

We have reverses in the field of fuels until the middle of next year, there will not be large amounts in the field of rubber. The Renn-process in the field of ores is having great difficulties.

If we now shout out our decision abroad to make ourselves economically independent, then we cut our own throats, because we can no longer survive the necessary transitory period.

Also, it must always be pointed out that German materials are at present much too expensive to be used for export, and export alone makes further armament possible.

If the food-basis of the people is not to be endangered, the Fuehrer must refrain from his plan.

President Schacht concluded that he again requests urgently to listen to this warning, and that he forwards it to the minister of war, as he will not participate in to-morrow's conference.

Thomas 2/9 [in blue pencil][Translator's note: the following is written in pencil in theoriginal:]

THOMAS in his memorandum:

The missing million in cash must be saved, since there is no more possibility to obtain it by increase of export.

English armament-ore! Our own procurement is amust.

4 Year Plan withoutantagonizing foreign countries.

Card file?Speed of armament? Yes—

Extent of armament not sufficient. Backing by foreign exchange and raw materials is absolutely necessary.

Top Secret [rubber stamp]1st copy 5 Sept 1936Wi IIFile No 66 b 9910 II z-a

Minutes on a Conference in the Reichministry for Economy on 3 Sept 1936

Chairman:Ministerialdirektor SarnowPresent:Ministerialdirektor Dr. LandwehrMinisterialdirigent Dr. SpittaOberregierungsrat Dr. Michals{Reichministry for Economy and the competent experts of the Reichministry for Economy and the supervisory agencies}Major CzimatisCommander GriebelRegierungsbaurat Wissman{Reichministry of War, W.A.}Intendanturrat Nierhoff {Reichministry of War, V.A.}Lt.Col. PlochCol. WittingDipl.ing. Bresser{Reichministry for Air and Supreme Commander of the Air Force}Gen.Direktor Schirner, combined alum. plantsDr. Westrick, combined alum. plantsDir. Byer, Alum. Sales{Only during the conference on aluminum}Subject:

I. Possibilities of allotment of foreign exchange to the armed forces and economy.II. Aluminum supply.

I. Possibilities of allotment of foreign exchange to the armed forces and economy.

II. Aluminum supply.

I. After extensive study of the connected disadvantages, the Reichministry for economy has dropped the principle that one could desist from exporting all products with more than 40% foreign raw materials. Therefore an additional need for foreign exchange results for the upkeep of the export of 2 million marks with the supervisory board for base metals. Furthermore the allotment of cash foreign exchange to the supervisory board for bast fibres must be increased from 10 million marks to 17 million marks.

Intendanturrat Nierhoff made reports on the need of the Armed Forces of textiles and leather in the year 1937, which has increased considerably from the requirements of the year 1936 (see inclosure). To fulfill these Armed Forces requirements, cash foreign exchange is necessary in the following amounts:

Accordingly, the following overall picture results:

Amount of cash foreign exchange necessary previously for the upkeep of economy and for the covering of requirements of the Armed Forces.146.8 million marks

Amount of cash foreign necessary for the upkeep of export.248 million marks

Additional requirement of cash foreign exchange necessary for the Armed Forces.146.8 million marks

Available amount of cash foreign exchange140 million marks.

II. Aluminum

Report on the requirements of aluminum for the Armed Forces are contained in the summary given to the Reichministry for Economy on 29 Aug.

Major Czimatis explained that the Reichministry of War did not renounce the limitations of the allotments of aluminum to the general industry, as it was said in the letter of the Reichministry for Economy of 21 Aug 1936, but that the demands for full delivery to the Armed forces for the programatic rearmament, especially for the Air Force, will be kept up.

The Reichministry for Economy considers the full delivery to industry urgently necessary also in the interest of the Armed Forces, since by a "strangulation" installations important to the Armed Forces (power issues) would also be affected immediately, and one could therefore count on an increased requirement of copper and thus of foreign exchange.

The administration of aluminum by the supervisory board for base metals is being absolutely refused by the Reichministry for Economy.

Generaldirektor Schirner reports that the negotiations for the import of 1000 tons of aluminum from Switzerland against delivery of German clay and pitch-coke are favorable. Also, the payment of processing wages is to be done with clay. However, the import of these 1000 tons is distributed over 6 to 7 months.

1000 tons more can be obtained in a comparatively short time from the Aluminum Ltd. from Canada. The negotiations for this are still in process.

Schirner reported that the stocks of aluminum in the plants is so high that he, in case the Reichministry for Air should agree to a temporary decrease of the stocks, could guarantee full delivery for both the Armed Forces and Industry until the opening of the new plants in Toging and Bitterfeld.

Lt. Col. Ploch consents that the stocks be decreased temporarily.

The Reichministry for Economy orders that the supervisory board for base metals first determine by revision the exact size of the stocks of aluminum for the Duren Metal works and the combined Light Metal works [Vereinigten leicht Metall Werke].

However, if difficulties should arise in the delivery to the Armed Forces with aluminum, then the Reichministry for Economy is ready to take up negotiations again.

MW [initials in pencil]

Inclosure

Textile and Leather Requirements of the Armed Forces

[4]figures by Reichministry for air

[5]for 400 tons soft hemp and 200 tons Manila and Sisal

[6]for 22 500 tons hides corresponding to 11 200 tons leather

It must be considered in the calculation of the foreign exchange requirements for the upkeep of the export of woolen goods, that the wool industry cannot stand more than a 10% decrease of the present amount, if it is to retain its export capability. Instead of Australian wool, one must reach back to about 50% of the available South-African wool for exports. The wool available through the limitations of value of the clearing agreement is entirely used for export. The calculated amount of foreign exchange and the most urgent requirement within Germany of 12 million marks only applies under the condition that there are until the end of September still 2 million marks in cash foreign exchange available.

One can count for the requirement of the Armed Forces on an amount of 10,000 tons raw wool, based on existing agreement. 24 million marks in cash foreign exchange are required for the additional amount of 8,152 tons with the price basis of 3,000-marks per ton.

Intendanturrat Nierhoff explained: that a decrease of the demands for quality for the Armed Forces is no longer bearable. Already 20% cellulose wool is being earmarked for uniform cloths, and a mixing of 30% scrap wool for over-coats.

The amount of foreign exchange of 4 million marks for quality cotton is therefore necessary, because one cannot count any more on the hitherto existing compensating transactions—especially with Egypt after circular 237.

The amount of foreign exchange estimated for export of 17 million marks for the supervisory board for bast fibres is distributed as follows:

10 million marks for jute6 million marks for Sisal1 million marks for Manila

The production of hides in Germany is reported as 140,000 tons per year. Even with the basis that the consumption of leather within Germany is decreased to a minimum, the 22,500 ton hides, corresponding to 11,200 tons leather for the Armed Forces, can only be procured with cash foreign exchange (22.5 million marks).

The raw hide requirement has been determined individually with consideration for the time required to tan the individual types of leather.

[in pencil] Top Secret!

Conference at General Field Marshal Goering's at 1000, 14 Oct. 38, in the Reich Air Ministry

[in pencil] attention H.G.

General Field Marshal Goering opened the session by declaring that he intended to give directives about the work for the next months. Everybody knows from the press what the world situation looks like and therefore the Fuehrer has issued an order to him to carry out a gigantic program compared to which previous achievements are insignificant. There are difficulties in the way which he will overcome with utmost energy and ruthlessness.

The amount of foreign exchange has completely dwindled on account of the preparation for the Czech enterprise, and this makes it necessary that it should be strongly increased immediately. Furthermore, the foreign credits have been greatly over-drawn and thus the strongest export activity—stronger than up to now—is in the foreground. For the next weeks an increased export was first priority in order to improve the foreign exchange situation. The Reich Ministry for Economyshould makea plan about raising the export activity by pushing aside the current difficulties which prevent export.

These gains made through the export are to be used for increased armament. The armament should not be curtailed by the export activity. He received the order from the Fuehrer to increase the armament to an abnormal extent, the air force having first priority. Within the shortest time the air force is to be increased five fold, also the navy should get armed more rapidly and the army should procure large amounts of offensive weapons at a faster rate, particularly heavy artillery pieces and heavy tanks. Along with this manufactured armaments must go; especially fuel, powder and explosives are moved into the foreground. It should be coupled with the accelerated construction of highways, canals, and particularly of the railroads.

To this comes the Four Years' Plan which is to be reorganized according to 2 points of view.

In the Four Years' Plan in 1st place all the constructions which are in the service of armament are to be promoted and in 2nd place all the installations are to be created which really spare foreign exchange.

The substitutes produced by the Four Years' Plan are to be brought rapidly into circulation. The Reich Ministry for Economy and the other agencies should make suggestions by the beginning of November for rapidly increasing the introduction of the substitutes. The import of materials for which we have substitutes has to be drastically curtailed.

General Field Marshal Goering enlarged then upon the main problem of the session: how can these requirements be fulfilled.

He is faced with unheard difficulties. The treasury is empty, the industrial capacity is crammed with orders for many years. In spite of these difficulties he is going to change the situation under all circumstances. Memoranda were of no help, he desires only positive proposals. If necessary, he is going to convert the economy with brutal methods in order to achieve his aim. The time has come when private enterprise can show whether it has a right for continued existence. If it fails, he is going over to state enterprise without any regard. He is going to make barbaric use of his plenipotentiary power which was given to him by the Fuehrer.

All the wishes and plans of the state, party and other agencies which are not entirely in this line have to be rejected without pity. Also the ideological problems cannot be solved now, there will be time for them later. He urgently cautions against making promises to the workers which can not be kept by him. The wishes of the labor front recede entirely into the background. Industry has to be fully converted. An immediate investigation of all productive plants is to be initiated in order to determine whether they can be converted for armament and export or whether they are to be closed down. The problem of the machine industry has the first consideration in this respect. There is no place for printing and laundry machines and other machines of that kind, they all have to produce machine tools. In the field of machine tools the priorities of the orders are to be investigated, and wherever possible, increase in productive capacity is to be introduced. It follows without saying that work has to be conducted in 3 shifts.

It remains now to decide who is going to carry out this task; the state of the self-administrative industry. He requested a proposal from General Director Zangen for the methods to realize these plans. He warns all agencies, particularly the labor front, price controller, etc., from interfering with these proposals in any way. He is going to proceed ruthlessly against every interference on the part of the Labor Front. The Labor Front would not receive raw materials and workers for its tasks any more. Similarly all other party requirements have to be set aside without consideration. Foreign workers can continue being employed except in the particularly secret sections of the enterprise. At the present time the plants should not be burdened with unnecessary demands, such as athletic fields, casinos or similar desires of the Labor Front. Measures proposed by the Labor Front have to be submitted to him for approval.

Raw materials and power are to be subjected to accurate management. Similarly the distribution of men has to be organized in an entirely different way than it has been done until now. The retraining did not function; all agencies failed. The recommitment of the youth into the industry will be organized by him on a very large scale. Large state apprenticeships are to be created; besides, the plants will be obliged to hire a certain number of apprentices. A retraining of hundreds of thousands of people will have to take place. Much more work will have to be performed by women than until now. Above all, the young women have to be employed much more. Work periods of eight hours do not exist any more; wherever necessary, overtime is to be performed, double and triple shifts are a matter of course. Where the workers will protest, as in Austria, for example, General Field Marshal Goering will proceed with forced labor; he will create camps for forced labor. The Labor Front should not carry false social ideas among the workers. It is a fact that one generation has driven the cart into the mud through the mutiny of the workers and by being guilty of not having shot these workers on the spot. Therefore, we had to put the thing in order again.

Much is to be done at once in the field of transportation. The Ministry for Transportation should submit a request about the construction of rolling stock and about other requirements. The branch-canal near the Hermann Goering Works is particularly important. It cannot continue that the Armed Forces interfere with the car park. If that will continue, he will make a decision, because it is impossible that the people should starve on account of it.

In the agriculture it is of importance to employ foreign workers. Similarly the problem of the agricultural machine has to be promoted. Of particular importance is the erection of store-houses.

The Sudeten land has to be exploited with all the means. General Field Marshal Goering counts upon a complete industrial assimilation of Slovakia. Czechia and Slovakia would become German dominions. Everything possible must be taken out. The Oder-Danube Canal has to be speeded up. Searches for oil and ore have to be conducted in Slovakia, notably by State Secretary Keppler.

In the second part of his discussion General Field Marshal Goering took up the Jewish problem. The Jewish problem had to be tackled now with all methods, because they have to get out of the economy. However, the wild bustle of commissars as it developed in Austria has to be prevented under all circumstances. These wild actions have to cease and the settling of the Jewish problem should not be regarded as a system of providing for inefficient party members. Thereupon Ministry Councillor Fischboeck was allowed to speak. He revealed that in the beginning there were 25,000 commissars in Austria. Today there are still 3,500 who are useless almost without exception. In Austria the party is of the opinion that Aryanization is a duty of the party and that it is connected with the recompensation of the old party members.

In Austria there is still a total of 2 billions of Jewish property. The large enterprises are being bought up by the Control Bank; it is difficult to oust the Jews from the small industrial enterprises.

General Field Marshal Goering took a strong stand against the opinion that the Aryanization is the duty of the party. It is the duty of the State alone. However, he could not release foreign exchange for shipping away the Jews. In an emergency situation ghettos should be erected in the individual large cities.

State Councillor Schmeer cautioned against more lenient methods in the fight against the Jews; Jewish labor units should be established, then the people would emigrate of their own accord. State Councillor Neumann warned and expressed the opinion that one should use more precaution in this matter, particularly in Austria.

Thereupon the meeting was quite surprisingly closed by General Field Marshal Goering without recording the minutes of the meeting or making decisions.

HG.

Material for the Conference with Goering on 25 Nov 1938 (General Keitel, Brig. Gen. Thomas)

27 Oct 1938W.Wi Id.

For the consideration of the assignment of tasks to people, state and the Armed Forces, judging of the requirements of raw materials, especially steel, appears necessary.

This is shown as follows, as far as it can be judged from here. The inclosed summary shows that one must count, according to the Fuehrer's directives, on a steel requirement for armament production, which amounts to 1.08 million tons monthly from 1 Jan 1939 on, that is, it must be increased by about 48% of the present contingent. Added to this requirement are the increased demands of the Four Years' Plan, the demands of export and the amount necessary for the upkeep of the production machine of German economy in the amount of 1.83 million tons monthly from 1 Jan 1939 on; thus this results in a total requirement of 2.9 million tons monthly from 1 Jan 1939 on, against which there is only a monthly production of at present 1.8 million tons monthly.

Furthermore, it must be pointed out, that with the increased use of steel, an increased use of the already scarce non-ferrous metals is necessarily coupled; the latter also are closely associated with the procurement of foreign exchange.

The increased rearmament of the armed forces must further affect deeply the supply requirements of the armed forces, especially munitions and fuels. Therefore, it must be expected that the future requirements of the armed forces will exceed the present plans (accelerated program for powder and explosives, fuel program), which will have an increase of the steel requirements not yet planned as result.

Secret

Summary of the Iron and Steel Requirements of the Armed Forces and Industry tons per month

Summary on the Iron and Steel Requirement of the Armed Forces (tons per months)

Chief OKW58a 40 38 top secret1157/38 top secret7 Dec 1938Top Secret7 copies7th copy[in pencil]To the State Secretary NeumannReceived copy without receipt K. 12 Dec 38Documents for the conference at Field Marshal Goering's on 13Dec 1938 with Supreme Commanders General Keitel,Neumann, Koerner, Gen. Thomas.

Tothe Supreme Commander of the Army }the Supreme Commander of the Navy }the Reichs Marshal of the Air Force and } one copy eachSupreme Commander of the Air Force }

The Fuehrer and Supreme Commander of the Armed Forces authorized me to inform the Supreme Commander of the following:

The strained financial situation of the Reich makes it necessary that for the rest of the current fiscal year 38/39 the expenses of the Armed Forces, which in the last months under the strain of extraordinary circumstances have undergone a very considerable increase, should be lowered again to a level which would be tolerable for some time.

It will be at the discretion of the Supreme Commander to decide what measures should be taken for this purpose according to the priorities in the armament program. According to the Fuehrer's request.

ARMY

The equipping with arms will have first priority, the providing of ammunition and the building of fortifications for the army will be considered in second place only.

NAVY

The building of ships, of ports and docks will have first priority over all other requirements, also over that of providing ammunition.

AIR FORCE

The equipping with arms will have first priority, the providing of ammunition will have to be considered in second place only.

If necessary, the initiation of new enterprises will have to be delayed, the execution of current enterprises and orders will have to be distributed over a longer period of time. The allotted quota of raw materials which will be decreased starting 1 Jan 39, will also compel us to a certain extent to do this. It has to be achieved that

in theArmyin theNavyin theAir Force

during the period from 1 November 1938 to 31 March 1939 (end of the fiscal year) not more than

(Army): 3.7 billion RM (used until now 4.9)(Navy): 650 million RM(Air Force): 2.5 billion RM

should be expended in the form of cash and delivery treasury scrips.

It is not yet definitely established how much can be allotted for the next fiscal year 1939/40 in the form of cash and delivery scrips. At present, the branches of the Armed Forces cannot expect greater quotas than the following:

5.2 billion RM for the Army1.4 billion RM for the Navy4.9 billion RM for the Air Force

signed: Keitel

W H58 a 40 38 g K1157/38 g KTop SecretCopyfor information[illegible signature]tothe Chief of the Air Forcethe Chief of the W StbChief of the War Industry Staff Adjutant1 March 1939DraftTo the adjutant's office of General Field Marshal Goering.

On behalf of Brig. Gen. Thomas I request an appointment for a conference for the general before the departure of the General Field Marshal on following urgent subjects:

1. The branches of the Armed Forces—particularly the Navy—submitted requests for additional amounts of non-ferrous metals and of steel. General Thomas requests instructions what attitude he should take in regard to this question during the absence of the General Field Marshal.

2. The General Field Marshal has to make decisions in 2 matters concerning foreign policy.

[signature illegible]Captain.

TRANSLATION OF DOCUMENT 1316-PS

Working Committee OldenburgB.Nr. 15/41 g.Kdos. 21.3.412 copies1st. copy.TOP SECRETNote for Files.

Regarding the discussion held on the 21.3.41. at 11 o'clock with the head of the department.

Top SecretPresent: General Thomas, Colonel Huenermann, Lt. Col. Luther,Major v. Gusevius.

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