US military police at Potsdamer Platz where the US, British and Soviet sectors meet. The square was often the scene of confrontations between Communists and supporters of Western democracy.

  What happens to Berlin, happens to Germany; what happens to Germany, happens to Europe. -Vyacheslav Molotov

  On July 30, 1946, the Americans and British agreed to economically merge their two occupation zones. This bipartite decision was made over French and Russian opposition on the basis that such a fusion was a violation of the Potsdam Agreement . The US and British justification was the French obstruction in the Allied Control Council to the formation of any centralized economic agencies and the need by the United States and Great Britain to reduce the amount of financial support they were being forced to pay to underwrite the feeding and support of their respective zones.

  In attempting to justify the new bizone (which rapidly became known as "Bizonia") US Secretary of State James Byrnes, at a Council of Foreign Ministers meeting in Paris on July 11, 1946, invited all occupying powers to merge their zones economically with the US Zone. General Joseph T. McNarney, then US Military Governor, was instructed to repeat this proposal a few weeks later at the Allied Control Council in Berlin. As foreseen, only the British agreed to the proposal.

  Bizonia became operational in January 1947. To manage economic activity in the merged zones, the British and Americans established six boards: Economics, Food and Agriculture, Transport, Communications, Civil Service, and Finance. The British and Americans went to great lengths to avoid French and Soviet charges that they were forming any type of political unification and this resulted in a weak, ineffective organization. To avoid charges they were establishing a West German capital city, the six boards were headquartered in four different cities resulting in poor coordination. To avoid the appearance of a German government organization, the British and Americans maintained strict control over all decisions by establishing an Anglo-American Bipartite Board. This, however, also made it easy for German officials to disclaim responsibility for unpopular decisions.

  After the Council of Foreign Ministers meeting in Moscow during March and April 1947, resulted in no agreement on a German peace treaty or German unification, Secretary of State George C. Marshall met with General Lucius Clay in Berlin on April 25, 1947. Clay was instructed "to proceed vigorously with strengthening of the bizonal organization . . . in conjunction with Robertson [British Military Governor], and to expedite the upward revision of the level of bizonal industry to ensure the self-sufficiency of the area."⁽¹⁾

  In response to Marshall's instructions, an elected Economic Council was created consisting of German representatives from each of the Laender (states) of Bizonia. The Economic Council was given the responsibility for adopting and promulgating ordinances subject to approval by the Anglo-American Bipartite Board. Although this did not solve all the problems for effective coordination of German agencies, it was an improvement in that the Germans were more responsible for their decisions. The next step was the formation of an executive power or something very close to a government. Before taking this step, it was decided to await the outcome of the Council of Foreign Ministers meeting scheduled for London in November 1947.

  In the meantime, the Western European countries had agreed to participate in the proposed Marshall Plan and Clay advocated Bizonia be included. Marshall agreed. On November 18, 1947, just prior to the start of the Council of Foreign Ministers meeting in London, Marshall proclaimed in a speech in Chicago, "The restoration of Europe involves the restoration of Germany. Without revival of Germany's economy there can be no revival of Europe's economy.''⁽²⁾ By tying German recovery to European recovery, Marshall made economic assistance to a recent enemy more palatable to the US Congress and the American people.

  After the breakup of the London Conference, Clay reported:

  Shortly after the adjournment of the Council of Foreign Ministers, Secretary Marshall and Mr. Bevin [British Foreign Secretary] met at Ambassador Douglas' residence . . . at a luncheon attended also by Robertson, Frank Roberts of the British Foreign Office, Murphy and me. After luncheon I presented orally, by agreement with Robertson, our joint views on the German problem. We pointed out that currency reform was essential to economic progress and recommended that one more effort be made immediately to obtain quadrapartite approval to put it in effect throughout Germany, failing which we would proceed in western Germany if France would agree, or in the bizonal area if France held back. We further asked for authority to give political character to the bizonal administrative structure without giving it in the name of government. This could be done, we believed, by the direct election in the early summer of 1948 of members of the Economic Council. We proposed to continue to participate in the Allied Control Council unless it was broken up by others. We anticipated difficulties in Berlin and recommended that we stay there regardless of any Soviet pressures. We urged that our governments make it clear to the French Government that it was welcome to join us at any time but that no effort be made to bring any pressure on France.

  Before leaving London, Marshall informed Clay that the French were now willing to discuss the possible merger of their occupation zone with Bizonia provided the question of the Ruhr and French security could be settled.⁽⁴⁾ However, when Clay and Robertson returned to Germany and were prepared to announce measures to strengthen bizonal powers, the French officially protested and claimed this was a prelude to a powerful centralized government.⁽⁵⁾ The French protest was rejected and the new measures were proclaimed during February and March 1948.

  When Clay and Robertson informed the Allied Control Council of the measures to strengthen the Bizonal German administration, Soviet General Sokolovsky, in a bitter attack, answered "Under pretense of reorganizing the bizonal economic agency, the U.S. and British authorities . . . have commenced establishing a separatist government."⁽⁶⁾

  On January 20, 1948, the United States, Great Britain and France agreed to hold a conference in London commencing February 23, 1948, to discuss German affairs. The Benelux countries were also invited to participate in those matters effecting them. The Soviet Union sharply protested the meeting maintaining the conference would lead to a divided Germany.⁽⁷⁾

  The first sessions of the London Conference ended on March 5, 1948, with the general agreement by the Western powers that western Germany would have a "federal form of government." However, the French still held back from merging their zone with Bizonia. During the conference, on February 25, Communists seized full power in Czechoslovakia. "The coup sent a shock throughout the Western world. The shock was

British soldiers relax in their occupation sector. The Kaiser Wilhelm Memorial Church in the background still sits on the Kurfurstendamm and has been left in its ruined state as a memorial to war.

heightened by the death on March 11 of Jan Masaryk, the Foreign Minister of Czechoslovakia, which was officially presented as a suicide but widely suspected to have been caused by foul play."⁽⁸⁾ This was followed by the Soviet breakup of the Allied Control Council in Berlin on March 20, when they walked out charging the Western powers with nullifying any reason for the continued existence of the Allied Control Council by their actions in London.

  The Soviet actions made it abundantly clear to the French that they had little choice but to "cast the die" with the United States and Great Britain. They could not go it alone in their zone and the United States kept the pressure on by threatening not to include any Marshall Plan funds for a separate French Zone because standing alone the French Zone would not be a viable economic entity.

  Prior to the reconvening of the London Conference for a second session on April 20, 1948, French officials tentatively agreed to merge their zone with the US and British Zones. The memorandum of understanding agreed to by the French called for a constituent assembly to convene not later than September 1, 1948, to prepare a constitution to be submitted to the German Laender for ratification. The constitution was to be approved by the occupying powers. This was to be followed by a democratic election and the formation of a government. However, the foreign relations of this government would be handled by the occupying powers pending the signing of a peace treaty. Economically, the French also agreed to the principal of a currency reform prior to the establishment of the German government.⁽⁹⁾

  Although the French continued to "drag their feet" on a number of points, a final report, along the lines of the joint memorandum of understanding, was approved and submitted to their respective governments on June 1, 1948 . The US and British governments approved the report on June 9, but the French hesitated again before finally approving on June 17,  the very eve of the currency reform.

  Now, it was the German turn to hesitate. Although many German leaders desired a return to constitutional government, they also realized acceptance of the proposals would result in a divided Germany for an indefinite period. Would they be condemned by the German people for dividing Germany much as their predecessors had been for signing the unpopular Versailles Treaty after World War I?