Europaische WirtschaftsGemeinschaft

BEING in Translation:
EUropean Economic Community

Von:
ReichsWirtschaftMinister u. President der Deutschen ReichsBank Funk;
Professor Dr. Jecht, Berlin; Professor Dr. Woermann, Halle;
Dr. Reithinger, Berlin; MinisterialDirektor Dr. Benning, Berlin;
Gesandter Dr. Clodius, Berlin, und GauWirtschaftsBerater Professor
Dr. Hunke, Berlin

Mit einer EinFuhrung von:
GauWirtschaftsBerater Professor Dr. Heinrich Hunke
President des Vereins Berliner Kaufleute und Industrieller

HerausGeGeben von dem
Verein Berliner Kaufleute        und der        Wirtschafts – HochSchule
Und Industrieller                                                                        Berlin

Published
BERLIN 1942
Second edition 1943
Haude & Spenesche VerlagsBuchHandlung Max Paschke

------------------------------------------------------------------------------------------------------------------------------
To assist non Germans, reading the above, certain letters have been capitalised for convenience ONLY
Pamphlet #07

Europaische WirtschaftsGemeinschaft

BEING in Translation:
EUropean Economic Community

Von:
ReichsWirtschaftMinister u. President der Deutschen ReichsBank Funk;
Professor Dr. Jecht, Berlin; Professor Dr. Woermann, Halle;
Dr. Reithinger, Berlin; MinisterialDirektor Dr. Benning, Berlin;
Gesandter Dr. Clodius, Berlin, und GauWirtschaftsBerater Professor
Dr. Hunke, Berlin

Mit einer EinFuhrung von:
GauWirtschaftsBerater Professor Dr. Heinrich Hunke
President des Vereins Berliner Kaufleute und Industrieller

HerausGeGeben von dem
Verein Berliner Kaufleute        und der        Wirtschafts – HochSchule
Und Industrieller                                                                        Berlin

Published
BERLIN 1942
Second edition
1943
Haude & Spenesche VerlagsBuchHandlung Max Paschke

------------------------------------------------------------------------------------------------------------------------------
To assist non Germans, reading the above, certain letters have been capitalised for convenience ONLY

Pamphlet #07
Being the SEVENTH of a series of Pamphlets being published on the internet at: www.SilentMajority.co.UK/EUroRealist/Germany1942
Greg Lance-Watkins, who has overseen this project for SilentMajority over the last few years would like to thank ALL those who have helped in tracking down the original full text in German, and the short term acquisition thereof, for photocopying., Also for the lengthy process of accurate translation and independent checking of the translation work.
The original copy is available for inspection at Glance Back Books in Chepstow.

The final pamphlet in the series will contain ALL the maps and relevant charts, together with a brief summary of the document.
The European Economic Community 

Mr. Funk, the Reich’s Economic Minister and President of the German Reichsbank

Professor Dr. Jecht, Berlin

Professor Dr. Woermann, Halle

Dr. Reithinger, Berlin, Ministerial Director

Dr. Beisiegel, Berlin

Secretary of State Königs, Berlin

Director Dr. Benning, Berlin

Ambassador Dr. Clodius, Berlin and Economics Committee Advisor

Professor Dr. Hunke, Berlin

With an introduction by

Economics Committee Advisor, Professor Dr. Heinrich Hunke, President of the Society of Berlin Industry and Commerce

Issued by

The Society of Berlin Industry and Commerce and the Berlin School of Economics

Second Revised Edition (Berlin 1943)

Haude and Spenersche Publishing House Max Paschke

Preface to the First and Second Edition

This text contains the lectures presented under the title “The European Economic Community” by the Society of Berlin Industry and Commerce at the start of 1942 in conjunction with the Economic Advisor to the Berlin Committee of the NSDAP and The Chamber of Trade and Industry.  The order of lectures was as follows:

•	Walter Funk, Reichs Economic Minister and President of the Reichsbank:
“The Economic Face of the New Europe”

•	Dr. Horst Jecht, Professor at The Berlin School of Economics:
“Developments towards the European Economic Community”

•	Dr. Emil Woermann, Professor at Halle University:  
“European Agriculture”

•	Dr. Anton Reithinger, Director of the Economics Department of I.G. Farbenindustrie A.G., Berlin: 
“The European Industrial Economy”

•	Dr. Philipp Beisiegel, Ministerial Director of the Reich’s Labour Ministry:
 “The Deployment of Labour in Europe”

•	Gustav Koenigs, Secretary of State, Berlin: 
“Questions About European Transport”

•	Dr. Bernhard Benning, Director of the Reich’s Credit Company, Berlin: 
“Questions About Europe’s Currency”

•	Dr. Carl Clodius, Ambassador of the Foreign Office:
 “European Trade and Economic Agreements’’

•	Professor Dr. Heinrich Hunke, Economic Committee Advisor of the NSDAP, President of Germany’s Economic Publicity Agency and the Berlin Society of Industry and Commerce: 
“The Basic Question: Europe - Geographical Concept or Political Fact?”

The lectures met with considerable interest and very strong agreement. On account of this, we feel we should make them available to a wider circle of people.
Berlin, September 1942

The Society of Berlin’s Trade and Industry - The President: Professor Dr. Heinrich Hunke, Advisor to the Economics Committee

The Berlin School of Economics - The Rector: Dr. Edwin Fels, Professor of Geography

	Index	Page	
Preface		  2	
Hunke	Introduction	  8	
	The Discussion So Far and its Results 	  8	
	Economic Practice	  9	
	Problems Related to Economic Community of Continental Europe             	 10	
PAMPHLET #01			
Funk	The Economic Face of the New Europe    	 15	
	Real and False Economic Freedom 	 15	
	Co-operation in Continental Europe	 18	
	Europe’s Resources and Completion 	 20	
	Directing of the Economy by the State and Work 
                     between the States of the Community	 22	
	The Movement of Payments between the States and European Currency Issues	 24	
	Securing the Area and Economy of Europe	 27 	
	The Will for Co-operation in the Economic Community               	 28	
PAMPHLET #02			
Jecht	Developments towards the European Economic Community 	 30	
	The European Economic Community and its Enlargement    	 30	
	The Problem of the European Economic Area in Late Antiquity and 
                                                                                            the Middle Ages	 31	
	Recent Changes to the Problem of the Area of Europe 	 33	
	The Formation of the Nations and Independent Economies  	 33	
	Overseas Expansion and its Consequences for Europe       	 34	
	The Release of England from the Continent and the Formation of the 
                                                                                  “Free Global Economy”	 35	
	Europe’s Economic New Order: The Present Task                             	 37	
	Collapse of the Previous World Economy	 38	
	Means and Objectives of the European Economic Community        	 39	
	Outlook                                                  	 41	
PAMPHLET #03			
Woermann	European Agriculture                           	 42	
	The Development of Agricultural Enterprises and 
                                             the Structure of  Europe’s Food Economy 	 42	
	The Formation of the Division of Labour in World Agriculture                  	 47	
	Production Increase in Germany and Italy                                       	 49	
	The Supply Situation under the Influence of Economic Restrictions and Change                                                                    	 50	
	Political Consequences for Production                                               	 52	
	Possibilities of Increasing Europe’s Food Production 	 53	
PAMPHLET #04			
Reithinger	The European Industrial Economy                                   	 59	
	The Development of Industry in the 19th Century                              	 59	
	Stages of Technical and Economic Development                             	 60	
	Socio-Political Effects                                                                       	 60 	
	The Loss of Europe’s Hegemony in the World War                        	 61	
	The Transition to State Direction and Planning                              	 62	
	New Europe and its Shared Features                                             	 64	
	Regional Differences in Europe                                            	 66	
	The Major Powers at War - A Comparison of their Capabilities                 	 68	
PAMPHLET #05			
Beisiegel	The Deployment of Labour in Europe                           	 71	
	Population Density, Number and Structure of the Employed  	 71	
	People - The Wealth of Europe                                                                       	 72	
	Worker Exchange on the Basis of Inter-State Agreements            	 75	
	Adaptation of the Organisation for Labour Deployment      	 78	
	Employer Action and Order Switching   	 79 	
PAMPHLET #06			
Koenigs	Questions about European Transport                               	 81	
	“Technical Unity” in the Railway System	 82	
	The Magna Carta of Europe’s Internal Riverboat Traffic	 84	
	Motorways’ Contribution to the European Transport Community	 87	
	Community Work in Shipping                                                             	 88	
	Joint Work in Air Traffic                                                                    	 89	
PAMPHLET #07			
Benning	Questions about Europe’s Currency                                   	 91	
	Currency’s Two Sides                                                                         	 91	
	The Internal Economic Situation of Europe’s Currencies  	 92	
	Managing Foreign Exchange and Bilateral Settlements   	 92	
	Development of Multi-Lateral Settlements                                           	 94	
	The Problem of the Clearing Balances                                              	 95	
	Adjustment of Europe’s Exchange Rates                                          	 96	
	Future Formation of the European Currency System    	 97	
	Europe’s Future Currency Relationship to the Currencies of Other Major Nations 	 99 	
	What about Gold?                              	100	
	The European Currency Bloc                                                              	101 	
PAMPHLET #08			
Clodius	European Trade and Economic Treaties                                  	102	
	The Period of the Old Trade Policy                                                        	102	
	German Economic and Trade Policy since 1933                                      	103	
	Changes to Trade Policy Caused by the War                                          	105	
	The Reversal of the Law of Supply and Demand                                   	106	
	The Question of Labour Deployment in Europe                                         	106	
	The Problem of Traffic                                                                             	106	
	Effects of the English Blockade on Europe                                               	106	
	Principles of European Co-operation                                                           	107	
	The European Regional Principle                                                                 	107	
	Europe’s Economic Independence                                                               	107	
	Europe and the Global Economy                                                                	108	
	Internal Preconditions of a European Economic Community                  	109	
	Ways to Achieve European Co-operation                                                     	111	
PAMPHLET #09			
Hunke	The Basic Question: Europe – Geographical Concept or Political Fact?      	113	
	New Learning and Thought                                                                            	113	
	Starting Point for European Task 	114	
	Three Eras                                                                                                        	114	
	The Character of the Global Economy                                                          	114	
	Political Weakness of Continental Europe due to the Idea of 
                                                                         English World Superiority      	116	
	Britain’s Dominant Theory about the Modern National Economy	117	
	The Foundation of the European Economic Community                                     	118	
	Categories within the European Economic Community                                              	119	
	Three Principles                                                                                               	119	
	A New Era                                                                                                        	121	
	Taking a Look Back to the Past and to the Future               	123	
PAMPHLET #10
	The Illustrations – Maps, Charts etc. Summary of the series and Comments
	Request for help locating further FACTS
		Including Reinhard Heydrich’s 1942 Reichs Plan for The Domination
of EUrope – published in Berlin in 1942 believed to have been November.
ALSO – details of the Berlin Conference of 1944 Titled ‘How Will Germany Dominate The 
Peace, When It Loses The War.’ & details of the massive amounts of cash moved 
out of Germany during the war to safeguard the future of German domination against the economic collapse of losing the Second World War against EUropean Union. AND connections with organisations like The Bilderbergers, Council for Foreign relations, Tri Lateral Commission and other arms of the New World Order.

Introduction - by Professor Dr. Heinrich Hunke, Economic Committee Adviser to the NSDAP, President of Germany’s Economic Publicity Agency

Around the end of 1939, most of Europe was either consciously or unconsciously under the influence of the economic concept of England.  Over recent years, however, it has been swept out of European countries, politically, militarily and economically.  Politically the three-power pact has given honour once again to the ancient figures of life, people and room.  It has also established a natural order and a neighbourly way of co-existing as the ideal of the new order.  The foundation of English economics, which is the basis of the balance of powers, has been militarily destroyed.  And economically, a change has come about following the political and military development, the shape of which is easy to describe, but whose final significance is very difficult to evaluate.  I can only repeat, that the changing order that is happening now has to be ranked as one of the greatest economic revolutions in history.  It signifies a reversion of the economy of Europe to a time before the English concept of building an overseas Europe, i.e. an awareness of one’s own country.

The Discussion so far and its Results

Discussions about questions relating to Europe started as the power of the NSADP grew.  At the Congress of Europe in Rome from 14th to 20th November 1932, Alfred Rosenberg developed, for the first time in front of an international forum, thoughts and ideas that have moved us since.  No one, who fights for a new economic order in Europe, can ignore these perceptions and conclusions.  The economic and political wheel was set in motion, when the NSDAP declared the militarisation of the German economy.  It is to the credit of the journal ‘Germany’s Economy’ that it first seized these questions in 1932, kept on bringing them up and stuck doggedly to those original perceptions.  The idea of German economic self- sufficiency in the new political sense and the German economic militarisation are synonymous with this journal.  Besides this, Daitz, the ambassador, has earned the special credit of being the first to have related German economic history to the present time.  Part II of his selected speeches and essays, which appeared in 1938 under the title ‘Germany and the European Economy’, summarizes his concepts formed between 1932 and 1938.  The Italian, Carlo Scarfoglio, delivered with his book ‘England and the Continental Mainland’, a decisive historical contribution to the consciousness of the European continent.  Meanwhile German and Italian economic policy drew the political consequences from the historical lessons that were learnt during the blockade and learnt again during the sanctions.  The speech made in Munich in 1939 by the leader of the Reich’s farmers, R. Walther Darre, at the 6th Great Lecture at the Commission of Economic Policy of the NSDAP, takes a special place in the discussion at that time.  Its theme was “The market order of the National-Socialist agricultural policy - setting the pace for a new foreign trade order.”

While our leader maintained the hope of reaching a peaceful agreement with England, the route for European economic unity remained problematic.  The end of 1939 was a decisive point and it was natural that the years 1940-1941 heralded the new economic and political order.  The writer, in particular, developed and extended in speech and writing the intellectual fund of the new economic policy, which has been translated into most languages, so that today everywhere the great constructive texts are known.  These contexts revolve around the following issues:

1.	Theory about the Reich and the European economy.

2.	The historic, cultural, and economic significance of the German economic order.

3.	The foundations of the future economic relationships between the states.

4.	The nature of the European economic community.

On 25th June 1940 the Reich’s Economic Minister, Funk, publicised in his official capacity his thoughts, which underlined the development so far and thus gave them state sanction.  In October, the journal ‘German Economy’ summarised for the first time the principles of European co-operation, the fundamental principles of German foreign trade, Germany’s export economy and ways and means of promoting export.  It did so in a popular review “About A New Europe”, providing an overview of the important problem of European economic fusion.  Around the end of 1940 the Berlin historian Fritz Rorig finally outlined in his book “Hanseatic Essence” the historical foundations of the greatest economic and political achievement by the Germans.

I am clear in my mind that total clarity is to be found in the principle questions: The necessity is recognised for a political order for the economic co-operation of the people.  The nature of the new order which is: awareness of tradition, using up one’s own economic resources, long term economic agreements and fair relations, is affirmed.  The economic inter-dependence is underlined by fate.  The economic unity of Europe is thus evident.

Economic Practice

Even practical economic life has increasingly allowed entry to new thoughts.  I am able to see the decisive steps in the start and realisation of the following points:

1.	In the increasing payment traffic through Berlin.

2.	In the exchange of experiences in various areas of economic life.   Thereto belong also the statements of ministers and business people, the calls made by special advisers and the collective tackling of important tasks relating to the economy.  Even the specialist is surprised, once he has taken the trouble to put together all the connections.  Today they are already legion.

3.	In the signing of long term economic agreements between the Reich and the other European states, which the public is aware of.  There can be no doubt that such agreements are those of the future.  

Of course, that cannot prevent unclear points and new problems from arising, which become evident at the time when the situation is reviewed.

Problems Related to the Economic Community of Continental Europe

These unclear points primarily relate to the concept of economic direction, the extent of solidarity and neighbourly attitude, the development of one’s own powers, the care to maintain the standard of living and the question of raw material purchase from foreign countries. It is natural that one or another issue will take priority of interest, depending on the set of conditions that prevail.  It should be attempted at this point to give a reply, albeit a summary one.

There can be no doubt that the concept of direction of the economy, or rather its leadership, is as novel as it is revolutionary.  Its classification is all the more important, as the fate and consequence of European co-operation depend principally on a new consistent form of economic understanding.  The Anglo-Saxon view of economics is dead: consequently, even the so-called ‘classical’ national economy is no longer classical, but it has survived.   So what it comes down to is that a new understanding arises to do with ideology and terminology, which represents a sound basis for agreement and co-operation.  Relating to this, one must point out the following in detail:

1.	Economic direction is not a momentary emergency solution, instead it forms the core of new theory and practice.  First of all, it takes the place of individual egotism and the automatic autonomy of the Anglo-Saxon precept.

2.	Economic direction is not identical to the tendencies of a centrally planned economy.  It does not seek to cancel the individual or to administer through the state operators.

3.	Economic direction really means the following: the new instruction of the creative and constructive power of the individual in relation to the whole system; the creation of a consistent economic view and an attitude towards the economy; the selection of important tasks through political leadership and the state’s final decision on all questions about economic power.  Beyond this, the economy is free and responsible to itself.  

The degree of solidarity of the individual economies and their neighbourly attitude is characterised by three guidelines: 

Firstly, it is limited in regard to its own economic development by the recognition that the utilisation of individual resources represents not only a requirement of the new economic precept, but is the very foundation for economic activity.  The European economic community has no interest in leaving any abilities or possibilities unutilised.  

Secondly, it contains the obligation that, because of Europe’s freedom, consideration is given firstly to continental Europe regarding any matter related to economic activity.  Not only should the shared fate of the European people be emphasized, but the fact should also be stressed that the supplementation of the European economies beyond their borders is possible and sought after.

Thirdly, it must be maintained that, above all else, the spirit of the individual economies may not be allowed to go against the spirit of neighbourly co-operation.

The question of developing one’s own powers refers to the problem of monocultures, of industrialisation of the agrarian south-east and the awakening of new needs.

An answer can easily be given to the first question.  Monocultures are the result of the same economic precept that made the world market price the determining factor in the economy.  According to that precept, people and land are the vestiges of some by-gone age.  Europe is well on the way to destroying these monocultures with initiatives ranging from land improvements and growing new crops to discovering new local resources.  All these have the same aim, which is to develop the economy and broaden its basis.  Germany and the whole of Europe can only greet these efforts with gratitude.

The industrialisation of the south-east poses a particular problem regarding these questions.  As I am unable to handle this problem - like all other problems - here in a comprehensive and exhaustive manner, because the industrialisation of economies is theoretically a difficult problem, I can only say as follows:

1.	Just as it is in the nature of things that each country will strive to utilise its available resources for its own production, so will there will be a knock-on effect for other economic partners.

2.	If, as is the case in the South-east European countries, there is heavy 
over-population in the countryside, then there are only three possibilities to solve it: itinerant workers, a permanent emigration and an ‘intensivisation’ of the local economy, a term correctly created by Dr. Ilgner for the problem of industrialisation.  Itinerant workers can only form a part solution.  Besides, it only applies to agricultural and construction workers and gone on for ages.  Permanent emigration from Europe is just as false as impossible.  There just remains the intensivisation of the economies of south-east Europe as the way to self-help.

3.   The economies should make it possible for an independent life according to the modern economic view.  The intensivisation of their economies therefore is right for the time.

4.   The old features of industrialisation, which evolved from the price collapses in countries with agriculture and raw materials, have to now belong to the past.  Europe is a communal living area.  Only through a joint development of economies - and not through independence from one another - can protection against crises be achieved.

5.    The tasks that have to be solved in Europe are so big that the powers needed to do so have to be released by an intensivisation of the individual economies.  This can be easily done by employing the workers that have been liberated in new branches of the economy.

Without affecting the difficult questions of purchasing power, it can be regarded as proven that the joint work to build up Germany’s and the south-eastern states’ in the area of industrialisation lies in the direction of the intensivation of interest of the whole continent.  

One important and until now completely overlooked task in this regard exists and that is the awakening of new needs in the south-eastern countries.  It is because, in those countries, wealth has grown and will gradually continue to grow, as a result of the reliable purchase of agricultural products and available raw materials at adequate price levels.  According to the principle in economics that giving equals taking, peoples’ living habits there will have to change, otherwise one day the process will come to a halt.  Germany’s ability to absorb the products from the south-east is practically infinite, whereas creating a demand for German goods there is not only a matter for economic intensivation but also one of modifying the people so they consume more.  This task is of such importance that it has to be considered from the very outset, so that the south-eastern European economies are elevated after the war.

Equally important as the industrialisation of south-east Europe is the question of the standard of living in the north.  Their economic development and high standard of living, which underpin their lives though all economic conditions, should not be mistaken.  This standard of living has grown considerably during the 19th century and around the time of the world war due to free trade, so that various circles view world economic events with particular concern.  From a German viewpoint, only the following points can be made:

Firstly, a higher standard of living is also the aim of the German government. The German people not only understand this well, but also through its fight wants to ensure European civilisation and culture.  This fight will benefit the whole of Europe, and with it the north.

Secondly, despite being connected successfully to England and its economic system (one should not ignore the countless economic troughs that feature there), the economies of the north whose fate and greatness are very closely linked to Germany.

Thirdly, the northern states’ difficulties are going through a temporary phase of adjustment.  In the long term, this will bring about a lasting advancement, rather than destruction, for their economies’ foundations.

Maintaining a high standard of living is not an insoluble problem.  To finish, I now come to the problem of purchasing raw materials from overseas markets.  A leading south-east European economist once wrote about this principal question: “Unlike the war, we were in the following situation: in order to import raw materials from overseas countries, we bought goods from west European countries with foreign exchange.  In the area of continental Europe there is no gold.  Everything had to pass through the system of clearing - goods sold against goods. We have no product that can be sold to North or South America.  That means that the leading nations are obliged to acquire and distribute to us the raw materials that we need.  The leading nations of Europe can supply, with its capacity, enough products to overseas countries with which to acquire raw materials.  The one question is whether exchange will ever happen… Even before the new order is introduced, and without even joining in with the Axis powers, we stand in solidarity outside Europe with its traffic of goods…”

We can only agree with this view, leaving the matter open, as the Reich’s Economic Minister Funk described, how large the direct sources of help will be and whether raw material acquisition from overseas will take place through the system of clearing or free flow of currency.  With the introduction of the multi-lateral clearing system, on a practical level there is no change from the pre-war time.  As this learned person said, “All the benefits of the method of paying are regained from the system of free currency.”  Nor can it be realised - contrary to him - that this system of clearing through Berlin should function without those countries outside the European system. But the decisive factor is the way in which the continent is bound to Germany and Italy by one fate.

Since 1940, therefore, we are faced with an unparalleled economic and political revolution.  The problems created for us are large but can be solved.  Their solution will give Europe the peace it yearns for and will bring a great era of joint development.  It is worth fighting and working for this. 

 The following discourses should contribute to helping us to broaden and deepen our understanding of the tasks and nature of the European economic community.

Questions about Europe’s Currency
by Dr. Bernhard Benning
Director at the Reich’s Credit Company A.G., Berlin

Currency’s Two Sides

A whole host of problems are involved with this topic.  Firstly, each currency has an internal and an external aspect.

Internally, a currency has the objective of establishing stability in purchasing power, reaching a balance between earnings and an adequate supply of goods i.e. a balance between wages, prices and available goods.  Then there is the importance of developing sufficient credit and money supply.

Externally, it is related to the exchange relationships of the currency against all the other currencies of other economies.  The exchange rate being the focal point, which is in itself the expression of an extraordinarily complicated set of inter-nation relationships in trade and goods settlement, which results in a country’s overall balance of payments.  

First of all, in order to clarify the difference between the currency policy of today and of the past, I want to refer to the fundamental changes in the value placed on the internal and external currency that have taken place over the last decade.  In the time of the Gold Standard for the construction of a currency, the external relationship (i.e. the exchange rate) was the most important.  The consequences are well known: trade cycles were internationally linked and economies depended on overseas economic cycles.  This system had catastrophic effects on national economies during the global crisis of 1930-32 and it should never be allowed to return!  Everywhere now, including England, the importance of national economic policies and thus the internal currency policy has finally been recognised.  The resultant themes are stability in purchasing power and full employment, below which the external currency policy is clearly ranked.  

The situation can no longer arise where a policy of credit restriction is applied, in order to formally stabilise external currencies, entailing fixing exchange rates and restricting money supply below a certain minimum.  As in 1930-32, this would be like a “suicide attempt”, which has been successfully resisted since 1933 by the natural energies of our society.

This does not mean that limits do not apply in the internal credit policy under normal conditions, but this belongs to the remit of a structural internal economic and credit policy.  The two-fold aspect of currency is no longer enough for the analysis of the present currency situation where the external relationship is involved.  Today this in no way represents a uniform relationship, instead a multi-level structure.  

The relationships between the European currencies, for example, have three distinct sectors: independent national economies, the European sector itself, and finally the 
intercontinental relationships between the geographic areas.  Thus there are three similar sectors on three levels for currencies:

1.	The relationships between the currency partners.

2.	The leader currency in the area in relation to the member currency partners.

3.	The leader currency of the area in relation to its counterparts in other geographic areas i.e. the intercontinental currency relationships.

The Internal Economic Situation of Europe’s Currencies

How has this changed recently and what is the present situation?  Since the inflation brake in October 1936 Germany’s currency policy has focused on achieving purchasing stability and was successful with the help of a system of price and wage supervision.  Proof of this success is provided by the following price indices collated by the Reich’s Statistical Office basing on wholesale prices, which show an inflationary scenario since the start of the war: Sweden +61.3%, Denmark +89.2%, Switzerland +85.1%, Hungary +59.2%, Bulgaria +66.3% and Romania +145.2%.

So we can see that the purchasing stability in internal economies just has not been achieved and wages have had to rise as a result.  However, since autumn 1941, all these countries have increased efforts to put a brake on this price pressure.  Every European country now employs a price control authority and has anti-inflation laws.  In fact, prices have stopped rising so fast and hopefully Germany’s example will act as a guide in future.  By achieving purchasing stability in the partner countries, it should make it easier to form the internal European currency relationships.

Managing Foreign Exchange and Bilateral Settlements

Now to the external relationships between the European currencies.  As we know, Europe’s development into an enlarged economic area began before the war and experiences prove that currencies follow the line of the most intensive flow of goods and the strongest set of balance of payments.  The position of the main leader currency tends towards the strongest exchange partner.  The export trade of the south-eastern countries was centred on the Reich even in 1938; for example, 63% of Bulgaria’s exports went to Germany, 50% of Yugoslavia’s and Hungary’s, and 36% of Romania’s - since the war these figures have increased.  The Anglo-Saxon blockade of the whole European continent has had a one hundred percent effect on European trade in all other areas of Europe.

Reflecting their economic force in Europe, the alignment of currencies has sifted to the two Axis powers, Germany and Italy, who are taking up the task together of creating a new order for Europe’s currency.  Both countries have close trade relations with one another, with all of the neighbouring countries and with the other European partner countries.  Both make their own independent settlement treaties, but subsequently always agree matters at government conferences.  The following information might show that the German currency as the main leader currency but it could also be the case for Italy.

Since 1931 the system of managing foreign exchange has been developed into a consistent new currency system, whose main pillars are foreign trade control and settlement balance control in the individual economies and the forming of trade and payment agreements whose functioning depends on a readiness for a positive and trusting co-operation.  

The system of foreign exchange management has been heavily criticised both here and abroad, and those responsible for our economic policy have repeatedly stressed that the planned economy of foreign exchanges and bi-lateral settlement treaties cannot be regarded as a complete and final system for the order of Europe’s currency relationships.  Recently, therefore, efforts have been stepped up to remove existing shortages and to further develop more relaxed and settlement structures.  A comprehensive look at these efforts provides a good insight into the present set of tasks.

In the last few years, three main objectives can be seen in the currency development of Europe:

1.	The change from bi-lateral to multi-lateral settlement.

2.	The releasing of clearing balances.

3.	The creation and securing of balanced currency relations.

The Development of Multi-Lateral Settlements

It has proved to be particularly beneficial that Germany has developed a practicable system for currency payment over recent years.  It had to be firstly built on a bilateral basis, as initially each European partner negotiated with Germany separately.

During its development it has been possible to proceed from a bilateral to a multi-lateral settlement.  In numerous inter-nation negotiations the relationships governing trade and settlement were recognised in 1940-41, in which it was expressly stated that all transactions with the countries administered by Germany be routed via the German Clearing Bank in Berlin.  The fundamental point of the “joint clearing” was that all settlements between the named countries and Germany were routed via Berlin, including their settlements with third party partners, be it with Italy and their partners or with the neutral European countries.  Thus a whole network of multi-lateral settlement treaties came about, the latest of which is the one between France and Norway signed in November 1941.  Even beforehand, France’s settlements with Belgium and Holland went via Berlin, so today for the French balance of payments, the settlement relationships represent a unit to Germany, Belgium, Holland and Norway.  

In February 1942 the Governor of the Bulgarian National Bank, Kyrill Guneff, wrote an interesting statement in the “South-East Economist”, which shows the positive reception of the project in the multi-lateral clearing system: “ The change to the Bulgarian bank law was primarily justified by the introduction of multi-lateral clearing, since in so doing, the reichsmark became a truly leading currency for the whole transaction system within the European economic area.”

Some time ago, it was announced regarding the extent of the multi-lateral turnover at the German Clearing Bank in Berlin that about 15 nations were regularly participating in the so-called Europe-Clearing with certain quotas of their transactions.  Between September 1940 and March 1941 the total turnover figure doubled.

Figures issued by the Hungarian National Bank in 1941 are interesting, which show that up to nine-tenths of foreign transactions went via clearing.  A figure of about one billion Pengö, whereas only 105m Pengö were received in freely convertible currencies, mainly accounted for by the Swedish Krona and Swiss Franc.

As the President of the Swiss National Bank, Dr. Weber, revealed at the start of March 1942, 70% of Swiss foreign trade with its main partners is presently linked to clearing traffic.

The Problem of the Clearing Balances

Despite the signs of progress, the method of multi-lateral settlement in Europe is still in the early stages of development.  Our currency policy treads a careful path and seeks a structural and voluntary development.

The main problem remains that of the clearing balances, as described below.  Germany, the country carrying the heaviest burden in the fight against the Anglo-Saxon-Bolshevist threat, needs a constant flow of raw materials etc. for the war and Europe’s entire economy uses its production capacity for this and in order to supply the European area.  
Contract switching and, in addition, the employment of over two million foreign workers in Germany who want to transfer a proportion of their income back home and do so - the result is increasing reichsmark credit balances of almost all the European partner countries in Berlin i.e. for Germany, there are passive clearing balances.

These partners then grant the German war economy supply credits to the value of these balances, or rather work credits.  The partners then have two possibilities to deal with the problem of clearing balances.  Either the so-called waiting times for the local exporters get extended so money is held temporarily in the German Clearing Bank in Berlin, or their issuing banks step in and provide their exporting companies with local currency amounts immediately after the receipt of the reichsmark payment in Berlin.  

In the first case, the exporters have to bear the responsibility and in turn seek local finance credits.  In the second case it is the issuing bank with the responsibility.

Italy, Slovakia and also Sweden, to an extent, adhere to the waiting time process, whereas most other countries use the method of immediate settlement i.e. the issuing banks take over the clearing balances.  Bulgaria’s solution is interesting to note.  In mid-1941 there was a change in the issuing bank law, which allowed reichsmark credits to be established in Berlin for the Bulgaria National Bank against the cover of gold and free foreign exchange.  Thus Bulgaria was able to benefit from the reichsmark’s position as leading currency in the European payment system.

The significance for the credit and currency position of European countries of the problem of clearing balances should not be underestimated, as we can clearly see a considerable increase in the from the statements of the various European issuing banks.  For example, the Danish National Bank showed a net credit reserve of 850 million Krona (approximately RM 450 million) besides other reichsmark credits at the end of 1941.  Slovakia had a clearing credit of two million Slovakian Krona (approximately RM 170 million).  Romania’s National Bank figure was similar to Bulgaria’s.  In all these countries, an increase in the clearing balances leads to a big expansion of local credit volumes. 

So far the accrued clearing balances have been quite reasonable.  What adds mostly to the political argument is that Germany bears the greatest burden of the fight against the Bolshevist threat, but it should be remembered that the clearing accounts only contain the amounts due for payment.  Before and during the war, Germany supplied its European partner countries with investment goods and production equipment on lengthy credit terms.  As a result, considerable active balances are set against the German clearing passive balances, which will have to be settled eventually.

After the war Germany’s huge industrial output will have to be modified, in order to produce industrial goods needed by the European partner countries.  This export of goods will not only reduce the clearing passive balances but also actually translate them into active balances.   In the long term Germany’s whole structure will have to alter, in order to turn it into a supplier of capital for the developing countries in the south-east.  After the war our economic policy has to specifically take account of its position of responsibility in continental Europe by carefully planning its investments in line with internal and external economic activity.

Adjustment of Europe’s Exchange Rates

The third area of the present European currency question is what we referred to earlier as the changes in exchange rates.  Before the war, the value of the reichsmark fell in the individual south-east European countries in relation to the so-called free currencies of the leading devaluation countries, principally the Dollar and Pound Sterling.  There were various causes: the relatively high German price level against the reduced price level in the devaluation countries and then the large German import surpluses and the ensuing settlement balances in Germany whereby the previously mentioned waiting times brought about discounting even before the war.

Since the war started, Germany has concentrated on reducing and removing these problems for the reichsmark.  This was all the more important when the gradual transition to multi-lateral payment in Europe made the uniform valuation of the reichsmark a prerequisite.

By early 1941 lengthy negotiations with all south-eastern countries had succeeded in creating the first step for a currency unification in a way that the various high discount levels of the reichsmark could be limited to 20% against the theoretical parity.  After that, the other discounts were removed, such as Germany’s currency relationship to Croatia and Serbia and then to the Hungarian Pengö, followed by Bulgaria in October 1941.  There still remains today a 22.2% discount between the settlement Mark and the Romanian currency.  Except for this remaining discount, the continent of Europe demonstrates a picture in which relatively uniform inter-national currency relations have been formed - 10 years after the planned economy for foreign currencies and bilateral payments were introduced in Europe.  With this, one of the most important conditions for the further development of multi-lateral payment traffic in Europe has been created.

However, some caveats need to be added.  At the moment there is not yet a corresponding position of equilibrium in price structures and in the development of balance of payments.  A real and not only formal equilibrium for currency and balance of payments development also depends upon inter-national price equilibrium.  As explained already, in the majority of European countries the price conditions are subject to very different price pressures.  For future development it is essential that the price brake measures mentioned are successful.  The ‘correct’ levels of exchange rate equilibrium will be determined once normal peaceful conditions of supply and demand are established.

The recent increase in the Danish Krone by 8.2% shows how fluid the picture remains.  While depreciations were the rule for the south-east currencies against the reichsmark, the opposite was the case for the Danish Krone due to special reasons.  Denmark achieved an improvement in its goods trade with Germany thanks to certain German price concessions.  Any attempts by Denmark’s internal economy to put a brake on its local inflation should be supported.

Overall the picture is of a large variation in the exchange rates in Europe.  Instead of a dogmatic stability policy, the Reichsbank employs a system of variable rates between the reichsmark leader currency and the member currencies.  Its exchange rate policy is an active one that adapts itself to the changing conditions with the aim of achieving an optimal trade in goods and services in Europe.

Future Formation of the European Currency System

There are other interesting European currency processes e.g. the functions of the Reich Credit Bank, or the special rules concerning the Protectorate and Holland, or the question of how Sweden and Switzerland have reacted to the illegal import freeze measures by America.  Now is not the time, as we have to concentrate on two points: the future formation of Europe’s currency framework and the post-war duty of establishing a new order for the currency relationships between Europe and the other large areas of the world.

Right from the start it has to be emphasised that no one considers a removal of the monetary and political independence of the individual European partners in favour of some sort of European unit currency.  Besides the important political aspects, the fact of a strong income structure would stand in opposition to such a ‘currency union’ idea.  This structure is clearly defined by the social income calculations of Jostock and Clark.  Between 1925 and 1935 the pro capita incomes when calculated back to a reichsmark base were as follows: north, west and central Europe RM 1200-RM1400, south-east 
Europe only RM 350-RM 600, in Yugoslavia RM 400, in Romania RM 350.  Between the countries there are also considerable price level differences.  A hurried creation of a 
unit currency would end in failure precisely because of these differences in income and price level, which determine the whole economic structure of the partner countries.

Therefore we are talking about an structural framework of harmonised partner currencies, not a unit currency.  In this, the leading position of the reichsmark is uncontested, as is the Lira in the south-east area.  Connected with that is the focal point of Berlin as the liquidity centre of the currency reserves of the partner currencies.  Berlin thus gains an even stronger position than London did with the Sterling bloc.

Is it possible to imagine, in reality, the future of the European currency system?  The Berlin transfer has to bring about freedom and foreign exchange quality in European trade, which requires the security of liquidity of reichsmark credits.  During the war such liquidity in clearing balances cannot be achieved for well-known reasons.  The growth of the reichsmark clearing balances forms a noteworthy parallel to the piling up of internal purchasing power surpluses, but it can quickly change once the war is over and Germany’s industrial production adjusts to goods required in peacetime and for export.

Equally important is the fundamental task of producing and safeguarding balanced currency relationships in Europe.  The final definitions are yet to be decided but the clear, economic goal is full employment in Europe and structural co-operation of all European partner countries in the interest of safeguarding goods supply for the whole area.

The calculation basis of the currencies is to be made by carefully comparing the various countries’ price levels and ensuring that their balance of payments are kept in balance.  In the case of particular subsequent price changes, an appropriate revision of the exchange rates would be required.  In this way, there would still be some flexibility in the rates, which would require less interventionist measures than in the case of a reichsmark central currency, which necessitates manipulation of the internal value of the joint currencies.  Of course, any changes to the exchange rate relationships should be exceptional instances.  Temporary disturbances to balance of payment equilibrium e.g. caused by adverse harvests would be bridged by compensating inter-national credit relationships.

Careful agreement is also required for the granting of short-term and long-term credit, which would be based on precepts different to those in previous decades.  In place of international capitalist loans of the Anglo-Saxon-French type, which caused south-eastern countries to have serious balance of payment difficulties in the global economic crisis, there will be in future credit systems based on bilateral trade in goods involving the long-term development of partner countries.  The economic agreement between Germany and Romania in 1939 exemplifies this.

Europe’s Future Currency Relationship
to the Currencies of Other Major Nations

During wartime, this question is not yet relevant, but it will be after it.  What is certain is that the structure of global economic trade will have to be changed after the war.  The old style, based on the theory of ‘comparative costs’, suffered a heavy blow in World War I due to the use of blockades and has now collapsed in the second world war of the 20th century. Instead there will be a very different form of trade for the partner countries, which have their economic focus in the same area and whose aim is the overall increase in the general standard of living.

One has to be aware of these revolutionary global economic changes when considering the future shape of global currency relationships.  An important fact arises from this, which is that the relationship between the so-called global currencies are central i.e. against the English Pound and the US Dollar at the time.  The focus has now shifted to the relationships within the enlarged area.

After the war the prognosis is of a really intensive trade in goods between the new and old areas of the world.  We just have to think of the trade in German tool machinery, optical goods or chemicals in return for South American goods or Far Eastern supplies of soya beans or tin.  Similar payment methods can be considered for this type of international trade as well as those designed for currency evolvement.

As Vice-President Puhl recently pointed out, it is quite right that there will always be those countries that remain hostile to the idea of bilateral settlement.  For example, payment forms in trading with nations, such as North America, will need to be freer.  The economically strongest, and thus, the leading currency country in each major area has to constantly monitor the trade and currency relationships between the other areas in order to keep their balance of payments at the same level.  Therefore, there is no need to worry that the development of freer payment forms in such a limited sector of international currency relationships would bring about any undesired disturbances or side-effects.

Therefore, we can conclude that the currency relationship between the major areas are not subject to a dogmatically strict uniformity, rather it seems a mixed system will develop based partly on payment, partly on defined, freer payment methods.

The main task after the war will be to commit to new exchange rate relationships.  To many theoreticians and practitioners, the easiest solution might appear the re-establishment of those pre-war relations, which to a great extent were artificial.  However, what is easy is not always right.

There are true and reliable methods for bringing about new and correct currency relationships in the leading area countries.  ‘Purchasing power parity’ is one, which is described in recent research as being clearer than equilibrium rates.  It is not possible to say today what these rates of the leading area countries will be like due to the war conditions and the varying inflation rates in each one.

How about Gold?

What rôle will gold have to play in the new currency order of the world?  A quick answer to that is that it will not have one where currency is concerned!  The 100th birthday of Georg Friedrich Knapp is presently being celebrated. His definitive service was to finally settle the theory of ‘metallic value’ and replace it with the ‘National Theory of Money.’  Only now can the world draw the practical benefits.  Doors have now been opened with the realisation that the value of money is totally unrelated to the physical security of gold or silver.

This does not mean, though, that gold is no longer of value.  Despite lacking the commercial usability of copper or tin, it will keep its value as long as governments and individuals are prepared to exchange goods for it.  And as long as the USA, which owns the most gold in the world, is prepared to pay a fixed high price for it, gold will be the most highly valued commodity in global trade.  While that is so, gold can act as an extraordinarily useful economic reserve besides payment credits or free foreign exchange for the settlement of intercontinental payment relationships.

Here is a quotation from a speech made by the Reich Economic Minister to the South-East Europe Company in 1941 about the attitude to gold: 

“We are not against gold, the commodity, a priority which is neither a good nor a bad one.  It depends on how it is used.  We have never objected to its use for ultimate settlement, but it has to be distributed differently than it is in the world today.  Also a stability in its value has to be guaranteed internationally which requires no longer using trade and currency methods or revising the factors that brought about the collapse of the old global economic system of the gold currency, credit and trade….  Besides, Germany (for completion maybe one can say continental Europe) will have at its disposal, when peace is agreed, enough gold for the necessary international transactions, as long as overseas debts are not a currency problem for us.  As far as Germany is concerned, the gold problem is no longer a problem”.  

This could not be formulated more clearly.

The European Currency Bloc

Here we come to an end.  If our deliberations have made one thing clear, it is the realisation that currency questions rule out an isolating perspective both in Europe and internationally.  They have to be looked at against the backdrop of the political and economic events in the world in order to appreciate the true importance and possibilities to create solutions.  The geo-political development of the 20th century is driving towards the European economic community.  The currency order can remain just as untouched by it as any other economic area.

We tried to show that after two and a half years of war we have made some important steps towards establishing a degree of unification for the currency, as well as politically for the European continent.  An accurate parallel to this is the German Custom’s Union of 1834, which developed the economic area of Germany.  Now on a totally different political level, European co-operation is being brought about by the modern instruments of settlement agreements, European economic treaties and the new order of the European currency bloc.

The overriding aim of the monetary and political reform of our continent is a far reaching integration of credit markets and the regulation of inter-national transactions between each European country, which is as free and unbureaucratic as possible.  Above all this, there stands the overriding task of establishing an economic area with full employment and safeguarded supplies.

THE END OF BENNING’S essay.

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