Past and Present, 2011
The dilemma of how to come to terms with the violent conflicts of the past, how to meet the imperative for economic growth and simultaneously to satisfy the urgent demands of the Cold War was common to the battered continent of Europe after 1945.1 But nowhere were these difficulties more acute than in the provisional, Cold War creation that was the Federal Republic of Germany. And in Germany the process of resolution was drawn out well beyond the immediate post-war years. The passage of the new West German constitution in May 1949 did not complete the founding of the state, any more than the arrival of Marshall Plan funds in the spring of 1948 or the introduction of the Deutschmark in June 1948 completed the process of economic reconstruction. Well into the early 1950s the basic parameters of the economic and political order in West Germany remained to be defined. The success of the Deutschmark and the new central bank, the Bank deutscher Länder, was not preordained and West Germany’s insertion into the international economic system had barely begun in 1949. As a means of trade integration, tariff reduction through GATT was a slow-moving process.2 European payments remained constrained by exchange and capital controls. The single most important step towards redressing the persistent shortage of dollars was the downward adjustment of all the European currencies, including the Deutschmark, led by Britain in September 1949. But the crucial next step came in 1950 with the abandonment of the impractical Bretton Woods vision and the adoption instead of the European Payments Union (EPU) as a means of facilitating multilateral trade within Western Europe. Likewise, the international political integration of West Germany did not begin in earnest until the French initiative for the Coal and Steel Community in May 1950.