The Swiss did more than act as money-launderer and conduit for German payments, in itself a substantial contribution to Hitler’s war. In 1941-42 60 percent of Switzerland’s munitions industry, 50 percent of its optical industry and 40 percent of its engineering output was producing for Germany, remunerated in gold. The Bührle-Oerlikon small arms firm was still selling rapid-fire guns to the Wehrmacht in April 1945. All told, the German Reichsbank deposited the gold equivalent of 1,638,000,000 Swiss francs in Switzerland during the Second World War. And it was Swiss authorities before the outbreak of the conflict who asked that German passports indicate whether their holders were Jewish, the better to restrict unwanted arrivals.
The Swiss authorities, in their defence, had good reason to keep the Nazis friendly. Although the Wehrmacht high command postponed its June 1940 plans for an invasion of Switzerland, it never abandoned them; the experience of Belgium and the Netherlands was a grim reminder of the fate awaiting vulnerable neutral states that got in Hitler’s way. For similar reasons the Swedes also extended their cooperation to Berlin, on whom they were historically dependent for coal. Selling iron ore to Germany was something Sweden had been doing for many years—even before the war half of German iron-ore imports came across the Baltic, and three-quarters of all Swedish iron-ore exports went to Germany. In any case, Swedish neutrality had long been slanted toward Germany out of fear of Russian ambitions. Co-operation with the Nazis—allowing the transit of 14,700 Wehrmacht troops at the start of Operation Barbarossa, as well as German soldiers on leave from Norway passing through on their way home, deferring the draft for Swedish iron mine workers so as to ensure regular deliveries to Germany—was thus not a departure from habit.
After the war the Swiss (though not the Swedes) were initially the object of resentful international suspicion as accomplices to Germany’s war effort; in the Washington Accords of May 1946 they were constrained to offer a ‘voluntary’ contribution of 250 million Swiss francs to European reconstruction, as a final settlement of all claims relating to Reichsbank transactions through Swiss banks. But by that time Switzerland was already rehabilitated as a prosperous island of fiscal rectitude: its banks highly profitable, its farms and engineering industries set to supply food and machinery to needy European markets.
Before the war neither Switzerland nor Sweden had been especially prosperous—indeed they contained significant regions of rural poverty. But the lead they secured in the course of the war has proved lasting: both are now at the top of the European league and have been there steadily for four decades. Elsewhere the path to recovery was a little steeper. But even in Eastern Europe the economic infrastructure at least was repaired with remarkable speed. Despite the worst efforts of the retreating Wehrmacht and the advancing Red Army, the bridges, roads, railways and cities of Hungary, Poland and Yugoslavia were rebuilt. By 1947, transportation networks and rolling stock in central Europe had been brought up to or surpassed their pre-war levels. In Czechoslovakia, Bulgaria, Albania and Romania, where there was less war-related destruction, this process took less time than in Yugoslavia or Poland. But even the Polish economy recovered quite rapidly—in part because the western territories newly seized from Germany were actually more fertile and better supplied with industrial towns and factories.
In western Europe, too, material damage was repaired with remarkable speed—quickest, on the whole in Belgium, somewhat slower in France, Italy and Norway, slowest in the Netherlands, where the worst harm (to farms, dykes, roads, canals and people) had all come in the last months of the war. The Belgians benefited from Antwerp’s privileged status as the only major European port more or less intact at the end of the war, and from the high concentration of Allied troops in their country, pumping a steady flow of hard cash into an economy that had long specialized in coal, cement and semi-finished metals, all vital for reconstruction work.
Norway, by contrast, was considerably worse off. Half the nation’s vital fishing and merchant fleet was lost in the war. Thanks to deliberate German destruction in the course of the Wehrmacht’s retreat, Norway’s industrial output in 1945 was just 57 per cent that of its 1938 level, with nearly a fifth of the country’s capital stock gone. In later years the contrast with Sweden was not lost on embittered Norwegians. But even Norway was able to restore most of its rail and road network by the end of 1946; and in the course of the following year, as in the rest of western and most of eastern Europe, fuel shortages and inadequate communications were no longer an impediment to economic recovery.
To contemporary observers, however, it was
Germany’s
capacity to recover which seemed the most remarkable of all. This was a tribute to the efforts of the local population who worked with a striking singularity of purpose to rebuild their shattered country. The day Hitler died, 10 percent of German railways were operational and the country was at a literal standstill. A year later, in June 1946, 93 percent of all German rail tracks had been re-opened and 800 bridges had been rebuilt. In May 1945 German coal production was barely one-tenth that of 1939; a year later it had quintupled in output. In April 1945 it seemed to Saul K. Padover, an observer with the advancing US Army in western Germany, that it would surely take the flattened city of Aachen 20 years to rebuild. But within a few weeks he was already recording the re-opening of the city’s tyre and textile factories and the beginnings of economic life.
One reason for the speed of Germany’s initial recovery was that once the workers’ houses had been rebuilt, and the transport networks put back in place, industry was more than ready to deliver the goods. At the Volkswagen works 91 percent of the machinery had survived wartime bombing and post-war looting, and by 1948 the factory was equipped to produce one in every two cars made in western Germany. Ford of Germany was largely undamaged. Thanks to wartime investment, one-third of German industrial equipment was less than five years old in 1945, compared to just 9 percent in 1939. And the industries in which wartime Germany had invested most heavily—optics, chemicals, light engineering, vehicles, non-ferrous metals—were precisely those which would lay the foundations for the boom of the Fifties. By early 1947 the chief impediment to a German recovery was no longer war damage, but rather raw material and other shortages—and, above all, uncertainty over the country’s political future.
The year 1947 was to prove crucial, the hinge on which was suspended the fate of the continent. Until then Europeans had been consumed with repairs and reconstruction, or else were busy putting in place the institutional infrastructure for long-term recovery. In the course of the first eighteen months following the Allied victory the mood of the continent swung from relief at the mere prospect of peace and a fresh start, to stony resignation and growing disillusion in the face of the magnitude of the tasks still ahead. By the beginning of 1947 it was clear that the hardest decisions had not yet been taken and that they could not be postponed much longer.
To begin with, the fundamental problem of food supply was not yet overcome. Food shortages were endemic everywhere except Sweden and Switzerland. Only UNRRA supplies built up in the spring of 1946 kept Austrians from starving in the twelve months that followed. Caloric provision in the British Zone of Germany fell from 1,500 per day per adult in mid-1946 to 1,050 in early 1947. Italians, who suffered two consecutive years of hunger in 1945 and 1946, had the lowest average food levels of all the west European populations in the spring of 1947. In French opinion polls taken in the course of 1946 ‘food’, ‘bread’, ‘meat’ consistently out-paced everything else as the public’s number one preoccupation.
Part of the problem was that western Europe could no longer turn to the granaries of eastern Europe on which it had traditionally depended. For there, too, no-one had enough to eat. In Romania the 1945 harvest failed, through mismanaged land reforms and bad weather. From western Wallachia through Moldavia, into the western Ukraine and the middle Volga region of the USSR, poor harvests and drought led to near-famine conditions in the autumn of 1946, with aid agencies describing one-year old children weighing just three kilograms and sending back reports of cannibalism. Relief workers in Albania described the situation there as one of ‘terrifying distress’.
Then came the brutal winter of 1947, the worst since 1880. Canals froze, roads were impassable for weeks at a time, frozen points paralyzed whole rail networks. The incipient post-war recovery came to a grinding halt. Coal, still in short supply, could not keep up with domestic demand and anyway could not be moved. Industrial production slumped—steel output, having just begun to recover, promptly fell back by 40 percent over the previous year. When the snows melted, many parts of Europe were flooded. A few months later, in June 1947, the continent entered one of the hottest, driest summers since records began. It was clear that the harvest would be inadequate, in some places for the third year running: agricultural yields fell by about a third even over the previous year’s meager crop. The shortfall in coal could be made up in part from American imports (34 million tonnes in 1947). Food, too, could be purchased from America and the British Dominions. But all these imports had to be paid for in hard currency, usually dollars.
Two structural dilemmas underlay the European crisis of 1947. One was the effective disappearance of Germany from the European economy. Before the war Germany had been a major market for most of central and eastern Europe, as well as the Netherlands, Belgium and the Mediterranean region (until 1939, for example, Germany bought 38 percent of Greece’s exports and supplied about one-third of the country’s imports). German coal was a vital resource for French steel manufacturers. But until its political future was resolved Germany’s economy—for all its restored potential—remained frozen, effectively blocking the economic recovery of the rest of the continent.
The second problem concerned not Germany but the USA, though the two were connected. In 1938, 44 percent of Britain’s machinery imports by value came from the USA, 25 percent from Germany. In 1947 the figures were 65 percent and 3 percent respectively. The situation was similar in other European countries. This sharply increased demand for American goods was, ironically, an indication of an upswing in European economic activity—but to buy American products or materials required American dollars. Europeans had nothing to sell to the rest of the world; but without hard currency they could not buy food to stop millions from starving, nor could they import the raw materials and machinery needed to move forward their own production.
The dollar crisis was serious. In 1947 the UK, whose national debt had increased fourfold since 1939, was buying nearly half its total imports from the USA and fast running out of cash. France, the world’s largest importer of coal, was running an annual payments deficit with the US of $2,049 million. Most other European countries did not even have currencies in which to trade. Romanian inflation was at its worst in August 1947. The inflation in neighbouring Hungary, the worst in recorded history and far exceeding that of 1923 Germany, peaked at 5 quintillion (5
30
) paper
pengos
to the dollar—meaning that by the time the
pengo
was replaced by the
forint
in August 1946 the dollar value of all Hungarian banknotes in circulation was just one-thousandth of one cent.
In Germany there was no functioning currency. The black market flourished and cigarettes were the accepted medium of exchange: teachers in DP camps were paid 5 packs a week. The value of a carton of American cigarettes in Berlin ranged from $60-$165, an opportunity for soldiers in the American occupation forces to make serious money converting and re-converting their cigarette allocation: in the first four months of the Allied occupation US troops in Berlin alone sent home $11 million more than they received in wages. In Braunschweig, 600 cigarettes would buy you a bicycle—a necessity in Germany no less than in Italy, as depicted unforgettably in Vittorio de Sica’s 1948 film
Bicycle Thieves
.
The seriousness of the European crisis was not lost on the Americans. As we shall see, it was one of their main reasons for pressing forward with a solution to the problem of Germany with or without Soviet cooperation. In the opinion of well-informed Presidential counselors like George Kennan, Europe in the spring of 1947 was teetering on the edge. The frustrations of western Europeans, who had initially been led to expect quicker recovery and a return to normal economic conditions, and the hopelessness of Germans and other central Europeans, compounded by the unanticipated subsistence crisis of 1947, could only strengthen the appeal of Communism or else the risk of a descent into anarchy.
The attraction of Communism was real. Although the Communist parties of Italy, France and Belgium (as well as those of Finland and Iceland) remained in governing coalitions until May 1947, through their trade union affiliates and popular demonstrations they were able to mobilize popular anger and capitalize on the failures of their own governments. The electoral successes of local Communists, combined with the aura of the invincible Red Army, made an Italian (or French, or Czech) ‘road to Socialism’ seem plausible and seductive. By 1947 907,000 men and women had joined the French Communist Party. In Italy the figure was two and a quarter million, far more than in Poland or even Yugoslavia. Even in Denmark and Norway, one voter in eight was initially attracted to the promise of a Communist alternative. In the western zones of Germany the Allied authorities feared that nostalgia for the better days of Nazism, together with a reaction against denazification programmes, food shortages and endemic minor crime, could yet turn to neo-Nazi or even Soviet advantage.
The west European states were perhaps fortunate that their Communist parties in the spring of 1947 were still pursuing the moderate, democratic path adopted in 1944. In France, Maurice Thorez was still urging coalminers to ‘produce’. In Italy the British ambassador described Togliatti as a moderating influence on his more ‘hotheaded’ Socialist allies. For his own reasons Stalin was not yet encouraging his many supporters in central and western Europe to exploit popular anger and frustration. But even so, the spectre of civil war and revolution was never far away. In Belgium, Allied observers described communal and political tensions as serious and ranked the country with Greece and Italy as ‘unstable’.