Full Citation

  • Title Financial Counter-Blockade of Eastern Berlin Is Ordered
  • Author Higgins, Marguerite From the Herald Tribune Bureau
  • Publication Title New York Herald Tribune (European Edition)
  • Collection New York Herald Tribune (European Edition)
  • Date Thursday,  Aug. 12, 1948
  • Issue Number 20385
  • Page Number [1]
  • Place of Publication Paris, France
  • Language English
  • Document Type Article
  • Publication Section News
  • Source Library The New York Times Company
Financial Counter - Blockade Of Eastern Berlin Is Ordered MG Bars Flow of West-Sector Funds to the Area; Banks Forbidden to Transfer Capital To Their Main Offices Across Line By Marguerite Higgins From the Herald Tribune Bureau BERLIN, Aug. 11.—The Western Allies hit back today at the Soviet financial squeeze of Berlin by setting up their own currency counter¬ blockade. As of today, the flow ot funds from the Western-occupied sectors of the city to the Soviet area is strictly prohibited unless prior and written y p p approval of the Western Military Governments has been given. Equally important, all city reve¬ nues gathered in the western sectors by taxation, sale of rationed goods, streetcar and subway fares, etc., .will remain in west Berlin banks instead of being deposited as before in the main bank, located in the Soviet sector. It was control of this main bank and therefore of all city govern¬ ment revenues that enabled the Russians to discriminate in re¬ leasing funds so as to prevent pay¬ ment of city employees working in the western' sectors. Fkom now on the Russians will no longer have a chance to get their clutches on revenues gleaned in the western boroughs as these funds will stay in west-sector branch banks and will be distributed from there. The Western Allied action was forced by the Soviet attempts to gain complete financial control of both public and private banks in the entire city. The Soviets waged their currency warfare on two main fronts. Freeze Private Funds First, they froze all funds of the city govemrnent, ignoring the fact that at least two-thirds of thé revenues had been collected in the western sectors and thus ought to be available to pay city debts in¬ curred there. Then, when the Rus¬ sians finally did begin releasing a dribble of the required funds, they attached unacceptable conditions in so far as the western sectors were concerned. For, using the bait of money, the Soviets sought to impose conditions which would have brought city government affairs in the western sectors under their control. Similarly, the Russians froze the money of private firms and then combined the offer of release with equally objectionable conditions. The Russians got their hands on the East mark accounts of west- sector firms during the most recent currency exchange, at which time (Continued oil Page 3, Col. 6) , e n ¬ s n g t t d f n e y y o s e ¬ , e ¬ Finance Block (Continued from Page 1) all these funds had to be deposited. The Russians simply never followed through with the money exchanges for west-sector firms that would not meet Soviet political conditions. East marks constitute 75 per cent ot the money supply in Berlin’s west sectors. The Western Allies issued the order today because taxes come due again next week. As the three- power communique explained, there is no point in collecting revenues and sending them to the Soviet sector only to have them frozen there. It i* estimated that revenues from the west sectors have in the past furnished more than two- thirds of the city’s yearly revenues —or close to 1,400,000,000 marks. The new order, it is understood, prohibits all west-sector firms from accepting Soviet attempts to have all trade within the city channeled through the Soviet controlled “Greater Berlin Trading Corpora tion.” Splitting-Up Process The Western counter-blockade is part of the process in which Ber¬ lin is gradually being split into East and West regimes. The present Western order will remain in force until the Soviets lift their blockade of the East mark funds of west- sector firms and make city funds available for debts and salary pay¬ ments in western sectors. Berlin now has two separate pol¬ ice forces, food administrations, trade unions and two different cur¬ rencies. As of today, it will have two separate administrations for distributing city revenues. Despite the Western counter-ef¬ forts, the financial snarl in this city is unparalleled. It is unlikely that any large city has ever been faced with such a shortage of money. The Western Allies sought par¬ tially to avert the shortage by offer¬ ing sixty-day loans of West marks at 3 per cent discount. But these offers have provided more irritation than help to the western-sector firms, few of which feel they can be certain of having sufficient West marks in sixty days to pay back the loan, since, because of the land blockade, they have little access to west German customers. Second, many west firms resent having to pay a 3 per cent interest on the loan they are forced to take be¬ cause the Russians will not release their legally acquired funds. At the moment hundreds of thousands of persons are without back wages.