[Page 181]

3. The Austrian "Anschluss"

I wish the Tribunal would contemplate the chart a moment and see that worm-like form of Czechoslovakia, which General Jodl calls a "wasp waist in the direction of France," and then he very accurately described what happened when Austria was taken by the Anschluss, that the wasp waist was "now enclosed in the pincers."

I resume reading:

"Her own strategic position had now become so unfavourable that she was bound to fall a victim to any attack pressed home with rigour before effective aid from the West could be expected to arrive. This possibility of aid was furthermore made more difficult by the construction of the West-Wall, which, in contra- distinction to the Maginot line, was not a measure based on debility and resignation but one intended to afford rear cover for an active policy in the East.

4. The bloodless solution of the Czech conflict in the autumn Of 1938 and spring of 1939 - that is - the two phases in Czechoslovakia - and the annexation of Slovakia, rounded off the territory of Greater Germany in such a way that it now became possible to consider the Polish problem on the basis of more or less favourable strategic premises."

"5. This brings me, said General Jodl, to the actual outbreak of the present War, and the question which next arises is whether the moment for the struggle with Poland, in itself unavoidable, was favourably selected or not. The answer to this question is all the less in doubt since the opponent who was, after all, no inconsiderable one, collapsed unexpectedly quickly, and the Western Powers who were his friends, while they did declare war on us and form a Second Front, yet, for the rest, made no use of the possibilities open to them of snatching the initiative from our hands. Concerning the course of the Polish campaign, nothing further need be said beyond that it proved in a way which made the whole world sit up and take

[Page 186]

notice, what up till then had not been certain by any means; that is, what a high state of efficiency the young armed forces of Greater Germany had achieved."

In one of Adolf Hitler's reviews of the six year period between his ascendancy to power and the outbreak of hostilities, he not only admitted but boasted about the orderly and co-ordinated long-range planning. I bring up again, if the Tribunal please, document L-79, which was offered in evidence yesterday, as exhibit USA 27. That is the minutes of the conference of the Fuehrer by Schmundt, his Adjutant. In as large a staff as ours, we inevitably fall into a kind of patoise or lingo, as Americans say. We refer to this as "Little Schmundt." The large file that I offered yesterday, we call "Big Schmundt."

At this point, I merely wish to read two sentences from page 1 of that document which we call "Little Schmundt. "One sentence on page 1. It is found below the middle of the page: "In the period 1933-1939 progress was made in all fields. Our military situation improved enormously." And then, just above the middle of the second page of the English translation: "The period which lies behind us has indeed been put to good use. All measures have been taken in the correct sequence and in harmony with our aims." One of the most significant direct preparations for aggressive war is found in the Secret Reich Defence Law of May 21st, 1935, which I offered in evidence yesterday, as exhibit USA 24 and commented on sufficiently. I need not repeat that comment. The law went into effect upon its passage. It stated at the outset that it was to be made public immediately, but at the end of it Adolf Hitler signed the decree ordering that it be kept secret. I commented on that sufficiently yesterday.

General Thomas, who was in charge of War and Armament Economy, and for some time a high ranking member of the German High Council, refers to this law as "the cornerstone of war preparations." He points out that, although the law was not made public until the outbreak of war, it was put into immediate execution as a programme of preparation.

I ask the Tribunal to take judicial notice of General Thomas' work, "A History of the German War and Armament Economy, 1923 -1944," page 25. We have the volume here, in German, so that anyone may examine it who wishes. I don't care to offer the entire volume in evidence unless the Court thinks I should. We do give it an exhibit number, exhibit USA 35, but I should like to place it in the files merely as a reference work implementing Judicial notice, if that is practicable.

THE PRESIDENT: You want it simply for the purpose of showing that General Thomas said that that law was the cornerstone of war

MR. ALDERMAN: Yes.

THE PRESIDENT: That has already passed into the record.

MR. ALDERMAN: I want to say to counsel for the defendants that it is here if they care to consult it any time.

THE PRESIDENT: Very well.

MR. ALDERMAN: I should have identified it by our number, 2353-PS.

This secret law remained in effect until September 4th, 1938, at which time it was replaced by another secret Defence Law, revising the system of defence organisation and directing more detailed preparations for the approaching status of mobilisation, which 1 think was the euphemism for war.

[Page 187]

The second Secret Defence Law I offer in evidence as our document 2194-PS. It will be exhibit USA 36.

As to that document I only intend to read the two covering letters, "Reich Defence Law, the Ministry for Economy and Labour, Saxony, Dresden ; and 6th December, 1939, Tel." - I suppose - "Telegraph, "52051. Long Distance, Top Secret."

THE PRESIDENT: Does this occur at the beginning Of 2194-PS?

MR. ALDERMAN: It should, yes, sir, unless my English mimeograph is different from yours.

THE PRESIDENT: I don't think I have any letter introducing it.

MR. ALDERMAN: Does it not start after that, "To the Reich Protector in Bohemia and Moravia"?

THE PRESIDENT: Yes, that's right. I beg your pardon.

MR. ALDERMAN:

"Transportation Section, attention of Construction Chief Counsellor Hitch, or representative in the office of the Reich Protector in Bohemia and Moravia, received Prague, 5th September, 1939, No. 274. Enclosed please find a copy of the Reich Defence Law Of 4th September, 1938, and a copy each of the decrees of the Reich Minister of Transportation, dated 7th October, 1938, RL 10.2212/38, Top Secret, and of 17th July, 1939, RL/VL 1.2173/39, Top Secret, for your information and observance, by order, signed Kretschmar. 3 enclosures completed to Dresden, 4th September, 1939, signed Schneider, 3 enclosures. Receipt for the letter of 4th September, 1939, with 3 enclosures, signed 5th September, 1939, and returned to Construction Counsellor Kretschmar."

I refer next to Indictment, paragraph IV (F) 2A. That paragraph of the Indictment refers to four points: (1) Secret rearmament from 1933 to March, 1935; (2) the training of military personnel (that includes secret or camouflage training); (3) production of munitions of war; (4) the building of an air force.

All four of these are included in the general plan for the breach of the Treaty of Versailles and for the ensuing aggressions. The facts of rearmament and of its secrecy are self-evident from the events that followed. The significant phase of this activity in so far as the Indictment is concerned, lies in the fact that all this was necessary in order to break the barriers of the Versailles Treaty and of the Locarno Pact and to wage the aggressive wars which were to follow. The extent and nature of those activities could only have been for aggressive purposes, and the highest importance which the Government attached to the secrecy of the programme is emphasised by the disguised financing, both before and after the announcement of conscription, and the rebuilding of the army, 16th March, 1935.

I have, if the Court please, an unsigned memorandum by the defendant Schacht dated 3rd May, 1935, entitled "The Financing of the Armament Programme (Finanzierting der Ruestung). "As I say, it is not signed by the defendant Schacht, but he identified it as being his memorandum, in an interrogation on the 16th October, 1945. I would assume that he would still admit that it is his memorandum. That memorandum has been referred to but I believe not introduced or accepted in evidence. I identify it by our No. 1168-PS, and I offer it in evidence as exhibit USA 37.

I think it is quite significant, and with the permission of the Court, I shall read the entire memorandum, reminding you that the German interpreter has the original German before him to read it to the transcript.

"Memorandum from Schacht to Hitler," identified by Schacht as exhibit A, interrogation 16th October, 1945, page 40. 3rd May, 1935 is the date of the memorandum.

[Page 188]

Financing of Armament. The following explanations are based upon the thought that the accomplishment of the armament programme with speed and in quantity is the problem of German politics, that everything else therefore should be subordinated to this purpose as long as the main purpose is not imperilled by neglecting all other questions. Even after 16th March, 1935, the difficulty remains that one cannot undertake the open propagandistic treatment of the German people for support of armament without endangering our position internationally (without loss to our foreign trade). The already nearly impossible financing of the armament programme is rendered hereby exceptionally difficult.

Another supposition must also be emphasised. The printing press can only be used for the financing of armament to such a degree, as permitted by maintaining the money value. Every inflation increases the prices of foreign raw materials as well as the domestic prices, and is therefore like a snake biting its own tail. Our armament had to be camouflaged completely till 16th March, 1935, and even after that date the camouflage had to be continued to a larger extent, making it necessary to use the printing press (bank note press) from the very beginning of the whole armament programme, though it would have been natural to start it (i.e., the printing process0 at the final point of finance. In the portefeuille of the Reichsbank are segregated notes for this purpose, that is, armament, of R.M. 3,775 millions and 866 millions, altogether 4,641 millions out of which the armament notes amount to 2,374 million, that is, of issue 30th April, 1935. The Reichsbank has invested the amount of marks under its jurisdiction, but belonging to foreigners, in blank notes of armament. Our armaments are also financed partly with the credits of our political opponents. Furthermore, 500 million Reichsmark were used for financing of armaments which originated out of Reichsanleithe, the Federal Loans placed with the savings banks. In the regular budget the following amounts were provided: for the budget period 1933-34 -R.M. 750 millions; for the budget period 1934-35-R.M. 1,100 millions and for the budget period 1935-36-R.M. 2,500 millions.

The amount of deficits of the budget since 1928 increases after the budget 1935-36 to 5 to 6 millions of Reichsmark. This total deficit is already financed at the present time by short-term credits of the money market. It therefore reduces in advance the possibilities of utilisation of the public market for the armament. The Reichsfinanzminister (Minister of Finance) correctly points out in his defence of the budget: "As a permanent yearly deficit is an impossibility, as we cannot count with security on increased tax revenues to balance such deficit and any other previous debits, and as, on the other hand, a balanced budget is the only secure basis for the impending great task of military policy" - I interpolate that evidently the defendant Schacht knew about the impending great military task to be faced by Germany - "for all these reasons we have to put in motion a fundamental and conscious budget policy which solves the problem of armament financing by organic and planned reduction of other expenditures not only from the point of receipt, but also from the point of expenditure, that is, by saving.

How urgent this question is, can be deduced from the following, that a large amount of cash has been started by the State and Party" - it isn't just the State it is the State and the Party - "and which is now in process, all of which is not covered by the budget, but from contributions and credits, which have to be raised by industry in addition to the regular taxes. The existing of various budgets side by side, which serve more or less public tasks, is the greatest impediment for gaining a clear view about the possibilities of financing the armaments. A whole number of ministries and various branches of the party have their own budget, and for this reason have possibilities of incomes and expenses, though based on the sovereignty of finance of the State, but not subject to the control of the Finanzminister (Minister of Finance) and therefore also not subject to the control of the cabinet. Just as on the sphere of politics the much too far-reaching delegation of legislative powers to individuals brought about various states within the State,

[Page 189]

exactly in the same way the condition of various branches of State and Party, working side by side and against each other, has a devastating effect on the possibility of finance. If on this territory concentration and unified control is not introduced very soon, the solution of the already impossible task of armament finance is endangered. We have the following tasks:

1) A deputy is entrusted with, I suppose, finding all sources and revenues, which have origin in contributions to the Federal Government, to the State and Party and in profits of public and party enterprises.

(2) Furthermore experts entrusted by the Fuehrer have to examine how these amounts were used and which of these amounts in the future can be withdrawn from their previous purpose.

(3) The same experts have to examine the investments of all public and party organisations, so as to determine to what extent this property can be used for the purpose of armament financing.

(4) The Federal Ministry of Finances is to be entrusted to examine the possibilities of increased revenues by way of new taxes or increasing of existing taxes.

The up-to-date financing of armaments by the Reichsbank, under existing political conditions, was a necessity, and the political success proved the correctness of this action. The other possibilities of armament financing have to be started now under any circumstances. For this purpose all absolutely nonessential expenditure for other purposes must cease and the total financial strength of Germany, limited as it is, must be concentrated for the one purpose of armament financing. Whether the problem of financing, as outlined in this programme, succeeds, remains to be seen, but without such concentration it will fail with absolute certainty."

May 21st, 1935, was a very important date in the Nazi calendar.

THE PRESIDENT: Would that be a convenient time to adjourn for ten minutes

MR. ALDERMAN: Yes.

(A recess was taken)

MR. ALDERMAN: 21st May, 1935, was a very important date in the Nazi calendar. As I have already indicated, it was on that date that they passed the secret Reich Defence Law, which is our document 2261-PS. The secrecy of their armament operations had already reached the point beyond which they could no longer maintain successful camouflage and since their programme called for still further expansion, they made the unilateral renunciation of the armament provisions of the Versailles Treaty on the same date, 21st May, 1935.

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