[Page 409]

A. We cannot even talk about keeping the rearmament a secret. I call your attention to some excerpts from documents presented and submitted by the prosecution themselves as exhibits. I quote first of all from the affidavit by George Messersmith, dated 30 August, 1945, Document 2385-PS, where it says on Page 3, line 19:-

"Immediately with the assumption of power, the Nazis launched a tremendous programme of rearmament."

"The tremendous German armament programme which was never a secret ..."

I continue quoting from Exhibit EC-461. It is the diary of Ambassador Dodd, where it says, under 19 September, 1934, and I quote in English, for I just have the English text before me:-

[Page 410]

"When Schacht declared that the Germans were not arming so intensively, I said, last January and February Germany bought from American aircraft manufacturers one million dollars worth of high-class war flying equipment and paid in gold."

(A mechanical disturbance in the courtroom at this point.)

THE PRESIDENT: The Tribunal will adjourn.

(A recess was taken.)

THE PRESIDENT: The Tribunal would like to know how long you expect to be with your examination in chief of the defendant. You have already been nearly a whole day, and the Tribunal thinks, in view of the directions in the Charter, that the examination of the defendant ought to finish certainly in a day.

DR. DIX: Your Lordship, there are two things I do not like to do, to make prophecies which do not come true, and to make a promise I cannot keep.

May I answer the question by saying that I consider it quite impossible for me to finish today. I am fully aware of the rules of the Charter, but on the other hand I am asking you to consider that the prosecution has tried to prove the accusations against Schacht by numerous pieces of evidence, directly and indirectly relevant facts, and that it is my duty to deal with these individual pieces of evidence offered by the prosecution.

Please apply strict measures to my questions, and if the Tribunal should be of the opinion that there is something irrelevant, then I shall certainly adhere to its ruling. However, I do think that I not only have the right, but also the duty to put any questions which are necessary to refute the evidence submitted by the prosecution.

I shall, therefore, certainly not be able to finish today. I think - I should be extremely grateful if you would not force me to stipulate definitely, it may speed up and tomorrow I may finish in the course of the day but it may even take the whole day - I cannot say for certain. In any case, I shall make every effort to put only relevant questions. If the Tribunal should be of the opinion that something is not relevant, I ask to be told so after I have explained my viewpoint.

THE PRESIDENT: I think you had better proceed at once then, Dr. Dix, and we'll tell you when we think your questions are too long or too irrelevant.

BY DR. DIX:

Q. Now, Dr. Schacht, we were considering the Mefo Bills, did you consider them as a suitable means of keeping the rearmament secret? Have you anything else to say to that question?

A. The Mefo Bills as such as far as rearmament was concerned, had no connection with the question of secrecy, for the Mefo Bills were used to pay every supplier. And there were, of course, hundreds and thousands of small and big suppliers all over the country.

Apart from that, before they could be taken to the Reichsbank, the Mefo Bills circulated amongst the public for at least three months and the suppliers who required cash used the Mefo Bills to discount them in their banks or to have advances made on the strength of them, so that all banks participated in this system.

But I should like to add also that all the Mefo Bills which were taken up by the Reichsbank were listed on the bill account of the Reichsbank. Furthermore, I should like to say that the keeping secret of State expenditure - and armament expenditures were State expenditure - was not a matter for the President of the Reichsbank but an affair concerning the Minister of Finance. If the Reich Minister of Finance did not publish the guarantees which he had accepted for the Mefo Bills, then that was his affair and not mine. I am not

[Page 411]

DR. DIX: The next question, your Lordship, might arouse doubts as to its relevancy, I personally consider it irrelevant for the verdict in this trial. However, it has been mentioned by the prosecution, and for that reason alone I think it is my duty to give Dr. Schacht an opportunity to reply and to justify himself.

The prosecution has represented the view that the financing by means of Mefo Bills, from the point of view of a solid financial procedure was also very hazardous. One might adopt the view that that may have been the case or not to make this verdict -

THE PRESIDENT (Interposing): Ask the question, Dr. Dix. Ask the question.

BY DR. DIX:

Q. You have heard what I have in mind.

A. It goes without saying that in normal times and under normal economic conditions such means as Mefo Bills would not have been resorted to. But if there is an emergency, then it has always been customary, and it has always been a policy recommended by all experts, that the issuing bank should furnish cheap money and credits so that the economic system can, in turn continue to function.

Mefo Bills, of course, were a thoroughly risky operation, but they were absolutely not risky if they were connected with a reasonable financial procedure, and to prove this I would say that if Herr Hitler, after 1937, had used the accruing funds to pay back the Mefo Bills, as had been intended - the money was there - then this system would have come to its end just as smoothly as I had put it in operation. But Herr Hitler preferred simply to refuse to pay the bills back, and instead to invest the money in further armament. I could not foresee that someone would break his word in such a matter too, a purely business matter.

Q. But, if the Reich had met the bills and had paid, then means would no doubt have been partly lacking for further rearmaments and the meeting of the bills would therefore have curtailed armament. Is that a correct conclusion?

A. That, of course, was the very purpose of my wanting to terminate the procedure. I said if the Mefo Bills weren't met, it would obviously show ill-will; then there would be further rearming, and that could not be.

Q. Earlier you briefly dealt with the question of keeping armament secret in another connection. Have you anything to add to that?

A. I think in a general manner it must be realised that State expenditures do not come under the jurisdiction of the President of the Reichsbank, and that the expenses and receipts of the State are under the control of the Minister of Finance, and consequently the responsibility lies in his hands and it is his duty to publish the figures. Every bill which the Reichsbank had in its possession was made known.

Q. Is that what you have to add to your answer to the basic question of allegedly keeping the armament programme secret?

A. Yes.

Q. You have also already explained why you fundamentally were in favour of rearmament. Have you anything to add to that?

A. Yes. A few very important remarks are, of course, necessary on that, and since this question concerns the chief accusation against me, I may perhaps deal with it in greater detail.

I considered an unarmed Germany in the centre of Europe, surrounded by armed States, as a menace to peace. I want to say that these States weren't only armed, but that they were, to a very large part, continuing to arm and arming anew. Especially two States which had not existed before, Czechoslovakia and Poland, were newly arming, and England, for example, was

[Page 412]

I should like to say quite briefly that I myself was of the opinion that a country which was not armed could not defend itself, and that consequently it would have no voice in the concert of nations. The British Prime Minister Baldwin once said, in 1935, "A country which isn't willing to take necessary precautionary measures for its own defence will never have power in this world, neither moral power nor material power. "

I considered the inequality of status between the countries surrounding Germany, and Germany, as a permanent moral and material danger to Germany.

I further want to point out - and this is not meant to be criticism, but merely a statement of fact - that Germany, after the Treaty of Versailles, was in a state of extreme disorganisation and confusion. Conditions in Europe were such that, for example, a latent conflict and controversy existed between Russia and Finland and between Russia and Poland, which had considerable parts of Russian territory. There was Russia's latent conflict with Roumania which had Bessarabia, and then Roumania had a conflict with Bulgaria about Dobrutschka and one with Hungary about Siebenburgen. There were conflicts between Serbia and Hungary, and between Hungary and all its neighbours, and between Bulgaria and Greece. In short, all of Eastern Europe was in one continuous state of mutual suspicion and conflict of interests.

In addition, there was the fact that in a number of countries there were most serious internal conflicts. I remind you of the conflict between the Czechs and the Slovaks. I remind you of the civil war conditions in Spain. All that will make it possible to understand that I considered it absolutely essential that, in the event of the outbreak of any conflagration in this devil's punch bowl, it was an absolute necessity for Germany to protect at least its neutral attitude. That couldn't possibly be done with the small army of 100,000 men. For that a good-sized army had to be created.

Here, in prison, I accidentally came across an edition of the "Daily Mail", dated April, 1937, where the conditions in Europe were described, and I beg you to allow me to quote one single sentence. I shall have to quote it in English. It does not represent the views of the "Daily Mail"; it only describes conditions in Europe.

I quote:-

"All observers are agreed that there is continual peril of an explosion and that the crazy frontiers of the peace treaties cannot be indefinitely maintained. Here, too, rigorous non-interference should be the king-pin of the British chariot. What vital interests have we in Austria or in Czechoslovakia, or in Roumania, or in Lithuania or Poland?" End of quotation.

Now, I shall probably be asked whether I considered Germany threatened in any way. No, gentlemen of the Tribunal, I did not consider Germany threatened directly with an attack, nor was I of the opinion that Russia was likely to attack Germany. However, for example, we had experienced the invasion of the Ruhr in 1923. The past events of the actual situation made it imperative for me to demand equality for Germany and to support a policy that would attempt to achieve this.

I assume that we shall deal with the reasons for carrying out the rearmament and with the reaction of foreign countries, etc.

Q. What did you know at the time about Germany's efforts to cause the other nations to disarm? Did that have anything to do with your decisions?

[Page 413]

Fundamentally, I was not in favour of rearmament. I only wanted equality for Germany. That German equality could be brought about either by means of disarmament on the part of the other nations or by means of our own rearmament. I would have preferred, in fact, I desired disarmament on the part of the others, which anyway had been promised to us. Consequently I zealously tried for years to prevent a rearmament, if general disarmament could be brought about.

Disarmament by the others did not take place, although the disarmament committee of the League of Nations had repeatedly declared that Germany had met her obligations regarding disarmament.

To all of us who were members of the so-called National Government at the time, and to all Germans who participated in political life, it was a considerable relief that during the first years Hitler, again and again, strove for and suggested general disarmament. Afterwards, of course, it is easy to say that that was a false pretence and a lie on Hitler's part, but that false pretence and that lie would have blown up quite quickly if the countries abroad had shown the slightest inclination to take up these suggestions.

I remember quite well what was told Foreign Minister Eden of Great Britain, when he visited Germany at the beginning of 1934, because I was present at the reception. Quite concrete proposals concerning Germany's obligations in all disarmament questions, in case disarmament on the part of the others was begun and carried out, were made to him. It was promised to Eden that all so-called half-military units like the S.S., the S.A. and the Hitler Youth, would be deprived of their military character if only the general disarmament could be accelerated by those means.

I could produce a number of quotations regarding these offers to disarm, but since it is the wish of the President not to delay the proceedings, I can forgo that. They are all well-known statements made by statesmen and ministers, ambassadors, and such, all of which have the same tenor, namely, that it was absolutely essential that the promise made by the Allies should be kept; in other words, that disarmament should be carried out.

DR. DIX: Excuse me if I interrupt you, but we can do it more quickly and more simply by asking the Tribunal to take judicial notice of Exhibit No. 12, which I have been granted, without my reading it. Page 31 of the English translation of my document book. These are pertinent remarks and speeches made by Lord Cecil and others, by the Belgian Foreign Minister, etc. There is no need to read them, they can be presented. I just hear that they have been presented, and I can refer to them.

BY DR. DIX

Q. Pardon me, please. Continue.

A. Well, in that case I am finished with my statement. Hitler made still further offers but the other countries did not take up a single one of these offers, and thus, unfortunately, only one alternative remained, and that was re-armament. That rearmament carried out by Hitler was financed with my assistance, and I assume responsibility for everything I have done in that connection.

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