6 Memorandum prepared for Delegation to Imperial Conference
Extracts n.d. [after 9 February 1937]
REVIEW OF RELATIONS BETWEEN THE UNITED KINGDOM AND GERMANY
The Commonwealth has not recently had any direct relations of particular significance with Germany, nor was Australia, or any of the Dominions, a signatory of the Locarno Treaty, the renewal of which was one of the chief European problems of 1936. Yet by reason of the vital interest of Australia and the other Dominions in the preservation of European peace and as a corollary World Peace, German policy and activities are always followed with close attention.
[There followed a comprehensive summary of the events of 1936.]
The necessity for some action to ease the economic position in Germany is now being widely discussed. The difficulties of a purely political agreement to replace the Locarno Treaty seem very great and it is felt that Great Britain must, as a safety valve to ensure peace, take some action to relieve that economic trouble in Germany. The currency agreement which was negotiated between France, the United Kingdom and the United States, for the devaluation of the French franc, did not ease this situation but rather tended to emphasize Germany's sense of isolation.
Failing either a political agreement or an economic settlement, and excluding the unlikely possibility of the waning of Nazism, it would appear that the hope of averting an 'adventure' on the part of Germany lies in the strong position of Great Britain today by reason of her rearmament.
Generally speaking the peace of Europe today is centred around Germany's future intentions. Her rearmament programme does not give any indication whether her intentions are peaceful or warlike. The various declarations made by the German leaders, writers and publicists, do not really qualify the position. For example, Professor Banse  says Germany wants a German empire from the North Sea and the Baltic to the Mediterranean; Rosenburg -the breakup of Soviet Russia and the creation of vassal states from the Black Sea through the Ukraine to the Baltic; Dr Schacht -the return of the former colonies; Spengler the regeneration of the decadent white races by the spirit of prussianism; Hitler in 'My Struggle'-the unity of the German race and sufficient land in Europe to support it. Today there is unity in the demand for return of colonies and access to raw materials. This aspect is dealt with in a separate paper.
Probably German ideas of foreign policy are in a state of flux and they do not quite know what they want, and their actions since 1933 have been opportunist in taking advantage of a difficult economic and political situation both international and as regards individual states. Apart from the return of colonies, there are still some German demands such as the status of Danzig, Memel, Luxemburg, the union of Austria and Germany, the revision of frontiers and German minorities, particularly in Czechoslovakia, which are likely to come to the front at any time and which may not only increase the prevailing tension, but cause a general conflagration.
Beyond this there are clear indications that German policy visualises the establishment of a Germanic bloc in Central and South-eastern Europe. The aim is probably not a political empire as the Germans are well aware of the existing strength and ideals of the young nations created as a result of the Peace Settlement, and have in mind the difficulties which may be caused by minorities within their frontiers. They learned this by bitter experience over Alsace and Lorraine, and for this reason this particular problem practically ceases to exist.
The reports from Roumania, Yugoslavia, Hungary, Greece and Turkey show clearly that this Germanic bloc is being created by economic and financial domination effected through the so-called clearing and exchange agreements which places a large proportion of foreign trade at the mercy of Germany. There are also tendencies towards the formation of a distinct Fascist bloc. In this connection all the authoritarian or totalitarian states are included as against the democratic countries with whom for the time being at any rate Soviet Russia has allied herself for common protection. The idea of the groupings of Europe into these two blocs is still nebulous but it is one which will have to be closely watched and guarded against. 
1 Professor Ewald Banse, enthusiast for Pan-Germanism, author of several books including Raum und Volk im Weltkriege (1933), published in English (1934) as Germany prepares for War.
2 Alfred Rosenberg, German Nazi ideologist, philosopher and Minister for Eastern Occupied Territories 1941-44.
3 Dr Hjalmar Schacht, German President of the Reichsbank 1924-30, 1933-39, Minister of Economics 1934-37.
4 Dr Oswald Spengler, German philosopher and mathematician, author of Der Untergang des Abendlandes (2 vols, 191 8, 1922), published in English (1926-28) as The Decline of the West.
5 Memorandum prepared in Department of External Affairs.
[AA: A981, IMPERIAL RELATIONS 137]