Your telegram 2181. Germany.
In United Kingdom view following factors are regarded as important in present situation:
i) Meeting of Ministers, President and Allied Commandants should take place as quickly as possible, despite French delaying tactics.
ii) Implementation of currency reform and harvest may delay meeting of Constituent Assembly beyond 1st September unless Russians (whose preparations for government in Soviet zone, with charter for all Germany, are apparently not so well advanced as United Kingdom authorities formerly thought) rush formation of Government in their zone. United Kingdom still hope to have Constituent Assembly's work completed by end of winter and 'Parliament' meeting in spring of 1949.
iii) German leaders have not been really hostile to plans. S.P.D. in Berlin has shown opposition, but German leaders, having cleared themselves of responsibility for division of Germany, should be able to lead Germans into cooperation with new regime. The Western Powers believe that in last resort Germans would not run the risk of a unified Germany under Communist control.
iv) If E.R.P. gets going and present rate of economic improvement is maintained, and currency reform achieves its objectives, practical effectiveness of tripartite political programme is assured.
v) French Government will not again have to go to Assembly for approval, but United States and United Kingdom expect French authorities in Germany to be 'stubborn'.
2. Western Powers regard Soviet Government as having, by various measures, made tripartite arrangements only means of promoting production. How far they have impressed this on Germans as a whole is far from clear. They do not view Russian propaganda with alarm although they do not deny the advantages the Russians secured through the delays in the last London meetings and the hostility from both Left and Right in France. Incidentally, United States have somewhat moderated their attitude on deliveries of reparations.
3. Generally it is expected that the situation in Berlin will remain tense and awkward. Soviet actions there recently may have somewhat lost advantages Soviet gained elsewhere in propaganda on future of Germany. Small incidents have been magnified out of their real significance on both sides.
4. Russian reaction henceforth is difficult to assess and probably depends in part on current Cominform meeting, but it may include following lines:
a) Speeding up of establishment of Government and currency reform in Soviet zone.
b) Further relatively minor difficulties in Berlin, but no action which might stop flow of coal from West.
c) Embarrassment to E.R.P. and Western economic cooperation.
d) Until after United States Presidential election, continuation of so-called 'peace offensive' started with Molotov - Bedell Smith exchanges. Observers here claim to see evidence of this in Balkans and Northern Europe.
e) Vigorous, but comparatively mild, propaganda, in part through satellite states.
5. My impression is that United Kingdom and United States authorities tend to treat too lightly importance of propaganda although their insistence on raising standards of life and promotion of German self-help is basically right.