Archive/File: imt/tgmwc/tgmwc-12/tgmwc-12-118.03
Last-Modified: 2000/01/29

Q. It is known to you that the Reichsbank's method of
financing consisted in the discounting of the so-called Mefo
bills. The prosecution has discussed this fact in detail and
the afore-mentioned affidavit signed by Puhl says that this
method made it possible to keep the extent of rearmament
secret. Is that correct?

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."

And on Page 8 it says:-

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

Thus, Mr. George Messersmith, who was in Berlin at the time,
knew about these matters and I am sure, informed his
colleagues also.

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."

That is from a conversation between Dodd and myself which
took place in September, 1934, and he points out that
already in January and February, 1934, war aircraft ...

(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]

responsible for that. The responsibility for that lies with
the Reich Minister of Finance.

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]

continuing to re-arm, specifically with reference to its
naval rearmament in 1935, etc.

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.

This merely describes the seething state of Europe at that
time, and in this boiling pot which was always on the point
of exploding, there was Germany, unarmed. I considered that
a most serious danger to my country.

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]

A. May I say the following:-

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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