The 1848 constitution established the present form of Swiss government in approving three cantons, civil liberties and the parliamentary form of democracy. The franchise did not extend to women until 1971. Switzerland has ruled for decades by a center right coalition of parties. During WWII these parties were the Christian Conservatives, Social Democrats, Liberals, and the Farmers and Artisans Party. The same coalition rules today, although some of the party names have changed. A seven-member Federal Council, the members of which parliament selects for rotating one-year terms, rules Switzerland.
Much of Switzerland’s complicity with the Nazis has only recently come to the forefront from the efforts of President’s Clinton’s action in appointing Eizenstat in leading a commission into reaching a just settlement with the victims of the Holocaust. While the legend of the fierce Swiss neutrality lives on, it is more of a myth, considering Swiss policy during WWII was balanced heavily in favour of the Nazis. Likewise, the threat of a Nazi invasion of Switzerland has no basis in fact. As early as the 1930s, the Nazis were busy with cloaking their corporations and cartel agreements with Swiss fronts. An invasion would have compromised all the hard work they had expended in cloaking these corporations. As we have seen in the cases of the other neutral countries, once the Nazis invaded Russia, they simply lacked the manpower and equipment to open another front. Finally, Switzerland had no strategic geographic location, unlike Spain or Turkey. Its only strategic value to the Nazis was its international banks. The Nazis could use the international banks to obtain hard currency and launder their looted gold.
The ruling Federal Council with extra wartime dictatorial powers was responsible for setting up the economic collaboration with the Nazis. Despite the ever-present Swiss denials, the Federal Council was responsible for the most shameful act of Swiss neutrality. In August 1938, after the Anschluss the Federal Council ordered the borders closed. Fearing a mix of refuges including Jews, the Federal Council petitioned the Nazi government in Berlin to affix a "J" stamp on all passports for Jews. The Nazis initially were not keen to the idea as they were still using immigration as a way to free Germany of Jews. The negotiations continued throughout late summer and autumn. Eventually the Swiss threatened to require vistas for all Germans entering Switzerland. The Nazis then proposed the "J" stamp on passports as a solution. Now it was a Nazi idea in the eyes of the Federal Council.
Much of Switzerland’s pro-Nazi bias can be attributed to Pilet Golaz, who after the invasion of France urged the nation to adapt to the new political realities of Europe. In other words, there was much money to be made dealing with the Nazis. Swiss policy, like that of other neutrals, depended on the fortunes of war and as the allies began their march across Europe from the Normandy beaches, Swiss policy took a turn in favour of the Allies. Even Golaz's political fortunes suffered the same fate, as he was booted from office in 1944, when the tide had clearly turned towards the Allies’ favour.
Swiss government officials knew of both the effects and early methodology of the Nazi genocide from the very beginning. The Nazis had invited Swiss army doctors to serve on the eastern front to treat wounded Nazi soldiers in Operation Barbarossa. At that stage, roving bands of the Einsatzgruppen carried out the killings by shooting in mass the Jews they had rounded up. While the Swiss doctors didn’t see the killing squads directly, they certainly saw the effects and reported it to the Red Cross and government officials. A 1943 National Bank Legal report mentions the deportations and persecutions of Jews.
The only area in which the Swiss displayed anything close to true neutrality was in the area of espionage. The Swiss police left both Nazi and allied agents unmolested and free to come and go in Switzerland. However, once France fell there was no overland route for the Allies to travel to and from Switzerland.
The earliest news of the Holocaust to reach the west came in a telegram on August 8, 1942 from Gerhart Riegner. The informant that provided the information was a Leipzig businessman, Eduard Scholte. The text of the telegram follows:
Received alarming report that in Führer’s headquarters plan discussed and under consideration according to which all Jews in countries occupied or controlled Germany numbering three and a half to four million should after deportation and concentration in the east be exterminated at one blow to resolve once and for all the Jewish question in Europe. Action reported planned for autumn; methods under discussion including prussic acid. We transmit information with all necessary reservation as exactitude cannot be confirmed. Informant stated to have close connections with highest German authorities and his reports generally reliable.
Unfortunately, this report was widely disbelieved in the west, even by Jews. Allen Dulles labelled it as hysterical Jewish propaganda. Rabbi Stephen Wise, one of the recipients of the telegram, released it to the press on November 24, 1942. After that, everyone was aware of the savageness and horror occurring inside the Third Reich.
Likewise, an article in the June 1943 Financial Times, written by Paul Einzig concerning the Allies declaration of January 1943, sent tremors through the Swiss banking community. The article detailed how all transfers of property bought by a neutral from the Nazis would be declared invalid and restoration would be sought. The bankers' concern was over the gold transfers. In July 1943, the Switzerland National Bank Committee met to decide if they should continue to accept Nazi gold. The committee took the view that Switzerland, having a gold standard, was compelled to accept all gold. The committee agreed to ask the Federal Council for a ruling. The council was briefed in October of the issue, including the fact the Allies had advised the National Bank that some of the gold might be looted. In November, the Council ruled that it was in agreement with the bank officials, thus giving a green light to Swiss banks to accept further Nazi gold.
Report no. 26904, written on January 30, 1945 by theForeign Economic Administration, implicated both Credit Suisse and Union Bank in supplying the Nazis with foreign currency. Attached to the memo were 28 intercepts of Credit Suisse’s and Union Bank’s communications. Nine of the intercepts concerned the financial triangle of Germany, Switzerland, and Portugal about gold transfers as detailed earlier in this chapter. The attached memos showed that Credit Suisse alone had made available to the Nazis 500,000 escudos and 200,000 kroners.
A report by the Allied economic intelligence group entitled Allied Claims Against Swiss for Return of Looted Gold, dated February 5, 1946, provides the best estimate of gold looted from the central banks of Europe. The report shows a total of $648 million in Nazi gold. At the outbreak of the war, the best estimate of the Nazi gold reserves was $100 million. The difference of $548 million was looted from the countries of Europe. The report estimates from bank records that between $275 million and $282 million was sold to the Swiss National Bank. In addition, another $20 million was sold to commercial Swiss banks. The report concludes that much of the gold, after being laundered by the Swiss, ended up in Portugal and Spain.
In another report, Safehaven No. 2969, sent by the Americans in Bern to the Secretary of State, the six-page document details the extent of Nazi assets in Switzerland. The report states that the Nazis owned or controlled a total of 358 Swiss economic enterprises. In 263 of these, the Nazis' capital invested totalled about $114 million. The enterprises stretched across all areas of economic activity. The report listed 6 in textile manufacture, 6 in transportation manufacturing, 15 insurance enterprises, 67 retail and wholesalers, 9 banks, 15 chemical concerns, 330 holding and financial companies, 11 other machinery manufacturers and 7 other types with less than 3 each. In the report, a Swiss banker estimates that the banks held $110 million dollars in Nazi assets. The amount of German assets in Switzerland varied widely, as the table below shows.
In addition, the Nazis had large amounts of gold, currency, gems, and art stored away in safety deposit boxes. The British estimated the value of 53 paintings at $484,000. The report determined the total value of all the looted paintings at $390 to $545 million.
Postwar analyzes of the blockade by the British show that in the early years of the war the blockade was ineffectual, and at no time during this period did the Nazis experience a shortage of raw items. It was only the massive bombing campaign and large battle losses in 1944 that finally weakened the Third Reich. On June 22, 1944, Secretary of War Stimson noted the period of gentle appeasement of neutrals had passed by. Following the D-Day invasion of Normandy, Allied casualties rose dramatically. Accompanying the rise in casualties was an increase in pressure exerted by the Allies on all the neutral countries.
On July 10, 1944, Bill Donovan, head of the OSS, informed Roosevelt that Switzerland had agreed to buy $7-10 million of gold monthly from the Nazis. Roosevelt told Donovan to take the matter up with the Secretary of State, Cordell Hull, and have pressure put on the Swiss. On the 14th Hull called in Swiss Minister Charles Bruggmann and reviewed the mounting casualties and cost with a gentle hint the U.S. would view continued trade with the Nazis harshly. With the success of the Normandy invasion in August 1944, the State Department commanded its legation in Berne to begin informal talks to limit the Swiss-Nazi trade. The Swiss response came in late August and reveals the duplicity of the Swiss. The response follows.
It goes without saying that the war as it nears the Alps changes aspect of transit problem and has a bearing on its solution. For this reason Federal authorities keep this problem under constant and careful watch. They have thus been able to observe that traffic in both directions has in general decreased and not increasing since spring. In spirit of true neutrality which guides them will see to it that it follows the trend circumstances demand.
Because of the pressure coming from both the United States and England, the Swiss reduced their exports of strategic materials such as ammunition, locomotives, machine tools, etc. The Federal Economic Administration supported stern measures against the Swiss, including withholding of food and fodder previously promised the Swiss by the Allies. The Joint Chiefs of Staff also favoured withholding supplies from the Swiss. However, Britain opposed such stern measures. In October 1944, Under Secretary of War Patterson noted in a memo that Swiss convoys carrying shipments of goods from Spain across France to Switzerland had resumed in late September 1944. Paterson argued that such shipment should be stopped until the Swiss agreed to end all trade with the Nazis.
On December 8, 1944, the executive committee of the Economic Foreign Policy approved a policy on the Allies’ economic policy toward neutral countries. The policy approved reflected the though stance of the FEA, calling for a continuation of trade controls, exchange controls, and freezing regulations into the postwar period, as leverage in gaining support from the neutrals in attaining Safehaven objectives. Despite the approval of President Roosevelt, various government agencies and departments continued to dispute the policy.
In February 1945, after much wrangling over imposing sterner measures against Switzerland, Lauchlin Currie, Assistant to President Roosevelt, headed the American delegation to Switzerland for talks on stopping the war time trade and to begin negotiations on gold issues. Dr. William Rappard headed the Swiss delegation, although the man pulling the strings was Walter Stucki. In March, Currie reported some success. The Swiss had agreed to freeze all German assets in Switzerland, prohibit the importation, exportation, and dealing in all foreign currencies, and to restrict Swiss purchases of gold from Germany. While the Currie mission was greeted as a success, however, controversy would soon follow. In May 1945, the U.S. Legation in Bern reported the Swiss bought 3,000 kilograms of gold from Germany. The Currie agreement clearly excluded the purchase. However, the Swiss argued the gold was not looted.
In June 1945, Harley Kilgore chaired the Senate’s War Mobilization Subcommittee. In the hearings, he introduced documents uncovered by Allied investigators of correspondence between German Reichsbank Vice President Emil Puhl and the German Minister of Economic Affairs Walter Funk, about German-Swiss commercial discussions conducted during the Currie Mission. The treachery of the Swiss received widespread publicity. Orvis A. Schmidt, Director of Foreign Funds Control for the Treasury Department and a member of the Currie Mission to Bern, testified before the subcommittee as follows.
Even at this late date, the Swiss Government is loath to take the necessary steps to force banks and other cloaking institutions to disclose the owners of assets held in or through Switzerland. This means that German assets held in or through Switzerland will not be identified. Thus, the true picture of German financial and industrial penetration throughout the world will be kept a secret. By the same token, Swiss banks will continue to profit by protecting, through their secrecy laws, German’s war potential and the hidden assets of it financiers and industrialists.
In September, Leland Harrison, U.S. Minister in Switzerland, expressed to Max Petitpierre, the Swiss Minister for Foreign Affairs, of U.S. dissatisfaction with Swiss efforts to complete a census of German assets and of the general noncooperation of Switzerland. The Kilgore committee’s revelations raised alarms in Switzerland. Some right wing papers in Switzerland went so far to claim Switzerland could not withstand another crisis like the Kilgore Committee.
In March 1946, formal talks with Switzerland, the US, Britain, and France opened in Washington. When the formal talks with Switzerland opened, US negotiators held an optimistic view that the Swiss were committed to the Currie Mission agreement that Switzerland would not become a haven for Nazi assets. On the other hand, Switzerland viewed its actions during the war as consistent with the internationally recognized obligations and rights of a neutral power. The Swiss asserted international law accorded the Nazis' seizure of monetary gold from the occupied countries (the right of occupying powers to war booty). Henceforth, the receipt of the gold by Switzerland was legal. Switzerland argued the Allies claim to German assets beyond Germany’s border was illegal and a violation of Swiss sovereignty. Additionally Switzerland sought the removal of all Swiss companies and individuals from the allied blacklist.
With such diametrically opposing views, the talks were set for long and hotly contested negotiations. The dispute between the US and British as to the use of sanctions to induce compliance further complicated the Allied side of the talks. Treasury briefing material for the US negotiators urged a global approach to the gold issue, rather than to settle the amount of looted gold in each transaction. Additionally, the Treasury wanted an opened end clause in any agreement whereby Switzerland would be obligated to return any further looted gold that may be found once the agreement was reached. Treasury Assistant Secretary Harry Dexter White insisted that Swiss funds remain blocked in the United States until the Swiss provided ironclad guarantees that they would identify and seize all accounts under German control. White estimated total of German assets in Switzerland, excluding numbered accounts and cloaked assets to be $500 million.
The American negotiators had the benefit of two comprehensive evaluations of German gold movements during World War II. Both reports were prepared from the records of the Reichsbank. Otto Fletcher, Special Assistant to the Division of Economic Security Controls of the State Department, estimated that at the beginning of the war, Nazi gold reserves totalled $120 million and the Nazis acquired another $661 million in monetary gold during the war, most of which was looted. Fletcher also reported that all gold sold by the Nazis after early 1943 was looted. His report showed the Nazis sold or transferred $414 million in looted gold to the Swiss National Bank. The second report, prepared by James Mann of the Treasury Department, estimated the total monetary gold looted by Germany at $579 million, out of $785 million available to Germany after June 30, 1940. Mann’s report concluded the Swiss took a total of $289 million.
The Treasury’s strategy for the negotiations revolved around the neutral countries recognizing the authority of the Allied Control Council’s (ACC) legal right to all external German assets under the Vesting Decree. Even before the talks began, the Treasury insisted the Swiss recognize the ACC Vesting Decree and agree to restitute to the Allies for reparations an estimated $378 million in looted monetary gold.
Randolph Paul was designated Special Assistant to President Truman in charge of the U.S. contingent to the Allied-Swiss negotiations. He was placed in charge of the U.S. contingent to the Allied-Swiss negotiations. Paul had an important role in urging the rescue of Jews in Europe as the extent of the Holocaust became known. Seymour Rubin and Walter Surrey, and Senior Department of State officials responsible for economic security programs assisted Paul. Walter Stucki headed up the Swiss delegation.
The opening statements of all of the countries revealed the chasm separating the two sides. In an effort to remove the deadlock, the Allies gave up its claim to all German assets and offered the Swiss a twenty-percent share. After returning from Berne, Stucki wrote Paul, reserving the Swiss legal position, but enclosing a draft agreement that accepted a role for the Allies in the liquidation of German assets in Switzerland through the establishment of a joint commission and a plan to share the revenues in some unrevealed proportion. Two days later, the Swiss released a report entitled "Swiss Observations With Regard to the Gold Problem," which differed markedly from Allied calculations regarding German gold holdings at the beginning of the war, and questioned the credibility of information provided by former Reichsbank Vice President Emil Puhl. Puhl had informed allied investigators that the Swiss National Bank knew they were getting looted gold because he had told them that.
Allied reaction to the Swiss response was extremely negative. By then the talks were not much more than the exchanging of notes and memos. Further efforts continued and other proposals arose, but none were satisfactory to either side. Finally, on April 24, Seymour Rubin informed Under Secretary Acheson and Assistant Secretary Clayton that the Swiss had suspended the talks. The Allies had sought the return of $130 million in gold looted from Belgian and traceable to Switzerland.
On May 2, the Swiss resumed the negotiations in a meeting arranged by the Swiss ambassador in Washington, Minister Bruggmann. Stucki made his final order on his word of honour. The proposed deal provided for a 50-50 split on the proceeds of German assets in Switzerland and a payment of $58.1 million, in settlement of the gold question. Paul felt that the Swiss offer was the final bid. Paul had the benefit of US intelligence reports on the flexibility, which the Swiss government had given Stucki to base his opinion on. In short, Paul already knew how much latitude the Swiss government had given Stucki in reaching an agreement. Paul reminded the British and French that their original proposal of $88 million in gold had been a good case, but they had agreed to a settlement of $75 million. Paul felt that a better agreement could be achieved only if economic controls against the Swiss remained in place. Paul met with Stucki before he returned to Berne and agreed to the offer if the payment was raised to $70 million. Stucki not only refused, but also suggested that the Swiss would subtract a 2 percent commission as a collection fee on German assets. Paul conveyed his thoughts in a letter to Assistant Secretary of State Clayton and Treasury Secretary Vinson that the final Swiss offer had been made. He observed that there was significant sentiment in France, Britain, and the United States for elimination of controls over commercial and financial activities.
After three weeks of meetings between the Allies, the Swiss agreement was finally accepted.
The final agreement with the Swiss was signed on May 26. It consisted of an Accord, an Annex, a gentlemen’s agreement, and an exchange of letters between the Swiss and Allied delegations. On June 3, Paul submitted a summary to President Truman. The major points of the agreement follows below.
1. The Swiss Compensation Office would liquidate German property in Switzerland.
2. Germans whose property was liquidated would have a right to compensation in German money.
3. The Swiss Compensation Office would liquidate German assets in cooperation with a Joint Commission composed of Allied representatives.
4. Liquidated assets would be divided on a 50-50 basis between Switzerland and the Allies.
5. The Swiss Government would make available to the Allied Gold Pool 250 million Swiss francs ($58.1 million) on demand in gold in New York.
6. The United States would unblock Swiss assets and the Allies would discontinue trade "black lists" as they applied to Switzerland.
7. The interpretation of the Accord might be settled by arbitration.
8. The effective date of the Accord would be the date of ratification by the Swiss Parliament.
On May 24, 1946, Senator Harley Kilgore wrote a letter to President Truman, urging rejection of the agreement and reversing his earlier agreement. Representative Joseph Clark Baldwin also urged Truman to reject the agreement. Truman accepted the agreement. In October 1946, the United States unblocked private Swiss assets. By the end of 1948, the United States had unblocked nearly $1.1 billion in Swiss assets in the US. However, the Swiss continued to drag their feet in carrying out the agreement. In the period from July to September 1946, the Swiss argued that they could not begin liquidating German assets until the Allies fixed a "fair" rate of exchange between the Reichsmark and the Swiss franc. On July 22, 1947, the Allies sent their exchange rate proposal to the Swiss. The Swiss quickly rejected the proposal, arguing the rate could not be fixed unilaterally by France, the United States, and the United Kingdom.
This wasn't the only case of Swiss duplicity. During the summer of 1946, the Swiss questioned the amount of gold to be returned. On August 2, 1946, in a note to the State department from the Swiss Legation, the Swiss stated that it was prepared to turn over to the Allies 50,807 kilograms of gold in payment of its 250 million Swiss franc obligation. This amount was about 800 kilograms and nearly $1 million short of the $58 million anticipated by the Allies. The Swiss had arrived at the new figure by devaluating the franc. The Swiss insisted on arbitration into 1947, only to finally back down in May 1947.
Negotiations with Switzerland continued until 1952 before a final accord was agreed to. Throughout the years, Switzerland exhibited a disregard and contempt for the Allies’ authority. All of the negotiations were marked by the duplicity of the Swiss, especially in the heirless assets. In the case of heirless assets, the Swiss banks had no problems in liquidating those accounts for the benefit of the bank but for Jews seeking the accounts of loved ones lost in the Holocaust, the banks refused all help. Often times the banks would demand a death certificate, knowing that no death certificates were ever issued for victims in the concentration camps. This final issue wasn’t settled until the 1990s initiative started by President Clinton and headed by Eizenstat.
Although there were renewed talks in the 1990s, Swiss duplicity still abounds. A new scandal emerged in 1997 when former bank guard Christoph Meili came forward with evidence that Union Bank of Switzerland was shredding documents concerning Union’s activities with the Nazis. Meili, a nighttime guard at Union Bank discovered a large quantity of documents waiting to be shredded. Among the documents were records of accounts from the war years. The young guard took two books and pages ripped from another to his locker that night, and then home. Meili then turned the books over to a Jewish organization in Switzerland. Swiss law forbids destroying documents that might relate to WWII investigations. For a reward in his efforts to uncover the truth, Union Bank fired Mr. Meili. The government also is investigating whether Meili violated any of the Swiss secrecy laws. The young man was subjected to threats of kidnapping of his daughters and has since moved to the United States. Even in the United States, Meili still receives death threats. President Clinton signed a bill that granted the Meili family permanent resident status. Christoph Meili has the distinction of being the only Swiss citizen ever granted political asylum in the US.
* gold recovered in Germany