The three-page, closely typed report,
marked 'Secret', copied to British officials
and sent by air pouch to Cordell Hull, the
US Secretary of State, detailed how the
industrialists were to work with the Nazi
Party to rebuild Germany's economy by
sending money through Switzerland.
They would set up a network of secret
front companies abroad. They would wait
until conditions were right. And then they
would take over Germany again.
The industrialists included
representatives of Volkswagen, Krupp and
Messerschmitt. Officials from the Navy and
Ministry of Armaments were also at the
meeting and, with incredible foresight, they
decided together that the Fourth German
Reich, unlike its predecessor, would be an
economic rather than a military empire - but
not just German.
The Red House Report, which was unearthed
from US intelligence files, was the
inspiration for my thriller The Budapest
Protocol.
The book opens in 1944 as the Red Army
advances on the besieged city, then jumps to
the present day, during the election
campaign for the first president of Europe.
The European Union superstate is revealed as
a front for a sinister conspiracy, one
rooted in the last days of the Second World
War.
But as I researched and wrote the novel,
I realised that some of the Red House Report
had become fact.
Nazi Germany did export massive amounts
of capital through neutral countries. German
businesses did set up a network of front
companies abroad. The German economy did
soon recover after 1945.
The Third Reich was defeated militarily,
but powerful Nazi-era bankers,
industrialists and civil servants, reborn as
democrats, soon prospered in the new West
Germany. There they worked for a new cause:
European economic and political integration.
Is it possible that the Fourth Reich
those Nazi industrialists foresaw has, in
some part at least, come to pass?
The Red House Report was written by a
French spy who was at the meeting in
Strasbourg in 1944 - and it paints an
extraordinary picture.
The industrialists gathered at the Maison
Rouge Hotel waited expectantly as SS
Obergruppenfuhrer Dr Scheid began the
meeting. Scheid held one of the highest
ranks in the SS, equivalent to Lieutenant
General. He cut an imposing figure in his
tailored grey-green uniform and high, peaked
cap with silver braiding. Guards were posted
outside and the room had been searched for
microphones.
There was a sharp intake of breath as he
began to speak. German industry must realise
that the war cannot be won, he declared. 'It
must take steps in preparation for a
post-war commercial campaign.' Such
defeatist talk was treasonous - enough to
earn a visit to the Gestapo's cellars,
followed by a one-way trip to a
concentration camp.
But Scheid had been given special licence
to speak the truth – the future of the Reich
was at stake. He ordered the industrialists
to 'make contacts and alliances with foreign
firms, but this must be done individually
and without attracting any suspicion'.
The industrialists were to borrow
substantial sums from foreign countries
after the war.
They were especially to exploit the
finances of those German firms that had
already been used as fronts for economic
penetration abroad, said Scheid, citing the
American partners of the steel giant Krupp
as well as Zeiss, Leica and the
Hamburg-America Line shipping company.
But as most of the industrialists left
the meeting, a handful were beckoned into
another smaller gathering, presided over by
Dr Bosse of the Armaments Ministry. There
were secrets to be shared with the elite of
the elite.
Bosse explained how, even though the Nazi
Party had informed the industrialists that
the war was lost, resistance against the
Allies would continue until a guarantee of
German unity could be obtained. He then laid
out the secret three-stage strategy for the
Fourth Reich.
In stage one, the industrialists were to
'prepare themselves to finance the Nazi
Party, which would be forced to go
underground as a Maquis', using the term for
the French resistance.
Stage two would see the government
allocating large sums to German
industrialists to establish a 'secure
post-war foundation in foreign countries',
while 'existing financial reserves must be
placed at the disposal of the party so that
a strong German empire can be created after
the defeat'.
In stage three, German businesses would
set up a 'sleeper' network of agents abroad
through front companies, which were to be
covers for military research and
intelligence, until the Nazis returned to
power.
'The existence of these is to be known
only by very few people in each industry and
by chiefs of the Nazi Party,' Bosse
announced.
'Each office will have a liaison agent
with the party. As soon as the party becomes
strong enough to re-establish its control
over Germany, the industrialists will be
paid for their effort and co-operation by
concessions and orders.'
The exported funds were to be channelled
through two banks in Zurich, or via agencies
in Switzerland which bought property in
Switzerland for German concerns, for a five
per cent commission.
The Nazis had been covertly sending funds
through neutral countries for years.
Swiss banks, in particular the Swiss
National Bank, accepted gold looted from the
treasuries of Nazi-occupied countries. They
accepted assets and property titles taken
from Jewish businessmen in Germany and
occupied countries, and supplied the foreign
currency that the Nazis needed to buy vital
war materials.
Swiss economic collaboration with the
Nazis had been closely monitored by Allied
intelligence.
The Red House Report's author notes:
'Previously, exports of capital by German
industrialists to neutral countries had to
be accomplished rather surreptitiously and
by means of special influence.
'Now the Nazi Party stands behind the
industrialists and urges them to save
themselves by getting funds outside Germany
and at the same time advance the party's
plans for its post-war operations.'
The order to export foreign capital was
technically illegal in Nazi Germany, but by
the summer of 1944 the law did not matter.
More than two months after D-Day, the
Nazis were being squeezed by the Allies from
the west and the Soviets from the east.
Hitler had been badly wounded in an
assassination attempt. The Nazi leadership
was nervous, fractious and quarrelling.
During the war years the SS had built up
a gigantic economic empire, based on plunder
and murder, and they planned to keep it.
A meeting such as that at the Maison
Rouge would need the protection of the SS,
according to Dr Adam Tooze of Cambridge
University, author of Wages of Destruction:
The Making And Breaking Of The Nazi Economy.
He says: 'By 1944 any discussion of
post-war planning was banned. It was
extremely dangerous to do that in public.
But the SS was thinking in the long-term. If
you are trying to establish a workable
coalition after the war, the only safe place
to do it is under the auspices of the
apparatus of terror.'
Shrewd SS leaders such as Otto Ohlendorf
were already thinking ahead.
As commander of Einsatzgruppe D, which
operated on the Eastern Front between 1941
and 1942, Ohlendorf was responsible for the
murder of 90,000 men, women and children.
A highly educated, intelligent lawyer and
economist, Ohlendorf showed great concern
for the psychological welfare of his
extermination squad's gunmen: he ordered
that several of them should fire
simultaneously at their victims, so as to
avoid any feelings of personal
responsibility.
By the winter of 1943 he was transferred
to the Ministry of Economics. Ohlendorf's
ostensible job was focusing on export trade,
but his real priority was preserving the
SS's massive pan-European economic empire
after Germany's defeat.
Ohlendorf, who was later hanged at
Nuremberg, took particular interest in the
work of a German economist called Ludwig
Erhard. Erhard had written a lengthy
manuscript on the transition to a post-war
economy after Germany's defeat. This was
dangerous, especially as his name had been
mentioned in connection with resistance
groups.
But Ohlendorf, who was also chief of the
SD, the Nazi domestic security service,
protected Erhard as he agreed with his views
on stabilising the post-war German economy.
Ohlendorf himself was protected by Heinrich
Himmler, the chief of the SS.
Ohlendorf and Erhard feared a bout of
hyper-inflation, such as the one that had
destroyed the German economy in the
Twenties. Such a catastrophe would render
the SS's economic empire almost worthless.
The two men agreed that the post-war
priority was rapid monetary stabilisation
through a stable currency unit, but they
realised this would have to be enforced by a
friendly occupying power, as no post-war
German state would have enough legitimacy to
introduce a currency that would have any
value.
That unit would become the Deutschmark,
which was introduced in 1948. It was an
astonishing success and it kick-started the
German economy. With a stable currency,
Germany was once again an attractive trading
partner.
The German industrial conglomerates could
rapidly rebuild their economic empires
across Europe.
War had been extraordinarily profitable
for the German economy. By 1948 - despite
six years of conflict, Allied bombing and
post-war reparations payments - the capital
stock of assets such as equipment and
buildings was larger than in 1936, thanks
mainly to the armaments boom.
Erhard pondered how German industry could
expand its reach across the shattered
European continent. The answer was through
supranationalism - the voluntary surrender
of national sovereignty to an international
body.
Germany and France were the drivers
behind the European Coal and Steel Community
(ECSC), the precursor to the European Union.
The ECSC was the first supranational
organisation, established in April 1951 by
six European states. It created a common
market for coal and steel which it
regulated. This set a vital precedent for
the steady erosion of national sovereignty,
a process that continues today.
But before the common market could be set
up, the Nazi industrialists had to be
pardoned, and Nazi bankers and officials
reintegrated. In 1957, John J. McCloy, the
American High Commissioner for Germany,
issued an amnesty for industrialists
convicted of war crimes.
The two most powerful Nazi
industrialists, Alfried Krupp of Krupp
Industries and Friedrich Flick, whose Flick
Group eventually owned a 40 per cent stake
in Daimler-Benz, were released from prison
after serving barely three years.
Krupp and Flick had been central figures
in the Nazi economy. Their companies used
slave labourers like cattle, to be worked to
death.
The Krupp company soon became one of
Europe's leading industrial combines.
The Flick Group also quickly built up a
new pan-European business empire. Friedrich
Flick remained unrepentant about his wartime
record and refused to pay a single
Deutschmark in compensation until his death
in July 1972 at the age of 90, when he left
a fortune of more than $1billion, the
equivalent of £400million at the time.
'For many leading industrial figures
close to the Nazi regime, Europe became a
cover for pursuing German national interests
after the defeat of Hitler,' says historian
Dr Michael Pinto-Duschinsky, an adviser to
Jewish former slave labourers.
'The continuity of the economy of Germany
and the economies of post-war Europe is
striking. Some of the leading figures in the
Nazi economy became leading builders of the
European Union.'
Numerous household names had exploited
slave and forced labourers including BMW,
Siemens and Volkswagen, which produced
munitions and the V1 rocket.
Slave labour was an integral part of the
Nazi war machine. Many concentration camps
were attached to dedicated factories where
company officials worked hand-in-hand with
the SS officers overseeing the camps.
Like Krupp and Flick, Hermann Abs,
post-war Germany's most powerful banker, had
prospered in the Third Reich. Dapper,
elegant and diplomatic, Abs joined the board
of Deutsche Bank, Germany's biggest bank, in
1937. As the Nazi empire expanded, Deutsche
Bank enthusiastically 'Aryanised' Austrian
and Czechoslovak banks that were owned by
Jews.
By 1942, Abs held 40 directorships, a
quarter of which were in countries occupied
by the Nazis. Many of these Aryanised
companies used slave labour and by 1943
Deutsche Bank's wealth had quadrupled.
Abs also sat on the supervisory board of
I.G. Farben, as Deutsche Bank's
representative. I.G. Farben was one of Nazi
Germany's most powerful companies, formed
out of a union of BASF, Bayer, Hoechst and
subsidiaries in the Twenties.
It was so deeply entwined with the SS and
the Nazis that it ran its own slave labour
camp at Auschwitz, known as Auschwitz III,
where tens of thousands of Jews and other
prisoners died producing artificial rubber.
When they could work no longer, or were
verbraucht (used up) in the Nazis' chilling
term, they were moved to Birkenau. There
they were gassed using Zyklon B, the patent
for which was owned by I.G. Farben.
But like all good businessmen, I.G.
Farben's bosses hedged their bets.
During the war the company had financed
Ludwig Erhard's research. After the war, 24
I.G. Farben executives were indicted for war
crimes over Auschwitz III - but only twelve
of the 24 were found guilty and sentenced to
prison terms ranging from one-and-a-half to
eight years. I.G. Farben got away with mass
murder.
Abs was one of the most important figures
in Germany's post-war reconstruction. It was
largely thanks to him that, just as the Red
House Report exhorted, a 'strong German
empire' was indeed rebuilt, one which formed
the basis of today's European Union.
Abs was put in charge of allocating
Marshall Aid - reconstruction funds - to
German industry. By 1948 he was effectively
managing Germany's economic recovery.
Crucially, Abs was also a member of the
European League for Economic Co-operation,
an elite intellectual pressure group set up
in 1946. The league was dedicated to the
establishment of a common market, the
precursor of the European Union.
Its members included industrialists and
financiers and it developed policies that
are strikingly familiar today - on monetary
integration and common transport, energy and
welfare systems.
When Konrad Adenauer, the first
Chancellor of West Germany, took power in
1949, Abs was his most important financial
adviser.
Behind the scenes Abs was working hard
for Deutsche Bank to be allowed to
reconstitute itself after decentralisation.
In 1957 he succeeded and he returned to his
former employer.
That same year the six members of the
ECSC signed the Treaty of Rome, which set up
the European Economic Community. The treaty
further liberalised trade and established
increasingly powerful supranational
institutions including the European
Parliament and European Commission.
Like Abs, Ludwig Erhard flourished in
post-war Germany. Adenauer made Erhard
Germany's first post-war economics minister.
In 1963 Erhard succeeded Adenauer as
Chancellor for three years.
But the German economic miracle – so
vital to the idea of a new Europe - was
built on mass murder. The number of slave
and forced labourers who died while employed
by German companies in the Nazi era was
2,700,000.
Some sporadic compensation payments were
made but German industry agreed a
conclusive, global settlement only in 2000,
with a £3billion compensation fund. There
was no admission of legal liability and the
individual compensation was paltry.
A slave labourer would receive 15,000
Deutschmarks (about £5,000), a forced
labourer 5,000 (about £1,600). Any claimant
accepting the deal had to undertake not to
launch any further legal action.
To put this sum of money into
perspective, in 2001 Volkswagen alone made
profits of £1.8billion.
Next month, 27 European Union member
states vote in the biggest transnational
election in history. Europe now enjoys peace
and stability. Germany is a democracy, once
again home to a substantial Jewish
community. The Holocaust is seared into
national memory.
But the Red House Report is a bridge from
a sunny present to a dark past. Joseph
Goebbels, Hitler's propaganda chief, once
said: 'In 50 years' time nobody will think
of nation states.'
For now, the nation state endures. But
these three typewritten pages are a reminder
that today's drive towards a European
federal state is inexorably tangled up with
the plans of the SS and German
industrialists for a Fourth Reich -
