Moving to Israel was very difficult. We ate only pita and drank water, we worked long hours and we were constantly in fear of Arab attacks. Those were the words of Chaim Tsabag, an immigrant to Israel in 1947. At the age of 23, Chaim witnessed the hardships that many Jews had to endure when arriving to Israel from Europe. Just one year after his arrival, Chaim was in the army fighting for Israels Independence. When Chaim went home after the war, he recalled a country that was in need of food, construction and money. Israel received their independence in 1948, but was going to fall if they did not receive outside help.
The establishment of the State of Israel would have been possible without the Holocaust due to the Zionist movement, however the reparations from the Holocaust given by West Germany gave Israel the resources necessary to survive. In this paper I will argue that the Holocaust played an important role in the founding and long term visibility of the State of Israel in three respects: The Holocaust motivated large numbers of immigrants to move to the new country, providing the necessary population; secondly, the Holocaust enabled Israel to pressure Germany into supplying the economic base necessary to build infrastructure and support those immigrants; and finally, the Holocaust swayed world opinion so that the United Nations approved the State of Israel in 1948.
The founders of Zionism, led by Theodore Herzl, proposed the establishment of the State of Israel. Herzl, in the latter parts of the 1800s, started a movement among Jewish idealists to create a homeland for Jews because he felt that Jews always had been and always would be persecuted. Herzl encouraged many Jewish people from Russia and other parts of Eastern Europe to leave their homes and move to Palestine. The establishment of the World Zionist Organization was created in 1897 in response to a small number of Jewish pioneers who moved to Palestine in 1882.
The World Zionist Organization convinced Britain to recognize the importance of a Jewish homeland. In 1917, Britain introduced the Balfour Declaration, pledging a national homeland for Jewish people. By the 1930s, Britain had taken back the Balfour Declaration and decided to not give Jews a homeland in Palestine. In response, Zionists under the leadership of Menachem Begin started to resist with military tactics against Britains control of Palestine. Another leading Zionist, David Gurion, made a deal with Hitler in 1933 called the transfer agreement. The agreement allowed Jews to leave Germany and go to Palestine in exchange for all of their possessions. The treaty was an accomplishment, but many Jews in 1933 did not want to leave Germany, let alone leave to go to a desert in Palestine.
Between 1937 and1947, Begin and other rightist revisionists were organizing in military groups called Ezel. Ezel was willing to use force against Britain through military attacks, causing Britain to give the problem of Palestine to the United Nations in 1947. On November 29, 1947, the General Assembly of the United Nations passed a resolution calling for the partitioning of Palestine into an Arab and a Jewish State.
While scholars would argue this determination enabled the State of Israel and nothing to do with the Holocaust, evidence supplied by other scholars argues otherwise. Michael Wolffsohn, author of Eternal Guilt? Forty Years of German-Jewish-Israeli Relations, argued that the creation of the State of Israel was primarily due to the political, economic, social and military achievements of its founders. Wolffsohn contests the argument of Nahum Goldmann, the president of the World Jewish Congress, who stated that without Auschwitz there would be no Israel. Wolffsohn does not see why such a determined Zionist community would have shown less willingness to struggle for its independence even if there had been no Hitler. In addition, Wolffsohn states that, the Second World War and the Holocaust were events which rather than intensifying [the Zionist fight for Independence,] actually forced a suspension in the Zionists anti-British struggle for Independence.
The Zionist movement did have an important role in the establishment of the State of Israel, and Wolffsohn and other scholars who argue that the Zionists could have succeeded without the Holocaust and WWII fail to see a few key points. First, Zionist resistance groups could not have fought off Britain if Germany had not weakened the British military power during WWII. Second, once Israel was established in 1948, Israel needed resources to survive the initial influx of immigrants. West Germany supplied the resources in reparation for the Jews who suffered in the Holocaust. The State of Israel was established with the determination of the Zionist community as Wolffsohn points out, although the Holocaust gave Israel the money, population, resources and approval from other countries, which allowed Israel to survive and thrive for the past fifty years.
Reasons for Economic Problems
The first five years of Israels existence was plagued by economic crisis. Some of the leading problems that Israel faced were housing, hostile environment, huge balance of payments deficit, unemployment and lack of foreign currency. The main reason for all of the problems mentioned, according to Lily Gardner Feldman, Associate Professor of Political Science, was immigration.
Signs of anti-Semitism and the dream of a Jewish homeland prompted many to leave Europe from the time of Nazi seizure of power to the outbreak of WWII. Over 170,000 fugitives from Central Europe settled in Palestine between 1933 and 1938. The migration determined Palestine as a safe haven for many Jews. In the aftermath of WWII, the dream of a Jewish homeland was seen as necessary. The Nazis had stripped the Jews of their possessions, resulting in hundreds of thousands of Jews wandering in Europe homeless. When many survivors returned to their cities, they were shocked to see others living in their homes. Many survivors decided to flee Europe and migrate to Palestine in hopes of establishing a Jewish homeland.
The territory on which Israel stands was called Palestine prior to 1948. A British Mandate controlled the territory and was responsible for establishing order. Jews and Arabs lived side by side, neither group dominating the region. The population in Palestine in 1947 consisted of 630,000 Jews and 700,000 Arabs. Three years after the Holocaust, the United Nations voted on establishing Palestine as the new home for Jews, and on May 14,1948, Palestine would be called the State of Israel.
When the State of Israel was established, its first measure was to open its gates to Jews all over the world. Over 325,000 Jews from Nazi-occupied Europe came to Israel between 1948 and 1951. The largest concentration of Jews came from Romania, Poland, Bulgaria and Hungary. When Israel first opened to all Jews in 1948, 13,000 Ashkenazim Jews emigrated every month. In 1949, the numbers rose to 20,000 per month. By the end of 1949, Israel was overwhelmed by the immigrants, but continued to welcome every Jew with open arms. In addition to the Jews in Europe, between 1950 and 1951, over 160,000 Sephardic Jews went to Israel as a safe refuge from Islamic Arabs. Not only did Israel need to deal with the mass numbers of European Jews, now Israel had to deal with Sephardic Jews as well. In Israels first three years alone, the population more than doubled, as 687,624 refugees mostly from postwar Europe and the Arab States, poured into the country. The mass immigration forced Israel into an economic crisis.
Many of the Jews who came to Israel from Europe in 1948 were difficult welfare cases. Most Holocaust survivors came with nothing at all. The European Ashkenazim arrived in Israel with no possessions except some gold coins, some precious stones and some money that they were able to hide in the ghetto. Many men and women arrived in Israel chronically ill, physically exhausted and aged. For many immigrants, Israel was the only place they could call home because no other country was prepared to admit them.
Immigration was the chief problem, which resulted in other economic difficulties for Israel. Heavy tax burdens and a system of severe economic restrictions had to be decided on in order to produce homes and the means of existence for the immigrants. Israel faced an enormous inflationary gap, and the government had to make a decision to either let the market forces generate enough forced savings and thus restore equilibrium, or to control inflationary pressures by a system of direct controls. Overall, the government had to convince the Israeli population to tighten their belts and reduce their standard of living (Balabkins, P.98).
To add to the problem of large immigration, Israel also suffered massive destruction during the 1948 Independence War. After Arab nations from neighboring countries learned of Israel independence, they attacked Israel from all fronts. Israel was victorious, but suffered heavy losses. The 1948 war left a lot of transportation infrastructures damaged and railroads cut off. These problems led Israel to seek outside help.
Israeli political leaders communicated with the United States and England about receiving reparations from Germany. Dr. Chaim Weizmann, the President of Israel, sent a letter in September 20, 1945 to Allies for restitution of $8 billion. The $8 billion was a number estimated by Dr. Nehemiah Robinson, head of the Institution of Jewish Affairs of the World Jewish Congress, of the money Nazis stole from Jews, either from stolen homes, jewelry, art and compensation for material damages to the Jews as a nation. In his letter, Weizmann stressed that the collective claim of the Jewish people as a whole will be used for the rebuilding of Palestine as a Jewish national homeland. The United States and England did not want to get involved, and demanded that Israel deal directly with West Germany. The United States government replied that America could not impose on the government of the German Federal Republic an obligation to pay reparations to Israel. In order to obtain sorely needed funds for the nation-building efforts, Israeli leaders had to respect the wishes of the Western powers and negotiate with West Germany directly. According to George Lavy, author of Germany and Israel: Moral Debt and National Interest, the reason that the United States did not help Israel get money from Germany was because the government was far less concerned about the former enemy than about a possible threat from a new one, the Communist bloc. America did not want to give West Germany a reason to ally with Communism. Israeli leaders understood that if they wanted to receive reparations to help the country, they would need to start negotiations with West Germany.
The Israeli government had a difficult time convincing Israeli citizens that they should ask for reparations from West Germany for the aftermath of the Holocaust. Every third Israeli had personally experienced the horrors of Nazism. Many Israeli citizens did not want to negotiate with West Germany because they felt negotiations with Germany were morally wrong. Joseph Sprinzak, President of Israeli Parliament, strongly opposed money from West Germany because the honor of the Jewish people precluded any acceptance of restitution from Germany even if it were voluntary and spontaneously offered. Jews outside of Israel, such as Dr. Joseph B. Schectman of New York, led Jews in the Diaspora against negotiations with West Germany because he felt Israel should not accept blood money in compensation for the six million who died in the Holocaust. Many Jews from Israel and the United States shared the view that West Germany could not pay for the lives that the Nazis took.
Political leaders of Israel understood the emotional hatred Jews had toward West Germany, although Israel needed to get money in order to compensate all of the problems the country was having in its early stage. Dr. Nahum Goldmann, the leading negotiator with West Germany, argued that since the Nazis had looted Jewish property, it would be immoral for the Jews not to claim it back. In addition, Dr. Goldmann wanted to reassure the Israeli citizens that, nobody is saying to the Germans: You pay us; we forgive you. We are promising nothing; we are offering nothing. We are simply claiming what is Ours, morally and legally (Balabkins, p.94). The statement received much of support from the Israeli citizens.
The difficulty that faced Israel was how Germany in 1949, suffering from post-WWII economic downfall, was able to make an agreement. Factories, homes and lives were destroyed, and Germany did not have the financial ability to recuperate by 1949. West Germanys first Chancellor, Konrad Adenauer, never the less wanted to take small steps in claiming responsibility for the Holocaust. On November 11, 1949 Chancellor Adenauer made a speech proclaiming that West Germany would give Israel DM 10 million worth of German made goods. Israeli leaders saw the offering as a beginning of communication between Israel and West Germany. Years of talks continued until 1951, when Israel and West Germany came up with the first important deal between the two nations.
In 1951, Israel was facing their hardest economic decline, which was reversed by the Luxembourg Treaty. In the fall of 1951, Israels shortage of foreign currency became alarming. Israel needed to trade with other countries and stop relying only on domestic goods. If Israel was to avoid the danger of isolation by Western Europe, they would need to trade with West Germany.  Therefore, political leaders of Israel and West Germany opened talks addressing how one country could help the other. Lily Gardner Feldman, associate professor of political science, stresses that the establishment of the special relationship between Israel and West Germany was a result of Israels need for economic help and Germanys need for political rehabilitation. Germany and Israel saw each other as uniquely capable of fulfilling these needs which to a large extent were satisfied with the Luxembourg Treaty. Within a decade after the Holocaust, German and Jews, the West Germans and the government of the State of Israel, simultaneously concluded that they could not prosper without each other.
However, many Germans and Jews shared outrage towards the Luxembourg Treaty. Dr. Noah Barou, Vice President of the World Jewish Congress, demanded that the West German government assume a binding obligation to make collective reparation and accept the moral, political, and material responsibility for the deeds of the Third Reich. West Germany, suffering from the post-WWII economy felt that they had had no part in the destruction of European-Jewry and therefore had no blame attached to them. If the government and a minority of the public figures expressed their view that the German people owed a heavy moral debt to the Jews, the majority did not share that view. Hundreds of speeches against the acceptance of collective compensation were made in Israel as well as in the United States. Jews in Israel and the Diaspora were unwilling to accept the fact that they were getting help from Germany.
The Luxembourg Treaty marked the beginning of an official Germany-Israel-Jewish triologue. Chancellor Adenauer took the initiative in the negotiations with Israel and should be credited with a lot of praise. The Chancellor did not have the pressure of the United States, the German population was against the treaty and he risked the economy falling, but he still fought until the Luxembourg Treaty was signed. In an interview between Karl Marx and Chancellor Adenauer on November 11, 1949, Chancellor Adenauer stated that, the State of Israel is the outwardly visible concentration of Jews of all nationalities. Chancellor Adenauer did not want to admit guilt for the Holocaust, but was willing to include in the Luxembourg Treaty that the Federal Republic of Germany pledged to make good, within the limits of its capacity, the material damages suffered by the Jews under the government of the Third Reich. The Luxembourg Treaty was seen as overcoming of the past, a phrase coined by the West Germans to describe the efforts to be made by the German people as a whole to live down. Although most Germans did not accept the notion of collective guilt of the whole German people, they in some way felt responsible.
As a result of hard work by both West Germany and Israels administrations, the Luxembourg Treaty was finally signed on September 10,1952. The treaty would give Israel the needed resources to survive the difficult first years of mass immigration, war, and economic crisis. As Dr. Goldmann stated in 1951, West German payments should make Israel as economically independent as any country can hope to be in our interdependent world. Israel was facing a lot of problems, but the Luxembourg Treaty helped Israel recover and advance. In an interview with a West German newspaper in 1961, Prime Minister Ben Gurion reflected on the need for Israel to work together with West Germany if Israel was going to survive, My views about the present day Germany have not changed. There is no longer a Nazi Germany. On the Israeli side there is a readiness for close and normal relations and full cooperation. Israel was facing a lot of hardship and needed to look to West Germany for help.
The Luxembourg Treaty helped Israel achieve a level of economic stability between 1953 and 1964. The Treaty was divided into four separate agreements, one specifically pertaining to Israel. The Israel agreement, otherwise known as the Shilumim, committed West Germany to pay Israel 3 billion Deutsche Marks (about $800 million) over a twelve year period. The reparations from West Germany were not based on cash. Israel had little need for cash, and West Germany had little means of supplying the cash. Israel needed raw materials to promote production. Therefore, some eighty- percent of the agreement was accepted in shipments of capital goods of all kinds. 
After the agreement was signed, West Germany became one of Israels foremost importers. Twenty-five percent of Israels shipbuilding came from West Germany, nine percent of the electrical industry, eleven percent of the iron and steel and thirteen percent of machinery. Shipments under the agreement made up twelve percent of all annual Israel imports. They helped fuel Israels economy and stimulate future production. In the north, Israels ironworks were built entirely from German shipments. About 2000 individual enterprises, both large and small, received machinery and other equipment. According to Nicholas Balabkins, author of West Germany Reparations to Israel, the most important influence of the agreement was towards Israels field of telecommunication. Balabkins argued that, although ships, electricity generating and transmitting equipment, and railroads considerably improved the operating capacity of the sectors of Israels material infrastructure, the most remarkable qualitative improvement was in the field of telecommunication. Without the Shilumim agreement, the equipment for the telecommunication could never have been financed.
The Luxembourg Treaty also opened doors for outside deals between West Germany and Israel. Between 1953 and 1965, exports and imports outside of the agreement started to emerge. In 1953 exports to Israel from West Germany added up to DM 20.6 million, in 1960 the number climbed to DM 77.8 million, and in 1965 exports rose to DM 276 million. On the other side, imports from Israel to West Germany increased; in 1953 imports were limited at DM .4 million, although in 1960 the imports grew to DM 101.3 million and finally in 1965 the number blossomed to DM 206 million. The rise of Israels importation of goods to West Germany is linked to reparations Israel received from the agreement. The economy in Israel was starting to rise and a lot of the economic upswing was due to the Luxembourg Treaty. In an interview Dr. Goldmann stated that, for Israel, particularly in those difficult financial days, the agreement was a downright salvation. When we remember that in recent years the greater part of Israels deficit in foreign exchange has been covered by Germany under the agreement, we can see what tremendous importance it had for Israel. In addition, the reparations helped stimulate other industries in Israel, such as iron and rubber, which would have been difficult otherwise.
The Hashilumim report offered five alternatives if the Luxembourg Treaty never existed. The first step was to reduce imports, which would lead to additional domestic resources. Then Israel would need to borrow abroad, resulting in foreign investments and unilateral transfers. The Hashilumim report offered good points, but it would have led to a slower economy, which Israel could not afford because of the grave circumstances of the Arab nations. Israel did not have time to try to work out their own problems because danger was always around the corner and Israel needed the resources desperately
A sharp turn in Israels foreign exchange policy occurred in 1957. After the Sinai campaign, few countries, including the United States, were willing to trade with Israel. Israeli leaders at this time felt that Israel needed to stop relying too much on the United States and start looking to other countries. West Germany was one of the countries Israel looked to because West Germany had an army that could help. Shimon Perez, Director General of the Israeli Defense Ministry went to West Germany to negotiate another agreement, later called the secret agreement. In an interview about his reasoning behind negotiations with West Germany, Perez responded that, Germany should contribute in every possible way to Israels safety and we therefore discussed the two questions: the supply of German weapons to Israel and the sale of our weapons to the Federal Armed Forces. Israel was forced to create a new relationship with Germany, one that had some connection to the Holocaust. Israeli leaders, such as Perez, felt that West Germany had the responsibility to protect Israel from Arab nations because of the Holocaust.
The secret agreement was hidden from the public for some time because Israeli leaders did not know how the Israeli citizens would react to Israel selling and buying arms from West Germany. Israel only agreed to buy arms from West Germany because nobody else would sell it to them and because of the serious security issues Israel was facing. The negotiations over the uzi pistol showed that West Germany continued to feel a sense of responsibility towards the Jewish State. By buying arms from Israel, trade between West Germany and the Arab nations suffered. The secret agreement resulted in a new understanding that Israel and West Germany would need to help one another.
The establishment of the State of Israel was a great accomplishment for the Jewish people. After being exiled for 2000 years, Israel was finally a home again for Jews all over the world. It would be nice to say that the Zionist organization and the desire of the Jewish people were enough to create Israel, but realistically, Israel needed outside help. The Holocaust provided resources for Israel, which helped Israel survive for over half a century. Many countries received independence after WWII, although no country succeeded economically as much as Israel. A lot of the success is due to the reparations given by West Germany to Israel and the continuation of trade between the two countries. The Holocaust was not the reason for the establishment of the State of Israel, although reparations from West Germany helped Israel to stay economically viable in times of great struggle.
 Michael Wolffsohn, Eternal Guilt? Forty Years of German-Jewish-Israeli Relations (New York: University Press, 1993), 5.
 Wolffsohn, 6.
 Wolffsohn, 6.
 Wolffsohn, 2-3.
 Wolffsohn, 5.
 Wolffsohn, 7.
 Wolffsohn, 7.
 Wolffsohn, 10.
 Wolffsohn, 1.
 Wolffsohn, 6.
 Wolffsohn, 7.
 Lily Feldman, The Special Relationship Between West Germany and Israel (Boston: George Allen and Unwin, 1984), 66.
 Wolffsohn, 5.
 The Fighter, film shown at Campbell Hall in 2001.
 Nicholas Balabkins, West Germany Reparations to Israel (New Brunswick, New Jersey: Rutgers University Press, 1971), 97 found in M. Sicron, Immigration to Israel, 1948-1953 (Jerusalem: Central Bureau of Statistics, 1957), 35.
 Central Bureau of Statistics, Immigration to Israel, (2002) in: <http://www.us-israel.org/jsource/Immigration/Immigration_to_Israel.html> (15 Mar 2002).
 Balabkins, 96 found in Sicron, 35.
 Balabkins, 97.
 Balabkins, 96 from J.T Shuval, Immigrants on the Threshold (New York: Atherton Press, 1963), 6
 Austerity and Enterprise in Israel, World Today 6 (1950): 6-15.
 Rolf Vogel, ed., The German Path to Israel (London: Oswald Wolff, 1969), 30.
 Balabkins, 98.
 Balabkins, 83.
 Balabkins, 83.
 Balabkins, 88 from a note sent by the United States on July 5, 1951.
 Wolffsohn, Eternal Guilt?, 14.
 George Lavy, Germany and Israel: Moral Debt and National Interest (Portland, Oregon: Frank Class, 1996), 206).
 Balabkins, 92.
 Balabkins, 89.
 J.B Schectman, Case Against Negotiations with Germany, The Jewish Herald 15:19 (1951): 7.
 Nahum Goldmann, Bonn-Israel Claims Settlement Opens Way to Economic Expansion, Israel Economic Horizon, 5:4 (1953), 10.
 Balabkins, 94, taken from Nahum Goldmann, Direct Israel-German Negotiations? Yes, The Zionist Quarterly, 1:3 (1952).
 Balabkins, 85.
 Balabkins, 78.
 Lavy, 5.
 Feldman, 75.
 Feldman, 49.
 Balabkins, 90.
 Lavy, 2.
 Lavy, 206.
 Vogel, 18.
 Balabkins, 3.
 Lavy, 72.
 Lavy, 72-73.
 Goldmann, Bonn-Israel Claims Settlement Opens Way to Economic Expansion.
 Lavy, 88.
 Balabkins, 143 from the Luxemberg Accord found in Israel.
 Vogel, 88.
 Vogel, 89.
 Vogel, 88.
 Vogel, 88.
 Balabkins, 246.
 Vogel, 96, found in a report on the delivery of goods by the Federal Minister for Economic Affairs.
 Vogel, 99 from an assessment of the German-Israeli Reparations Agreement by Nahum Goldmann in 1962.
 Balabkins, 260.
 Inge Deutschkron, Bonn and Jerusalem: The Strange Coalition (Philadelphia: Chilton Book Company, 1970), 264-265.
 Vogel, 126 from an interview with Shimon Perez by Vogel early in 1967 on military co-operation between Israel and the Federal Government.