“1. Report by the C-in-C Navy concerning displacement of D. and E. (defensive weapons).
“Fuehrer’s instructions: No mention must be made of a displacement of 25-26,000 tons, but only of improved 10,000-ton (ships). Also, the speed over 26 nautical miles may be stated.
“2. C-in-C Navy expresses the opinion that later on the Fleet must anyhow be developed to oppose England, that therefore from 1936 onwards, the large ships must be armed with 35 c.m. guns (Like the King George Class).
“3. The Fuehrer demands to keep the construction of the U-Boats completely secret. Plebiscite also in consideration of the Saar.” (C-189)
In order to continue the increase in navy strength, as planned, more funds were needed than the navy had available. Hitler therefore proposed to put funds of the Labor Front at the disposal of the navy. This appears from another Raeder memorandum of a conversation between Raeder with Hitler, on 2 November 1934 (C-190). This report, again, is not signed, but it was found in Raeder’s personal file and seems clearly his memorandum. It is headed: “Conversation with the Fuehrer on 2.11.34 at the time of the announcement by the Commanding Officer of the “Emden”. It reads:
“1. When I mentioned that the total funds to be made available for the armed forces for 1935 would presumably represent only a fraction of the required sum, and that therefore it was possible that the navy might be hindered in its plans, he replied that he did not think the funds would be greatly decreased. He considered it necessary that the navy be speedily increased by 1938 with the deadlines mentioned. In case of need, he will get Dr. Ley to put 120-150 million from the Labor Front at the disposal of the navy, as the money would still benefit the workers. Later in a conversation with Minister Goering and myself, he went on to say that he considered it vital that the navy be increased as planned, as no war could be carried on if the navy was not able to safeguard the ore imports from Scandinavia.
“2. Then, when I mentioned that it would be desirable to have six U-Boats assembled at the time of the critical situation in the first quarter of 1935, he stated that he would keep this point in mind, and tell me when the situation demanded that the assembling should commence.” (C-190)
Then there is an asterisk and a note at the bottom:
“The order was not sent out. The first boats were launched in the middle of June 35 according to plan.” (C-190)
The development of the armament industry by the use of foreign markets was a program encouraged by the navy, so that this industry would be able to supply the requirements of the navy in case of need. A directive of Raeder, dated 31 January 1933, and classified “Secret Commando Matter,” requires German industry to support the armament of the navy (C-29). It provides: