The intended governing body was called the Allied Control Council. The commanders-in-chief exercised supreme authority in their respective zones and acted in concert on questions affecting the whole country. Berlin, which lay in the Soviet sector, was also divided into four sectors.
The United States, the United Kingdom, and the Soviet Union had agreed at Potsdam to a broad program of decentralization, treating Germany as a single economic unit with some central administrative departments. These plans broke down in 1948 with the emergence of the Cold War. The Western powers were concerned about the deterioating economic situation in their zones; the American Marshall Plan economic aid was extended to Western Germany and a currency reform introduced the Deutsche Mark and halted rampant inflation there. The Soviets had not agreed to this currency reform and withdrew in March 1948 from the four-power governing bodies and initiated the Berlin blockade in June 1948, blocking all ground transport routes between the FRG and Berlin. The western allies replied with a continuous airlift of supplies to the western half of the city. The Soviets ended the blockade after 15 months.
In 1949, the Western occupied zones were established as the Federal Republic of Germany (FRG, Bundesrepublik Deutschland, or West Germany). The Soviet Zone became the German Democratic Republic (GDR, Deutsche Demokratische Republik, or East Germany). Also in 1949, on September 6, Allied military authorities relinquished control of former Nazi Germany assets back to German control. his division endured as a troubled cooperation until a Soviet walkout in Berlin in 1948 which fractured occupied Germany and initiated the Cold War.
See also History of Germany since 1945.