When submarine construction was finally resumed in 1934, the first priority was for the coastal U-Boats of the TYPE II design. Their limited size however, required a closed-cycle engine which could be used both for surface propulsion as well as submerged, rather than individual diesel for surface propulsion and electric motors for submerged operation.

The most promising development under construction at that time was a Walter Project for a small and fast submersible, with a closed-cycle diesel engine - but soon after, Walter was proposing a close-cycle turbine that showed greater promise.

The first design was for an unarmed 60 ton experimental boat, known by the working name of VB.60 which had rather small dimensions: not quite 69 feet in length & a beam of only 6 1/2 feet. It was planned for a 2,000 SHP turbine driving a single shaft and the boat would have a crew of only three.

This boat was never built, but the planning and engineering that went into this concept proved of tremendous value when larger boats were considered.

While this highly advanced experimental work was a closely guarded secret, some rumors did indeed leak out not the least of which was the incorrect rumor that the TYPE II 'DUGOUT CANOES' were powered by closed-cycle Walter turbines.