462.00R296/2882½: Telegram
The Secretary of State to the Chargé in France (Armour)
148. Your No. 203, Reparation 236, May 10, 9 a.m. Department is disposed to concur in your judgment as to whether you should appear before Experts Committee. If Committee adjourns without allocating payments to the several Governments, it does not appear to be necessary to state at present time what this Government is willing to accept. You are authorized to tell Young now, however, that, in event experts reach point where they are definitely prepared to allocate the annuity among the several creditors of Germany, you desire to appear before Committee and inform them regarding the position of this Government. You are now authorized to tell Young what that position will be.
As we understand plan now under consideration, it proposes reduction of standard Dawes annuity to an average annuity of 1,988,000,000 gold marks per annum; we shall be glad to recommend acceptance by the United States of its proportionate share of that reduction. This Government is now receiving on account of mixed claims and Army costs 100 million gold marks per annum, which is 4 percent of present standard Dawes annuity. The same percentage of the new proposed average annuity would be approximately 79 million gold marks. We should be disposed, therefore, to recommend to Congress that an annuity of 79 million gold marks over a term of 37 years be accepted in full discharge of Germany’s obligations to the United States on the mixed claims and Army costs accounts. This would enable us, by allocation of 50 million gold marks to mixed claims account, to discharge that obligation in full in 37 years on basis of Settlement of War Claims Act of 1928.
By applying balance to Army costs account we shall be able to discharge 90 percent of those costs in 37 years, making allowance of 3½-percent interest on deferred payments.
[Page 1069]A settlement on foregoing basis would mean that this Government is willing to make following sacrifices:
- 1.
- To cut claim for Army costs to percentage already received by Allied nations for such costs;
- 2.
- To defer payment in full of these costs for period of 22 years beyond time at which they would be terminated under present arrangement. This would mean postponement in payment of approximately one-half the principal of such costs as now remain unpaid.
- 3.
- To accept interest at only 3½ percent on deferred payments during period of delay.
In order to measure fairly these sacrifices, let me remind you that in agreement of January 14, 1925, this Government has already made very substantial concession in amount of its claim for Army costs; that these costs represent the expenses of an occupation of the Rhineland in which this Government was not interested for its own sake, but was acting on the requests of its associates; that under the Treaty of Versailles these Army costs were expressly given priority; and that corresponding costs of occupation by the Associated Powers have already been paid. It should be pointed out further that such a settlement would result in a substantial concession on mixed claims obligations also, as it would be based on payments as set up in the Act for the Settlement of War Claims (1928), whereas Germany’s treaty obligations to this Government run into much higher figures.
You should make it quite clear that this Government would not be willing to extend payments beyond 37 years on either the mixed claims or the Army costs account. You should also make clear to Young that it will be necessary to obtain congressional authorization for any such settlement, as it necessarily modifies Germany’s treaty obligations.
We are not yet in position to inform either you or Young whether we would agree to place this annuity or any part of it in postponable class until you have cabled exact provisions regarding postponement.
We are much concerned, furthermore, as we have already pointed out in previous cables, lest methods which Experts Committee evidently have used in calculating amount of proposed standard annuities be allowed to appear in Committee’s final report. In making those calculations, the representatives of the creditor nations have evidently used, to large extent, the obligations of their respective war debts as measure of their proposed settlement with Germany. To that method we have already indicated our objections. It is only necessary to say now that we should be unwilling to subscribe to settlement which would recognize a direct relationship between Germany’s reparation payments and the Allied payments to the United States on account of war debts; and we should be unwilling to accept any revised annuities if, after examining completed plan, it should appear to our judgment [Page 1070] that by acceptance we would give sanction to such a relationship. Our assumption is, in all this, of course, that the 1,988,000,000 gold marks is total annuity, including reparations in kind. This last paragraph is not to be stated to Committee, as it is intended for your information and for that of Young only.