800.51 W 89France/113: Telegram
The Ambassador in France (Herrick) to the Secretary of State
268. Your telegram No. 184, May 5, 1 p.m. I had already had some informal conversations with Premier, Painlevé, Minister of Finance Caillaux, M. Loucheur,36 and with M. Franklin-Bouillon,36 who came at his own request on May 5 to talk matter over with me. We had talked together just before he left for Angora, and he had mentioned the difference in the rate of exchange between time when these loans were contracted and present, and that it seemed equitable some adjustment should be made so that France would not have to pay in francs more than she would have to pay were exchange at par. I had merely listened, and not until Painlevé also raised this point did I see that Franklin-Bouillon was seriously presenting it as an argument. I very briefly explained its fallacy to Painlevé, and when Franklin-Bouillon brought the idea up again on May 5 I pointed out its absurdity as an argument after the recent issue of notes when no guarantee existed that there would not be a further emission; I think I succeeded in dispelling any idea on his part that there was trading basis on this point.
Yesterday Franklin-Bouillon again asked to see me, in the meantime having taken my advice to consult some of the great French bankers. He said that first thing to do, in his opinion, was to agree on certain basic principles which he set forth as follows: (1) Great Britain to be paid pari passu with the United States; (2) France to be granted a 10-year moratorium; (3) debt to be extinguished in 80 years.
He had expressed these views to Caillaux; the latter had agreed; and Franklin-Bouillon said that he thought we would soon receive an official proposal along those lines. I said that I was glad to hear it, as I knew that my Government was expecting some overtures from France; that as far as terms were concerned, all I could say was that neither of the proposals made by M. Clémentel was thought by the Debt Commission to offer a basis for negotiation, and that to be successful a proposition along lines of Secretary Mellon’s statement (of which I handed him a copy) should be made.
At first he was somewhat moved, and said it was hopeless were we to stipulate the British terms and immediate payments; that it was impossible for them to pay anything until restoration of the devastated [Page 153] regions had been completed, and that this would take about 4 years. I referred to the qualifying words in Secretary Mellon’s statement, and said that although I had been given no interpretation of their exact meaning, they did not, in my opinion, seem to exclude any of the principles which he had set forth; as to payments on the principal, France was already paying 20 millions yearly, and that British agreement started with 23 millions, which was no great difference. He is going to discuss matter with the Government this morning and will come to see me this afternoon.
For my own personal information I should appreciate an expression of Secretary Mellon’s view on principles set forth by Franklin-Bouillon. I do not mean by this to ask for statement of what Debt Commission will be willing to accept, but only to ascertain principal lines on which I must work to evoke from French Government a proposal which Debt Commission would be willing to consider as a basis for beginning of negotiations.
Repeated to American Embassy, London.