462.00R296A/45

The Consul at Basel (Cochran) to the Secretary of State

Sir: I have the honor to transmit herewith five copies of a press communiqué, dated November 20, 1931,47 in which the B. I. S. announced the steps that it had taken, following the receipt of the German request for the convocation of the Special Advisory Committee.

There are also attached five copies each of the English translations, made in the B. I. S., of the note under which the Memorandum was transmitted, and of the Memorandum itself, the official text whereof was in German.

Respectfully yours,

H. Merle Cochran
[Enclosure—Translation]

The Finance Minister of the Reich (Dietrich) to the President of the Bank for International Settlements

Mr. President: In the name of the German Government I have the honour to transmit to the Bank for International Settlements in Basle a Memorandum, in which the German Government applies for the convocation of the Special Advisory Committee for which provision is made in the New Plan.

I have [etc.]

H. Dietrich
[Page 350]
[Subenclosure—Translation]

Memorandum

The German Government hereby applies for the convocation by the Bank for International Settlements in Basle of the Special Advisory Committee for which provision is made in the New Plan of the Hague Agreement of January 20, 1930. In regard to the cause and purpose of this application the German Government has the honour to make the following statement:—

As early as the beginning of June of this year the German Government became convinced that, in spite of the most severe retrenchment in Government expenditure and repeated increases in the burden of taxation, it would be incapable of continuing the payment of the annuities under the New Plan. The economic and financial situation of Germany was at the time already most gravely threatened. The German Government had accordingly decided to draw the necessary conclusions from the situation.

This decision was followed on June 21st by the declaration of the President of the United States of America, proposing the postponement during one year of all payments on intergovernmental debts, reparations and relief debts. The purpose of the far-sighted initiative thus taken was, in the words of the declaration, to assist in the re-establishment of confidence, thus forwarding political peace and economic stability in the world; the debtor countries were to be given time to recover their national prosperity. The hope that this proposal would bring about a decisive turn in the world crisis was not realized. In consequence of subsequent events, the Hoover holiday year was not in itself sufficient to overcome the danger of collapse. Accordingly, the British Government in July took the initiative of summoning the London Conference.48 The recommendations of the Conference led to the prolongation of the rediscount credit accorded to the Reichsbank, the Basle Standstill Agreement and the Report of the Basle Committee of Experts set up by the Bank for International Settlements.

Important as all these measures were for immediate relief, they were essentially merely preparatory in character. The London Conference itself in its closing declaration stated that the measures recommended were only intended as a first step which would form a basis for more permanent action to follow. Accordingly, the experts who collaborated in the execution of the London recommendations constantly had in mind the provisional character of all these measures. The Standstill Agreement states, for example, that the contracting parties have approved the settlement therein provided “pending a [Page 351] more permanent solution of the German short term indebtedness problem”. Similarly the Report of the Basle Committee of Experts closes with an urgent appeal to the Governments concerned to “lose no time in taking the necessary measures for bringing about such conditions as will allow financial operations to bring to Germany—and thereby to the world—sorely needed assistance”.

In the intervening months the economic and financial situation of Germany has become exceedingly critical. The characteristic facts of this situation are universally known. In other countries also the pressure of the crisis has had a most serious effect. The world has come to realize in an increasing measure, the inter-relationship of the various financial problems to which the situation has given rise, and the necessity for immediate action for their solution as a whole. In considering the most suitable method of handling this problem the view has gained ground that the Special Advisory Committee should now be convened. As under the terms of the New Plan the convocation of the Special Advisory Committee is dependent upon an application by the German Government, the German Government has determined to make this application, in order to do all in its power to pave the way for comprehensive and joint measures on the part of the Governments.

In accordance with the New Plan the application requires a declaration by the German Government to the effect that “they have come to the conclusion in good faith that Germany’s exchange and economic life may be seriously endangered by the transfer in part or in full of the postponable portion of the annuities”. In making this declaration, the German Government must expressly state that such a declaration does not do justice to the present situation. Since the New Plan was framed, the economic and financial situation in the world, and particularly in Germany, has been fundamentally altered by a crisis without parallel. As the New Plan requires the Committee to examine the situation from all points of view, the Special Advisory Committee must investigate the problem in its entirety by taking into consideration all its factors, with special reference to the circumstance that the question of Germany’s private indebtedness must duly form the subject of a new settlement before the end of the month of February next, by means of an agreement to be reached between foreign creditors and German debtors.

Present conditions being such that the necessary measures require to be taken with the utmost dispatch, the German Government proposes that the Special Advisory Committee should meet immediately and that it should complete its work as quickly as possible, in order that a Conference of those Governments which are competent to take the decisions then to be reached may thereupon at once be held.

  1. Not printed.
  2. For correspondence concerning the London Conference of Ministers, held July 20–23, see pp. 263264, 298313 and 317321.