462.00R296A/61

Memorandum by the Secretary of State of a Conversation With the French Ambassador (Claudel)

The French Ambassador sought this interview and when he arrived he produced a memorandum, which is attached hereto, which he said was a translation of a message he had received from his own government and that he left it not as a note or as a memorandum but simply as a message, for my own personal and confidential use, to explain the situation in which his government was. He told me that it was a copy of a message which his government was sending to the governments of Great Britain, Belgium and Italy, (being the other creditor countries like France) in order that there might be established a unity of viewpoint on this question of reparations and debts while the Basle Committee was meeting. At the same time he told me that his Financial Attaché, Mr. Monick, would deliver to Mr. Mills at the Treasury another copy of the same paper for the same purpose this afternoon. I asked him whether I should read the paper then, and he said yes. I then read it and when I got through I asked him whether the last paragraph on the fourth page50 referred to the provisions in the Young Plan under which the creditor nations are entitled to retain a certain percentage of any concessions which they may receive from the United States as their creditor and pass on the remaining percentage to Germany. He said, “Yes, we waive that provision for the retention.” He then said to me that while Mr. Laval was under political limitations it was his own (the Ambassador’s) impression that this message was intended to be conciliatory in reference to the questions which I had raised in my [Page 355] talk with him last week. I then pointed to the paragraph at the top of page 351 and said that I understood that this was an admission that the Special Committee could examine into and report on the entire economic and financial field affecting Germany, but that of course all action on its report was a matter for others. He said, yes; that that was his interpretation and this was intended to remove what he thought was my principal trouble last week. I said that it was not my only principal trouble but one of my principal troubles. The Ambassador then told me that his Financial Attaché was going to sail next week for France in order to explain to them the situation that he learned here in many conferences not only with the Treasury but with bankers in New York. He said, “While I am not authorized to say so, I am under the impression that this note is conciliatory and the French Government will go further.” He said, “That is only my personal opinion, but I think the real situation is that we are approaching the ‘last ditch’ and unless we wish to lose all that we have got we shall have to make very considerable sacrifices.”

H[enry] L. S[timson]
[Annex]

The French Ambassador ( Claudel ) to the Secretary of State

At the moment when the German Government has just addressed to the Bank of International Settlements a request for a meeting of the Consultative Committee provided for in the Young plan, the French Government thinks it advisable to explain its point of view on the reparations question to the other creditors of Germany, in order to establish a community of view as complete as possible. Instructions to that effect have been sent to the French Ambassadors in London, Brussels and Borne.

The French viewpoint is as follows:—

1°—In order to avoid any misunderstanding, it should be recalled that the memorandum forwarded by the German Government to the Bank of International Settlements, although submitted in advance to the French Government, was not drafted in agreement with the latter, and the French Government is not bound thereby.

The only purpose of the modifications which took place upon the request of the French Government was to avoid the obligation, in which France might have found herself, to make reservations concerning certain points contained in the memorandum. Therefore, [Page 356] she keeps her full liberty of action and of agreement with the other creditor nations.

2°—Germany remains bound by the obligations which she willingly and solemnly contracted at The Hague.

The exceptional procedure suggested last June by President Hoover has not altered the validity of previous agreements. When the German Government made use of the procedure of the Young plan in order to obtain, at the expiration of the Hoover moratorium, the reduction which circumstances may render necessary, it took an initiative which, in the very interest of a bona fide debtor, should prevent any misunderstanding as to the validity of the plan.

3°—In its request, the German Government insists upon the fact that the facilities of payment provided by the Young plan do not meet any longer the present situation.

Although observing that Germany is largely responsible for her present financial difficulties, the French Government is ready to admit that the world economic crisis, the amplitude and acuteness of which are beyond any prevision, may necessitate a temporary revision of the Young Plan together with an agreement concerning intergovernmental debts. Such a revision should be limited to the period of the economic depression.

The inquiry of the special Consultative Committee could, as the German Government requests, deal with the whole economic and financial situation of Germany, taking into account all the elements which affect such situation, the question of the private debts of Germany being one of those factors.

The problem raised by this last question should however remain distinct from the problem of reparations and its solution belongs to another committee. Although they must be dealt with along parallel lines, these two questions should not be confused.

By commercializing the unconditional part of the reparations annuities, the Young Plan and the Hague agreements have assimilated that part of the annuity to those external debts of the Reich which have the character of a private liability. This is why the French Government could not accept that priority be given to private debts over reparations.

5°—In the opinion of the French Government, the problem to be settled is of a more general character. The point is to know whether in case the German Government agrees to respect its obligations within the measure compatible with its possibilities, solutions can be found which will restore the situation of the Reich and allow normal economic and financial recovery not only in Germany, but also in all interested countries.

[Page 357]

The Committee should recommend by way of general conclusions the measures to be taken by the Reich in order to re-establish its credit, the interested Governments being responsible as to the choice of the decisions to be arrived at, for the application of these measures.

For that purpose, the French Government favours the meeting of an intergovernmental conference.

6°—When this conference convenes, the French Government firmly intends to keep the balance due it under the provisions of the Young Plan for the reparation of war destructions in France. However, the French Government is in no way opposed to finding at the convenient time and for a temporary period modalities of payment which would be necessary to reconcile the various interests to be considered. These modalities could be found by way of deliveries in kind or by way of commercial loans that would be granted the German economy through a part of the unconditional annuity due during the period of depression.

7°—According to the text of the memorandum of the creditor powers which is annexed to the Young Plan, the revision of the German annuities is possible only in case of inter-allied debts being reduced, said reduction being to the benefit of the Reich for a part, and of the creditor nations for another part.

The French Government is ready to grant Germany the totality of the bonification to which it would be entitled according to the Young Plan if the other powers are ready to make the same sacrifice.

  1. i. e., the last paragraph of the memorandum.
  2. Post, p. 356, paragraph beginning “The inquiry of the special Consultative Committee …”