462.00R296/4285b: Telegram
The Acting Secretary of State to the Ambassador in France (Edge)
329. In order that the French may have the points clearly before them, we suggest that you furnish the following memorandum:
The American Government is pleased to understand that the French Government is now in general agreement with it on all major questions of principle which have been before the two governments for discussion and concerning which the American Government is an interested party.
1. That France will forego the retention of any payments from Germany for the period of 1 year, and that the principle of continuity of payment of unconditional annuities is recognized while complete relief to Germany is afforded. We understand that this [Page 134] point is now settled by the provision that the payments made by the German Railway Company to the Bank of International Settlement shall be reloaned to the German Railway Company on the following conditions:
Insert here paragraph 3 of our No. 322 of July 2nd.
2. That the French Government suggest that $25,000,000 of the unconditional payments paid into the B. I. S. should be made available for loans to Central European countries, more particularly those whose budgets are affected by the suspension of reparation payments. The American Government did not feel justified in accepting this proposal, but understands that the French Government considers that a Central Bank credit would be an adequate substitute for the original French suggestion. The American Government points out, however, that action by the Central Banks cannot be made the subject of an agreement between governments.
3. That the two Governments differed as to the time over which the suspended payments should be funded, including, of course, both conditional and unconditional reparations. The American Government understands that the French Government is now willing to defer all repayments for 2 years from the end of the year of postponement and thereafter that they be repaid over a period of 10 years in equal annual or semi-annual instalments providing certain other questions are satisfactorily disposed of. This funding period is satisfactory to the American Government.
4. As to the guarantee fund, we understand that the French Government now indicates that it can drop this from the discussion so far as the American Government is concerned.
5. That in so far as deliveries in kind are concerned, the American Government has consistently taken the position that the solution of the problem arising from existing contracts falling due in the year July 1, 1931 to June 30, 1932 should be a matter for later discussion and solution by experts of the different interested powers, the French having already agreed that they will retain nothing during the years of suspension. The solution as worked out should, of course, be within the spirit of the President’s proposal.
It appears, therefore, that on the major question, namely, the principle of continuity of the unconditional payments, the method of affording complete relief to Germany by the reloaning of the sum deposited on account of the unconditional payment with the B. I. S., the principle of complete suspension of all payments for 1 year, and the period of the funding of the suspended payment, the two Governments are in substantial accord. The other questions do not appear to be of such a character as to justify further postponing of final agreement between the two Governments, particularly as they involve difficult technical questions under the Young Plan, to which the [Page 135] United States is not a party. The American Government suggests that they could, with propriety, be left to a committee of experts from the treasuries of the principal interested powers, but that they should be settled within the spirit of the President’s proposal.
The American Government offers a positive form of termination of the negotiations, and that is that the French Government should accept the President’s proposal and refer all technical questions not already agreed upon to a committee, as suggested above, with instructions that they should work them out within the spirit of the President’s proposal.