Paris Peace Conf. 180.03401/54

CF–54

Notes of a Meeting Held at President Wilson’s House in the Place des Etats-Unis, Paris, on Monday, June 9, 1919, at 11:45 a.m.

  • Present
    • United States of America
      • President Wilson.
    • British Empire
      • The Rt. Hon. D. Lloyd George, M. P.
    • France
      • M. Clemenceau.
    • Italy
      • M. Orlando.
Sir Maurice Hankey, K. C. B. } Secretaries.
Count Alarovandi.
Prof. P. J. Mantoux.—Interpreter.

1. Mr. Lloyd George said that he had received a report from Mr. Headlam-Morley to the effect that the Committee which was working out the details of the plebiscite for Upper Silesia had arrived at an impasse on the question of the time within which the plebiscite should be taken after the signature of peace. Consequently, he had asked that this Committee might attend to receive further instructions. Since then, however, he had seen Mr. Headlam-Morley and had suggested to him that the Committee should work out the conditions of the plebiscite, leaving the period within which it should be held blank to be filled in by the Council. Eastern Frontier of Germany: Plebiscite in Eastern Silesia

President Wilson said that the conditions of the plebiscite would, to some extent, depend upon the time.

Mr. Lloyd George said that he had suggested that the Committee should work it out on alternative hypotheses. He had told Mr. Headlam-Morley that it was not the business of the Committee to discuss policy but merely to work out the details, leaving the policy to the Council. In reply to President Wilson, he said that there were certain other difficulties, for example, some members of the Committee wished the clergy to be removed from the area during the time preceding the plebiscite, which was obviously impossible. He was inclined to leave all these details to the Commission to be set up by the League of Nations for the purpose of conducting the plebiscite.

[Page 260]

(The above views were accepted, and, at the request of the Council, President Wilson retired to the next room to meet the Committee and give them verbally the Council’s instructions.)

2. M. Orlando said he had information that Klagenfurt had now been occupied by the Jugo-Slavs. Carinthia: The Proposed Armistice

3. Sir Maurice Hankey reported that M. Clemenceau had that morning handed him a fresh proposal on the part of the Delegation of the Serbs, Croats and Slovenes, in regard to the Klagenfurt question. He had at once sent it to be translated. Klagenfurt

4. Mr. Lloyd George reported that he had received a letter from the Esthonian Delegation, asking that action might be taken to bring to an end the German activities which were affecting their operations against Petrograd. Balkan [Baltic] Provinces

(It was agreed that the letter should be communicated to the Military Representatives at Versailles, for their consideration. Sir Maurice Hankey undertook to hand it to Major Caccia, the British Secretary.)

5. M. Clemenceau said that it was a good thing that the telegram had been sent to the Hungarian Government insisting on their desisting from attacks on the Czecho-Slovaks.1 He now had information that the invitation to the Hungarian Government to send delegates to Paris to make peace had at last been received and he expected to have a definite reply on the following day. Situation in Czecho-Slovakia Arising: From the Advance of the Hungarian Red Army

President Wilson suggested that the representatives of the Czecho-Slovak and Roumanian Governments in Paris should be sent for by the Council, who, without asking their advice, should say: “If you do not observe the conditions on which a final settlement is alone possible and which we have communicated to you”—which, in the case of the Roumanians, would be the armistice line—”we will withdraw every sort of support.”

Mr. Lloyd George suggested that there ought to be someone on the spot. It might be General Franchet d’Esperey, or possibly some other person might be found to summon all parties and make them agree on the lines on which fighting should cease. He had very little doubt that the Hungarians would withdraw from Czechoslovakia if the Roumanians could be made to withdraw from Hungary.

President Wilson asked if a position had not been reached where the Roumanians ought to be allowed to take no further part in the settlement. If they were allowed to advance, they would never evacuate the territory they had occupied.

[Page 261]

Mr. Lloyd George hoped that this was no reflection on the Military Representatives. They had only been asked to report on the situation from a military point of view, and General Sackville-West had told him he had not felt at liberty to discuss the political consequences of their advice.

President Wilson said that no such reflections were intended. General Bliss said the military advice was good, but drew attention to the political risks.

M. Clemenceau said the political risks had already been taken when the telegram was sent to the Hungarian Government.

Mr. Lloyd George said that, by the following day, M. Clemenceau and he himself could ascertain how much war material was being sent to Roumania. General Sir Henry Wilson had informed him that a good deal of material was on its way and he had asked him to stop its delivery. He suggested that a report should also be obtained from the Supreme Economic Council.

(It was agreed:—

1.
That Mr. Lloyd George should ascertain the amount of British war material on its way to Roumania which could be stopped.
2.
That M. Clemenceau should obtain the same information as regards French war material. (He instructed M. Mantoux to initiate the necessary enquiries.)
3.
That Sir Maurice Hankey should obtain the same information from the Supreme Economic Council.)

6. President Wilson read a letter he had received from the Commission on Reparation, explaining the differences of opinion that had arisen. (Appendix I.)

(Sir Maurice Hankey was instructed to circulate this document immediately.) Reparation in the German Treaty

Mr. Lloyd George said that there was a good deal to be said, in his opinion, for putting Germany in a position to re-start her industries again. Unless she was given raw material and the necessary credits, it would be impossible for her to pay reparation. But, on the question of fixing the amount, he was not in agreement with the United States experts. He had turned the matter over in his mind again and again, in order to try and meet their views. The conclusion he had come to was that if figures were given now they would frighten rather than re-assure the Germans. Any figure that would not frighten them would be below the figure with which he and M. Clemenceau could face their peoples in the present state of public opinion. He did not know how Italy felt towards it but he had no doubt about Great Britain. Mr. Bonar Law had been in Paris during the last day or two and was better in touch with British public opinion than he was himself. Mr. Bonar Law was also inclined to take the same [Page 262]view as the United States delegates, but the moment any possible figure was mentioned he began to shrink from it. The statement of a figure at the present time would also raise inconvenient questions between the Allies. France could not accept any figure at the present time which did not provide a very large sum for restoration. His own opinion was that the present French estimate was a good deal higher than the actual cost would be. He thought that France could take the risk of a lower figure, but of course they had not yet been able to make any detailed survey. In three or four months a preliminary survey would have been made, and it would be easier for France to state a figure. Another point was that he did not see how any member of the Council could apply his mind to the considerations involved in fixing a figure. They were faced with an infinity of subjects; for example, within the last day or two they had been considering the making of an armistice between the Hungarians and Czechs and between the Jugo-Slavs and Austrians in the Klagenfurt region and Polish questions. The topics were innumerable. To ask them now to fix a figure was like asking a man in the maelstrom of Niagara to fix the price of a horse. It was impossible, in these circumstances, for him to work out a figure which was fair to the British, French and Germans. He could not honestly say that it was possible for him to give his mind properly to this at the present moment and he required more time. Only this morning he had received information to the effect that the Germans were saying just the same thing. They really did not know what they could pay and would prefer to have more time to consider it. He would have thought that the proposal to allow three or, as Mr. Loucheur urged, four months for the Germans to make an offer of a figure would be preferable. This would enable an examination to be made of the conditions and a survey to be carried out and for the estimates and methods to be worked out in detail. He hoped, therefore, that four months would be allowed in which the experts of all the Governments concerned, including the Germans, would be able to meet. The matter could not be settled in an hour or two’s talk with German experts at Versailles, but if time were allowed it should be possible. M. Loucheur, who was a particularly able business man, said frankly that he did not know what would be a fair sum. He was, however, with the United States experts in their desire to give a guarantee to Germany that she should get raw materials.

President Wilson said his position was that he was perfectly willing to stand by the Treaty provided that it were explained to the Germans, but he had understood that the British and French Governments were desirous of making some concessions as a possible inducement to the Germans to sign. If we must make concessions then [Page 263]he was in favour of perfectly definite concessions. He was not very interested in the details because personally he was prepared to sign the Treaty provided it was understood by the Germans. If, however, concessions were to be made the difficulties must not be allowed to stand in the way. He admitted the full force of what Mr. Lloyd George had said, namely that no-one knew enough to enable the bill to be drawn up, or the capacity of Germany to pay, to be estimated. Consequently, he was prepared to admit that any sum fixed now would be quite arbitrary and we should not know whether it covered the claims or whether it was within Germany’s capacity to pay. He understood, however, that Germany was supposed to want a fixed sum. From his point of view the sole consideration was as to whether it would provide a serviceable concession or not. He was warned, however, by his Economic experts that if Peace was not signed very soon most serious results would follow throughout the world, involving not only the enemy but all States. Commerce could not resume until the present Treaty was signed and settled. After that it was necessary to steady finance and the only way to do this was by establishing some scheme of credit. He wished to say most solemnly that if enough liquid assets were not left to Germany together with a gold basis, Germany would not be able to start her trade again, or to make reparations. His own country was ready to provide large sums for the purpose of re-establishing credit. But Congress would not vote a dollar under existing circumstances and he could not ask the United States bankers to give credits if Germany had no assets. Bankers had not got the taxpayers behind them as Congress had and consequently they must know what Germany’s assets were. The United States War Corporation [War Finance Corporation] was prohibited by law from granting credits unless they were covered by assets. Hence, if commerce was to begin again, steps must be taken to re-establish credit and unless some credit could be supplied for Germany’s use, the Allies would have to do without reparation.

Mr. Lloyd George suggested that the question between establishing an immediate fixed sum for Germany to pay, and allowing four months within which the sum was to be fixed, could be discussed between experts on both sides. For example, before long Germany would want raw cotton, but until the Treaty was signed it was impossible to discuss the conditions with her.

President Wilson said that he had not the material wherewith to justify any particular sum.

Mr. Lloyd George said that neither had he.

President Wilson said that the only argument in favour of fixing a sum was to provide a basis for credit. Supposing, for example, the sum were fixed at twenty-five billion dollars, the financial world [Page 264]could then form a judgment. If it was thought that Germany could pay this sum, many would be willing to lend to her on the strength of the bonds to be issued under the reparation scheme in the Treaty. Otherwise, money would not be lent. To find some way of making the bond issue the basis for credit, was the whole question.

M. Clemenceau said he agreed in this last statement.

Mr. Lloyd George thought it was impossible to fix a sum before Peace was signed.

President Wilson then read a suggested reply on the subject of reparation which had been prepared by the United States Delegation. (Appendix II.) He undertook to have it reproduced at once and to circulate it to the Council.

Mr. Lloyd George said he liked “the crust and the seasoning but not the meat”. He did not think it was necessary to go as far as was proposed. According to his information this was not necessary. He would like President Wilson to see the man who had given him this information.

President Wilson said that the difficulty was that the information was so conflicting.

Mr. Lloyd George said it was necessary to act on some information.

President Wilson said he did not agree in this. At the meeting of the United States Delegation it had been proposed that all the Commissions should be instructed to consider the concessions that could be made to Germany. He had replied that our objects should be to show the reasonableness of the Treaty and to make it workable. That was what he had in view in the present discussion.

Mr. Lloyd George said that, as a former lawyer, before a litigation he would always try and find out what concession it was necessary to make in order to secure an agreement. This was his present attitude, and according to his information it was not necessary to make so large a concession as was proposed in the letter of the United States Delegation.

President Wilson agreed that for the moment it would be desirable to leave out fixing the sum to be paid.

Mr. Lloyd George agreed that this was important. But he thought it was unnecessary to make the concessions in regard to shipping. He was prepared to meet the Germans in regard to the gold assets.

The question was adjourned until the following day.

7. M. Orlando said that his reply was ready and he could discuss the matter at once. Italian claims

President Wilson suggested that M. Orlando should forward his reply in writing in order that the Council might consider it.

[Page 265]

M. Orlando agreed to do this.

8. M. Clemenceau said that a repetition of the telegram containing Admiral Koltchak’s reply had been asked for.

(It was agreed that nothing should be published until the repetition had been received, as there were various important points still obscure, particularly the passage in which reference was made to the regime in force in Russia in February 1917. It was not clear as to whether the possibility of a return to this regime was or was not contemplated.) Russian Policy: Koltchak’s Reply

Appendix I to CF–54

M–252

Report of the Reparation Commission to the Supreme Council

Mr. President: As directed in your letter dated 4th of June, 1919, the Committee met on June 6 and 7 to draft a reply to the German comments on the reparation clauses contained in the letter of Count Brockdorff-Rantzau dated 29th May, 1919.2

They examined particularly the Three principal objections:

That the constitution and Powers of the Reparation Commission were objectionable;
That the clauses named no fixed sum as the amount of liability of Germany;
That they took objections to the deliveries of certain articles and to the cost of the army of occupation.

As to (1°) in pointing out that the comments on the Reparation Commission were founded on misconceptions of the meaning and effect of the clauses, the Delegations were unanimous.

As to (2°) and (3°)

I

The Delegations of France and Great Britain were prepared to concur in a reply to the following effect:

(1)
That it was impossible to fix the amount of the liability of Germany now, because the damage done was so vast, so various and so recent that it could not yet be calculated correctly; that in matters of such magnitude errors would either gravely prejudice the sufferers or result in serious over-charge against Germany; and they considered that they had no right to resort to mere conjectures in a matter of such vast importance.
(2)
That the Allied and Associated Powers, through the Commission, would in their own interest be willing to consider any bona fide proposals made by Germany, whereby the amount might be more readily fixed or agreed, or any other useful purpose might be served [Page 266]and that it was competent to Germany to present arguments, evidence or proposals by nominating a commission or otherwise as she may think fit;
(3°)
Further, as to the financial capacity of Germany, at present little more can be done than to hazard a hypothesis. Like all the other belligerent Powers, Germany is still living under an exceptional regime. The rate and extent of her recovery cannot at present be forecasted, but the period mentioned in the Treaty was chosen in order to give time for the national economy to adapt itself to the new situation. The substitution of a sum fixed now by an arbitrary hypothesis for the system established by the treaty after very full and arduous discussion appears to be very undesirable, and to abandon without any sufficient advantage a plan which secured to Germany the opportunity and the right to be heard and to have decision taken in accordance with equity.

The Delegation of the United States declined to concur in such a reply. The proposed American reply does not contemplate any change in the text of the conditions of peace. It should take the form of a statement of intentions of the Allied and Associated Governments with reference to directing the activities of the Commission and indicate the spirit which animates these Governments. The American Delegation believes that a fixed sum should be named now. The U. S. proposal contemplates a reply containing a finding that the total damage under the categories will approximate 120 milliards of marks gold, which, for practical reasons, is accepted as a maximum of Germany’s liability. The American delegates have been convinced, not by German arguments, but by current developments, of the soundness of their original view that, in the interest of the Allies, Germany’s reparation liability should be limited now to a definite amount which there is reason to believe Germany can pay. Only in this way can there be secured what the world instantly requires, a new basis of credit. Only under such conditions is it reasonable to expect that Germany will put forward those efforts which are indispensable to create a value behind what are otherwise paper obligations.

II

The American Delegation believes that definite assurances should be given with reference to (a) the retention by Germany of certain amounts of working capital in the form of ships, gold, and investments abroad; (b) the operation of the coal and chemical options, and the possibility of Germany securing minette ore; (c) the intentions of the Allied and Associated Governments as to the cost of the army of occupation which Germany is to support. The American Delegation expresses its view that vagueness on these subjects will react to produce the contrary impression to what may be desired. Unless, therefore, these subjects are susceptible of specific treatment, they question whether they should be alluded to at all.

[Page 267]

On the other hand the Delegations of Great Britain and France oppose themselves to these concessions, not only upon grounds connected with the terms of the proposals themselves, but also because they believe it to be unwise and inopportune for the Allied and Associated Powers to volunteer particular offers under present circumstances, especially as Germany has made no definite offer at all. They think that nothing is to be gained and much may be lost by such an attitude.

III

1° The Italian Delegation agrees with the English and French Delegations in thinking that it is impossible to fix in a document such as is now in preparation the total amount of Germany’s liability.

They believe however that it shall be wise at a future and early date to fix by negotiations with Germany a definite sum.

About Germany’s requests concerning the delivery of ships and raw materials the Italian Delegation thinks that it shall belong to the Reparation Commission to take such requests into account in so far as it shall think them equitable, and that the said Commission disposes to that effect of all necessary Powers.

Further they believe that the delimitation of the cost of the army of occupation should be the matter of later negotiations.

2° The Japanese delegation desires it to be reported that they concur in objecting to any sum being fixed, as it is now impossible to fix a sum which will both be accepted by Germany and satisfy the reparations claims in full. Further, they oppose any proposal for the retention of any ships.

Appendix II to CF–54

reparation

U. S. Project for Reply to German Counter-Proposals

The Allied and Associated Governments, consistent to their policy already enunciated, decline to enter into a discussion of the principles underlying the Reparation Clauses of the Conditions of Peace, which have been prepared with scrupulous regard for the correspondence leading up to the Armistice of November 11, 1918.

To the extent that your reply deals with practical phases of the execution of the principles enunciated in the Conditions of Peace, you appear to proceed on the basis of a complete misapprehension, which is more difficult to understand as the inferences you draw and the statements which you make are wholly at variance with both the letter and with the spirit of the Treaty Clauses. In order, however, [Page 268]that there may be no possible excuse for misunderstanding, and for purposes of clarification, the Allied and Associated Governments submit the following observations:—

The vast extent and manifold character of the damage caused to the Allied and Associated Governments in consequence of the war, has created a reparation problem of extraordinary magnitude and complexity, only to be solved by a continuing body, limited in personnel and invested with broad powers to deal with the problem in relation to the general economic situation. The Allied and Associated Powers recognising this situation, themselves propose to delegate power and authority to the Reparation Commission. The Reparation Commission is, however, instructed by the Treaty itself so to exercise and interpret its powers as to insure in the interest of all, as early and complete discharge by Germany of her reparation obligations as is consistent with the due maintenance of the social, economic and financial structure of a Germany earnestly striving to exercise her full power to repair the loss and damage she has caused.

The provisions of Article 241 are not to be misconstrued as giving the Commission Power to dictate the domestic legislation of Germany. Now [Nor] does Paragraph 12 (b), of Annex II, give the commission power to prescribe or enforce taxes or to dictate the character of the German budget. The Commission is required to inform itself as to the German system of taxation and of the character of the German budget, only in order that it may intelligently and constructively exercise the discretion accorded it in Germany’s interest particularly by Article 234. The provisions of Article 240 are similar in character and purpose and there should be no occasion for the exercise of these powers after May 1, 1921, if Germany is in a position to, and does, comply with the schedule of payments which then will have been notified to her and with the specific provisions of the several Annexes relative to reparation in kind. It is further to be observed that the power of modification accorded by the said Article 236 [234] is expressly designed to permit of a modification in Germany’s interest of a schedule and payments which events may demonstrate to be beyond Germany’s reasonable capacity.

The purposes for which the powers granted to the Commission are to be utilised are plainly indicated on the face of the Treaty, and the Allied and Associated Powers vigorously reject the suggestion that the Commission, in exercising the power conferred by Article 240 and by Paragraphs 2, 3 and 4 of Annex IV, might require the divulgence of trade secrets and similar confidential data.

It is understood that the action necessary to give effect to the provisions of Annex IV, relative to reparation in kind, will be taken by Germany on its own initiative, after receipt of notification from the Reparation Commission.

[Page 269]

The provisions of the Treaty are in no wise incompatible with the creation by Germany of a commission which will represent Germany in dealings with the Reparation Commission and which will constitute an instrumentality for such co-operation as may be necessary. The Treaty specifically and repeatedly provides opportunities for the German Government to present facts and arguments with respect to claims and modes of payments, within the limits of the principles and express provisions of the Treaty. This may be done through a commission and no reason is perceived as to why such a commission could not work in harmony with the Reparation Commission. Certainly this is greatly to be desired.

The Allied and Associated Governments, after examining the considerable data which are available, have unanimously reached the conclusion that the total damage under Annex I, when estimated on a gold basis, will approximate the principal sum of one hundred and twenty milliards of marks gold. These Governments recognise the desirability from every aspect that Germany’s liability be rendered as precise as circumstances will permit and that the benefits to follow from any reasonable and prompt decision in this respect will greatly outweigh any loss consequent upon a possible error in estimation. Accordingly the sum of 120 milliards* of marks gold may be regarded as an accepted maximum of the damage for which Germany is liable in accordance with Article 232. Inasmuch as the damage specified in Annex I includes damage caused by the former Allies of Germany, any sums received from Germany’s former allies will be credited against Germany’s liability. Further while not recognizing any right of contribution as between Germany and her former allies, the Reparation Commission will give to the Government of Germany an opportunity to present such facts as that Government deems relevant as to the capacity of payment of Germany’s former allies.

Germany proposes to assist in the restoration of the devastated areas by supplying labour and material. The Allied and Associated Governments had not desired to stipulate for German labour lest they be charged with demanding forced labour. The principle, however, of the general application of Germany’s entire economic resources to reparation is consecrated by Article 236 and the provisions of Paragraph 19 of Annex II authorise the Reparation Commission to accept payment in various forms. It is thus within the plain contemplation of the Conditions of Peace that Germany may address [Page 270]direct proposals to the Reparation Commission for the supplying of German labour for reparation purposes.

The Allied and Associated Governments do not ignore the economic needs of Germany. To do so would be contrary not only to their own material interests but to the spirit which has animated them in the preparation of the Conditions of Peace and of which ample evidence is to be found. The Commission is instructed in all its activities to take into account the social and economic requirements of Germany. In furtherance of such general instructions specific instructions are now in preparation directing the Commission to permit the retention by Germany for two years of ships, designated by the Commission, representing 30 per cent in tonnage of the total amount of ships referred to in Paragraph 1 of Annex III. These ships, the delivery of which is to be deferred, will be available for use by Germany to meet her economic needs and to assist in the fulfillment of Germany’s external obligations. The Commission will similarly receive detailed instructions to apply the provisions of Article 235 so as to permit the retention by Germany at home and abroad of certain amounts of working capital and so that for the present no gold will be required to be delivered by Germany for reparation purposes.

With reference to the provisions of Annexes V and VI, it is, of course, understood that the options therein referred to will be exercised exclusively to meet the domestic requirements of the country exercising the option. In further precision of the general principle above referred to enunciated by the Allied and Associated Governments for the guidance of the Commission, additional detailed instructions are in preparation, advising the Commission that to avoid any possibility of interference with the economic and industrial life of Germany the option for delivery of coal to France will, for the first year be exercised as to 50% only of the maximum amount mentioned, and that deliveries should commence with small monthly amounts, gradually increasing.

The Government of France has always contemplated that an arrangement would be made for the exchange of minette ore on mutually acceptable conditions.

With reference to the cost of maintaining the Army of Occupation, it is impossible for obvious reasons for the Allied and Associated Governments to make any commitment which would operate to limit the size of each army. The Allied and Associated Governments, however, perceive no reason for not advising the German Government that it is their hope and expectation that it will be unnecessary for such army to be of a size such that the cost of maintenance would exceed 240 millions of marks per annum.

[Page 271]

The foregoing should suffice to demonstrate the reasonableness of the conditions under which Germany is to discharge her reparation obligations, and how utterly unfounded are the criticisms of the German reply. These are, indeed, explicable only on the theory that the German plenipotentiaries have read into the Conditions of Peace, in clear defiance of their express terms, an intent which it would be not unnatural to see evidenced by victorious nations which have been the victims of cruelty and devastation on a vast and premeditated scale. The burdens of Germany undeniably are heavy, but they are imposed under conditions of justice by peoples whose social well-being and economic prosperity have been gravely impaired by wrongs which it is beyond the utmost power of Germany to repair.

Paris, 9 May [June], 1919.

  1. See appendix I to CF–52, p. 246.
  2. Post, p. 795.
  3. This sum might be still further increased were Germany given credit for various property to be taken from her without payment (e. g. in the Colonies) and were Germany further given credit for portions of war debt attaching to ceded territory. To give such credits appears just in principle. [Footnote in the original.]