Part VIII—Reparation

[The vertical rule indicates treaty text.]

Notes to Part VIII, Articles 231 to 247

The treaty restoring friendly relations between the United States and Germany signed at Berlin, August 25, 1921, and in force on November 11, 1921 with retroactive effect to July 2, 1921, stipulates that “Germany undertakes to accord to the United States and the United States shall have and enjoy … all the rights and advantages” stipulated for its benefit by this part of this treaty, “notwithstanding the fact that such treaty has not been ratified by the United States”. The rights and advantages of nationals of the United States specified in the joint resolution of Congress, approved July 2, 1921 (p. 18), were specifically mentioned in an understanding included in the Senate’s resolution of advice and consent to ratification of October 18, 1921. The Senate in that resolution made a further condition “that the United States shall not be represented or participate in any body, agency or commission, nor shall any person represent the United States as a member of any body, agency or commission in which the United States is authorized to participate by this Treaty, unless and until an Act of the Congress of the United States shall provide for such representation or participation”.

This part is, ipsissimis verbis, an annex, technically a schedule, of the treaty restoring friendly relations as printed by the Department of State in Treaty Series 658, but not as printed in 42 Stat. 1939.

Data on the various phases of reparation, for the most part in addition to officially published material, have been drawn from file [Page 381] 462.00 R 29/1314, /3815, /4185, /4362, and /4370. Specific use has been made of 462.00 R 29/828 and 462.00 R 29/4403.


The immediate application of the provisions of part VIII extended from the establishment of the Organization Committee of the Reparation Commission in July 1919 until the entrance of the Experts’ (Dawes) Plan into force on September 1, 1924. The results of that period are summarily accounted for in the notes to articles 231–47 and annexes I–VII.

In the earlier years the period was dominated by collection of the immense amount of material to which reparation was applicable, determination of procedures and methods of evaluation, the appraisal of claims, the development of systematic schemes for handling types of continuing deliveries, laying the legal bases of the whole vast network of deliveries, receipts, and credits, and the fixation of the Schedule of Payments of May 5, 1921. Germany accepted the Schedule of Payments while the sanction of a second default—additional occupation in the Ruhr—was being enforced and in the face of a decision to apply the same sanction to a third default (see annex II, par. 17).

The modification of annex II by the addition of paragraph 12A as an incident of elaborating a feasible Schedule of Payments introduced a new piece of reparation machinery in the Committee of Guarantees, which immediately encountered the difficulties raised by Germany in making cash payments. The additional difficulties attendant upon the creation of a system of deliveries in kind were evolving into the Wiesbaden agreement which gave that series of problems its early workable form. Promise of progressive adjustment was halted by the timber default found on December 26, 1922, leading to the occupation of the Ruhr and attended by the German inflation of 1923–24. This circumstance marked the cessation of the operation of the reparation system which had prevailed, as the accounts show. It was succeeded by the orderly period of the Experts’ (Dawes) Plan.

In order to round out the picture a running narrative is here set down of the governmental steps that were taken from the relaxation due to the moratorium of 1922 until the elaboration of the Lausanne settlement in 1932. As these steps were taken by the governments [Page 382] concerned and by the United States, they were outside of the terms of the treaty of peace itself.


While the Reparation Commission, with the assistance of the Committee of Guarantees, was arranging the 1922 modification of German payments (see art. 241), the creditor governments were considering measures for “securing payment of reparation, both by restoring order to German finance under effective supervision and by enabling Germany to pay off part of the capital of her debt by the issue of foreign loans”. As a step in this direction the finance ministers of Belgium, France, Great Britain, Italy, and Japan on March 11, 1922 concluded at Paris an agreement which dealt with the distribution of receipts, limited armies of occupation costs, and provided for the allocation of deliveries in kind (United Kingdom, Reparation, Financial Agreement … Signed at Paris, March 11, 1922, Cmd. 1616, printed post, p. 870).

The five governments participated in a conference at London from August 7 to 14, 1922 (United Kingdom, Misc. No. 16 (1924), Cmd. 2258) in which “their points of view were irreconcilable”. No decision was reached upon a German demand for a moratorium in respect of all cash payments up to December 31, 1924. On August 1 Great Britain had offered its war debtors relief in proportion as the United States granted relief (see p. 397), and delegates were at the time in the United States with a view to learning whether that proposal would be discussed. Uncertainty as to the outcome of that mission contributed to the failure of the conference.

On November 7, 1922 international financial experts, summoned by the German Government to advise it on the financial situation, made their report on the stabilization of the mark, which was then at 7000 to the dollar. The Belgian, British, French, and Italian premiers met at London on December 9 and 10, 1922 to consider a formal request from Germany for a final fixation of Germany’s liability and a moratorium from all payments for three or four years, except restoration of the devastated regions. The German plan submitted was rejected (United Kingdom, Inter-Allied Conferences on Reparation and Inter-Allied Debts, Misc. No. 3 (1923), Cmd. 1812). The Belgo-French occupation of the Ruhr began on January 11, 1923 (see annex II, par. 17).

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On May 2, 1923 a German memorandum proposed a total obligation of 30,000,000,000 gold marks raised before July 1, 1930 “by a bond issue at normal rates of interest on the international money market” (Foreign Relations, 1923, ii, 57). On June 7, 1923 Germany asked for a conference to determine its capacity to pay, which “depends on the character of the settlement as a whole”, and included limited proposals. The note declared that “Germany acknowledges her liability to make reparation” (ibid., p. 62). There followed an extensive production and exchange of analyses and proposals (United Kingdom, Correspondence with the Allied Governments respecting Reparation Payments by Germany, Misc. No. 5, Cmd. 1943).

The United States Government was not oblivious of these developments. On October 17, 1922 the Secretary of State suggested to the Ambassador in France “that the question of German reparation should be considered immediately by a committee of business men with approval of the Governments.” But “any suggestion looking to a discussion of debts would cause violent opposition here and render a conference futile” (Foreign Relations, 1922, ii, 169). The French Premier was “characteristically non-committal”. On December 27, 1922 the President wrote to the chairman of the Senate Committee on Foreign Relations that a proposed amendment to the pending naval bill requesting him to call an economic conference to deal with conditions in the war-torn nations of Europe was “undesirable”. He regarded a conference as futile until it was understood that it would be welcomed “within the limits of discussion which the expressed will of Congress compels this Government to impose” (Congressional Record, Dec. 28, 1922, p. 982).

He specified:

That Congress had not given its consent to the United States being represented on the Reparation Commission, as the reservation to the treaty restoring friendly relations required;
That the first practical step to facilitate the United States really dealing with the European situation was to free the hands of the Executive, the explicit terms for rates of interest and ultimate time of payment of intergovernmental debts being cited as hampering restrictions created by law;
That the United States could not assume to say what reparation should be paid or accepted, though adjustment of reparation was “quite generally accepted” as underlying any economic rehabilitation of Europe;
That it was inconsistent for the United States to initiate a conference in which foreign governments would insist that European debts to the United States and reparation were connected and the United States was denied all authority by act of Congress to negotiate on that contention.

The Secretary of State on December 29, 1922 delivered an address before the American Historical Association which was telegraphed to Paris, London, Brussels, Rome, Lausanne, and Berlin (Foreign Relations, 1922, ii, 199). After reviewing the economic situation in Europe, on which statesmen were not agreed, he asked:

“Why should they not invite men of the highest authority in finance in their respective countries—men of such prestige, experience and honor that their agreement upon the amount to be paid, and upon a financial plan for working out the payments, would be accepted throughout the world as the most authoritative expression obtainable?” …

He commented that “I have no doubt that distinguished Americans would be willing to serve in such a commission”.

“The extremely critical economic position that has arisen in Europe owing to the failure to discover any solution to the reparation problem” actuated a resumption of correspondence in October 1923 (ibid., 1923, ii, 68 ff.). Beginning in conversations between the British Embassy at Washington and the Secretary of State on October 13 and 15, the negotiations culminated in the adoption by the Reparation Commission on November 30 of the following resolution (Reparation Commission, Official Documents, xiv, 1):

“In order to consider, in accordance with the provisions of Article 234 of the Treaty of Versailles, the resources and capacity of Germany, and after giving her representatives a just opportunity to be heard, the Reparation Commission decided to create two Committees of Experts belonging to the Allied and Associated countries.

“One of these Committees would be entrusted with considering the means of balancing the Budget and the measures to be taken to stabilise the currency.

“The other would consider the means of estimating the amount of exported capital and of bringing it back into Germany.”

The two committees sat from January 14 to April 9, 1924. Charles G. Dawes, a national of the United States, was chairman [Page 385] of the First Committee, and its report came to be known indifferently as the Dawes Plan and the Experts’ Plan. Reginald McKenna, United Kingdom, was chairman of the Second Committee, consisting, as its sister body, of nationals of the United States, United Kingdom, France, Italy, and Belgium. Both reports were published by the Reparation Commission in its Official Documents, xiv.

The Dawes Plan confined its recommendations to the means of balancing the budget and the measures to be taken to stabilize the currency. Approaching these questions from the standpoint of business, the committee found itself under the necessity of determining the foreign debt obligation of the German Government and of devising means of recovering the required annual amounts from the German economy; of providing for the transfer of payments to the creditors; of devising methods of financial and currency reconstruction; and of insuring economic guaranties for the continuance of the payments stipulated, consistent with German financial autonomy. The plan provided for—

The establishment of a new Reichsbank and new currency, with the aid of an external gold loan;1
The fixation of annuities, the payment of which was to “comprise all amounts for which Germany may be liable to the Allied and Associated Powers for the costs arising out of the War, including reparation, restitution, all costs of all armies of occupation, clearing house operations, to the extent of those balances which the Reparation Commission decide must legitimately remain a definitive charge on the German Government, commissions of control and supervision, etc.;”
The assumption by the creditors of any exchange hazard. Payment in German currency into the Reichsbank to the credit of the Agent-General for Reparation Payments was “the definitive act of the German Government in meeting its financial obligations under the plan”;
The sources of the annuities were defined. One half of a standard annuity of 2,500,000,000 gold marks was to come ultimately [Page 386] from the German budget, this payment being collaterally secured by the produce of certain assigned revenues subject to control by a commissioner appointed by the creditors. A second portion of the annuity was a specified amount from a direct tax on transport. A third amount was raised by transferring the German Government railway system to the German Railway Company, which transferred its own bonds to a commissioner appointed by the creditors. A final portion of the annuity consisted of debt service on “industrial debentures”. Under complicated processes a debt liability was accepted by industrial corporations, and against this obligation as security were issued industrial debenture bonds in favor of the commissioner of the creditors;
The dependence of the reparation payments on the service of the German railway and the industrial debenture bonds created a basis for “commercializing” a part of the reparation debt;
In behalf of the creditors a Transfer Committee was established to manage the transfer of payments across the exchanges;
The whole system was supervised by the Agent-General for Reparation Payments, S. Parker Gilbert, Jr., whose very efficient organization contributed materially to coordinating the system into a smoothly running machine with benefits to the German fiscal system and advantages to the creditors;
The entire system being specific and fully worked out, the Dawes Plan indicated, and the agreements of the London conference provided in detail for, the smoothing out of all friction concerning it by appropriate arbitral methods, 19 separate types of jurisdiction being provided. The most important of these was the Arbitral Tribunal of Interpretation between the Reparation Commission and the German Government;
The Reparation Commission, while continued in existence, was substantially superseded, except for its functions with regard to Austrian, Bulgarian, and Hungarian reparation.

The Second Committee of Experts also made a report on April 9, 1924 that allayed concern over the two subjects with which it dealt. The report analyzed the conditions which attend the migration of capital and found that its so-called flight in the German instance “was in the main the result of the usual factors”. Speculation had been markedly a contributing factor. The committee reported that the normal remedies for the situation were the only ones that were applicable to Germany, namely, the attainment of stability and the restoration of confidence.

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The results under the Experts’ (Dawes) Plan were gratifying. The Agent-General for Reparation Payments, S. Parker Gilbert, Jr., the commissioners for railway and industrial debentures, and the Transfer Committee performed their assigned functions efficiently and their semi-annual reports gave evidence that the objectives of the Plan were being realized. The annuity under the Plan increased yearly and for the year beginning September 1, 1929 reached its intended level of 2,500,000,000 gold marks, the only change thereafter to be by application of the “prosperity index”. The Plan itself put no term to the annuities unless they were to cease upon the full liquidation of the A, B and C bonds of the Schedule of Payments. Their original total of 132,000,000,000 gold marks was, however, deemed unreal even in 1921 as a realizable joint claim upon all four of the reparation debtors and the C bonds, amounting to 82,000,000,000 gold marks, required a fresh decision to become an active obligation, except for cancellation by credits of capital transfers or of Austrian, Bulgarian, and Hungarian payments. Minor liquidations from those four sources were not expected to reduce the outstanding total of those bonds to any notable extent. On the other hand, the creditors, in view of their own claims and their obligations for intergovernmental debts to the United States, were not willing to contemplate the full payment of the A and B issued bonds, 50,000,000,000 gold marks, as automatically liquidating reparation at some future date.

The Agent-General for Reparation Payments raised the question of a final settlement in his report of December 10, 1927 where he wrote:

“As time goes on and practical experience accumulates, it becomes always clearer that neither the reparation problem nor the other problems depending upon it will be finally solved until Germany has been given a definite task to perform on her own responsibility without foreign supervision and without transfer protection.”

In his report of June 7, 1928 (Reparation Commission, Official Documents, xvii, 108), he stated that “fundamentally, what the Plan has done is to re-establish confidence and to permit Germany’s reconstruction as a going concern. In so doing it has marked the turning point in the reconstruction of Europe, and it has also achieved its primary object, by securing from the very beginning the expected reparation payments and transfers to the creditor powers.” He continued by calling attention to the fact that the Plan was not an [Page 388] end in itself, and added: “The fundamental problem which remains is the final determination of Germany’s reparation liabilities, and … it will be in the best interests of the creditor powers and of Germany alike to reach a final settlement by mutual agreement ‘as soon’, to use the concluding words of the Experts, ‘as circumstances make this possible’.”

The United States participated in the receipts from Germany under the Dawes Plan in virtue of an agreement regarding the distribution of the Dawes annuities signed at Paris January 14, 1925 on behalf of the Governments of Belgium, France, Great Britain, Italy, Japan, United States, Brazil, Greece, Poland, Portugal, Rumania, Serb–Croat–Slovene State, and Czecho-Slovakia (Foreign Relations, 1925, ii, 145).

This instrument, popularly known as the Finance Ministers’ Agreement, effected a settlement of past accounts and a precise allocation of the annuities to meet all requirements and to eliminate many miscellaneous claims. In addition to 12 percent of the special amount allocated for the reimbursement of the Belgian war debt as defined in article 232 of the treaty, the United States was to receive:

55,000,000 gold marks per annum beginning September 1, 1926, “in reimbursement of the costs of the United States Army of Occupation,” this provision being deemed to supersede the agreement with France, Great Britain, Italy, and Belgium of May 25, 1923” (ibid., 1923, ii, 180);
In satisfaction of awards under the Mixed Claims Commission established in pursuance of the agreement between the United States and Germany, August 10, 1922, “2¼ percent of all receipts from Germany on account of the Dawes annuities available for distribution as reparation.”

In virtue of these provisions, the report of the Agent-General for Reparation Payments, May 21, 1930, shows that 300,430,667.80 gold marks were transferred to the United States of America.


On September 16, 1928 the representatives of Germany, Belgium, France, Great Britain, Italy, and Japan, in attendance at Geneva on the ninth ordinary session of the Assembly of the League of Nations, announced that in concluding a series of three conversations [Page 389] they had reached agreement upon (1) opening negotiations for complete evacuation of the Rhineland; (2) constituting a committee of financial experts for the settlement of the reparation problem; and (3) constituting “a committee of verification and conciliation” as a result of negotiations.

The six governments defined the committee’s terms of reference on December 22, 1928 as follows:

“The Belgian, British, French, German, Italian and Japanese Governments, in pursuance of the decision reached at Geneva on September 16, 1928, whereby it was agreed to set up a committee of independent financial experts, hereby intrust to the committee the task of drawing up proposals for a complete and final settlement of the reparation problem. These proposals shall include a settlement of the obligations resulting from the existing treaties and agreements between Germany and the creditor powers. The committee shall address its report to the Governments which took part in the Geneva decision and also to the Reparation Commission.”

This mandate was preceded on December 17, 1928 (Foreign Relations, 1928, ii, 878) by an agreement between France and Germany which set forth that the Belgian, French, British, Italian, and Japanese experts should be nominated by their Governments and appointed by the Reparation Commission, the German experts should be appointed by the German Government, and that “citizens of the United States should also take part in the work”. The six governments approached the American Government on this latter point and on December 24 the Secretary of State announced that “the United States will have no objection” to Americans serving. The six governments joined in inviting Owen D. Young and J. P. Morgan to be the American members, with the approval of the United States Government. The Committee of Experts convened on February 11, when it chose Mr. Young as chairman, and dated its report June 7, 1929.

From March 3 onward, Mr. Young at the request of the Secretary of State forwarded statements on the program of the work for the attention of the President of the United States (ibid., 1929, ii, 1029 ff.). In the ensuing correspondence by or through the Secretary of State the chairman of the Committee of Financial Experts appointed by Belgium, France, Germany, Great Britain, Italy, and Japan was informed, in a memorandum by the Secretary of the [Page 390] Treasury, that “under no circumstances” would any official of the Federal Reserve System “be permitted to serve as a director of the International Bank or to name a director” and “that our Government would consider it most unfortunate … if the proposed payments by Germany are divided into categories, one of which is to be made to correspond exactly to payments by the allied governments to this country” (ibid., p. 1040). It was subsequently confirmed that this memorandum was “neither an official communication to the Committee of Experts through us, nor … an instruction to us” (ibid., pp. 1043, 1059). The direct interest of the United States in the effect of the “final settlement” upon payment of army costs of occupation and mixed claims was the subject of a separate agreement signed on June 23, 1930 pursuant to act of Congress of June 5, 1930 (46 Stat. 500) and is in Annual Report of the Secretary of the Treasury, 1930, p. 341, and 106 League of Nations Treaties Series, p. 121.

The report of the committee of June 7, 1929 added two essential elements to the solution of the reparation problem:

It fixed the number and reduced the amount of the annuities that were to be paid by Germany “on her own untrammeled responsibility”.
It removed the German reparation debt “from the sphere of inter-governmental relations” by making adequate provision for its liquidation in accordance with economic principles and, further, by its partial “commercialization”.

The plan incidentally provided for several important developments:

It called for the establishment of the Bank for International Settlements to “provide additional facilities for the international movement of funds” in connection with reparation payments and otherwise, and “to afford a ready instrument for promoting international financial relations”;
It finally removed from Germany all politico-economic controls and assimilated the entire future mechanism of reparation payments to normal financial and economic principles;
It abolished all organs invented specifically for the collection and distribution of reparation, including the Reparation Commission, the Agent-General for Reparation Payments, and foreign commissioners [Page 391] supervising pledges representing security for Germany’s liability;
It abolished the joint liability of Germany for any Austrian, Bulgarian, or Hungarian indebtedness;
It contemplated the eventual cessation of deliveries in kind, thus doing away with an artificial form of trade;
It abolished the “index of prosperity” which under the Dawes Plan would have in the future increased or diminished the annuities;
It established an equitable agreement between debtor and creditor groups by reduction “in the face value of payments due”. In doing this the committee definitely based its decision upon the conviction that the best “basis of security” was “the solemn undertaking of the German Government, to which no further guaranty could add anything whatsoever”. On the other hand, the creditors were to obtain “improvements in intrinsic and available values which arose from the practicability and certainty of commercialization and mobilization within a reasonable period and in its attendant financial and economic psychology”.

The Report of the Committee of Experts on Reparations (United Kingdom, Cmd. 3343) required acceptance by the governments, the enactment of its recommendations into treaty form, the settlement of collateral or dependent questions between the parties, and the ratification of all these. Effect was given to the report in a conference at The Hague August 6–31, 1929 and January 3–20, 1930. The conference was attended by delegates of Germany, Belgium, Great Britain, Canada, Australia, Union of South Africa, New Zealand, India, France, Greece, Italy, Japan, Poland, Rumania, Yugoslavia, Czechoslovakia, and the United States “in the capacity of observer and with specifically limited powers”.

The proceedings were delayed by difficulties put forward by the British Labor Government which had come into office on June 5. The New (Young) Plan had departed from the Spa percentages and, instead of 23.05 percent, gave the British Empire 19.494 percent of the total German payments in 37 years. The new Chancellor of the Exchequer set out to recover the remission of his predecessor. In a broadcast on September 2, 1929 he told how an increase of some £2,000,000 a year had been obtained by various assignments in the general scheme.

The first session of the conference reached the settlement on the evacuation of the Rhineland (104 League of Nations Treaty Series, [Page 392] p. 473) and an agreement on Locarno commissions of conciliation (ibid., p. 487) on August 30, 1929 and on the 31st approved a protocol covering transitional details (file 462.00 R 296/3396). This protocol provided for interim committees which met as follows:

Organization Committee of the Bank for International Settlements, Baden-Baden, October 3–November 13, 1929;

Committee on delivery in kind, Paris, September 16–November 30, 1929;

Committee on ceded properties, liberation debts, and final settlement under the treaties of St. Germain, Trianon, and Neuilly, Paris. September 16 … November 30, 1929;

Committee on liquidation of the past, Paris, September 16–November 22, 1929;

Adaptation of the system of controlled revenues to the New Plan. Annex I to the final protocol signed at London, August, 16, 1924; report submitted November 10, 1929;

Adaptation of the German law on the Reichsbank of August 30, 1924; report submitted November 12, 1929;

Adaptation of the German law concerning the German Railway Company of August 30, 1924; report submitted November 19, 1929.

While these committees were sitting the German Nationalist Party sought to defeat the government’s policy by initiating a petition for passage of legislation asserting that “no further financial burdens or obligations based on the war guilt acknowledgement shall be assumed”. That section was defeated in the Reichstag on November 30 by a vote of 317 to 82 (Verhandlungen der deutschen National versammlung, band 426, 3374). There followed an attempt to pass the proposal by plebiscite which failed on December 22, the favorable vote being 13.8 percent out of a required 50 percent.

At the second session of the conference Austria, Bulgaria, and Hungary had representatives. The whole business was brought to a conclusion on January 20, 1930 when the following instruments were signed:

With Germany:

Agreement of January 20, 1930 on the final acceptance of the Plan of the Committee of Experts of June 7, 1929; with 12 annexes:

  • Exchange of declarations;
  • Measures of transition;
  • Debt certificate of the German Reich;
  • Certificate of the Deutsche Reichsbahn-Gesellschaft;
  • Revision of the German bank law;
  • Amendment of the law and statutes of the Deutsche Reichsbahn-Gesellschaft;
  • Assignment by way of collateral guaranty of revenues of the Reich to meet service on the German external loan, 19241;
  • Form of Trust Agreement;
  • Regulations for deliveries in kind;
  • Agreement of Berlin, January 2, 1930, for amending administration of the British Reparation Recovery Act and agreement of The Hague, January 18, 1930, for amending administration of the French Reparation Recovery Act;
  • Securities for the German external loan, 1924;
  • Arbitration rules of procedure.

Arrangement relating to the concurrent memorandum accompanying the Experts’ report, January 20, 1930, with concurrent memorandum annexed.

Convention respecting the Bank for International Settlements; Constituent Charter and Statutes annexed.

Arrangement as to the financial mobilization of the German annuities.

Transitory provisions.

Financial agreement with Belgium, Brussels, July 13, 1929.

Agreement on the amnesty evacuation, Coblenz, October 5, 1929.

German-American debt agreement as initialed December 28, 1929; finally signed June 23, 1930.

Liquidation agreements on property, rights, and interests: with Belgium (Berlin, July 13, 1929, and Brussels, January 16, 1930); with Poland (Warsaw, October 31, 1929); with Great Britain and Northern Ireland (London, December 28, 1929); with France (Paris, December 31, 1929); with Canada (The Hague, January 14, 1930); with Australia (The Hague, January 17, 1930); with New Zealand (The Hague, January 17, 1930); with Italy (The Hague, January 20, 1930).

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Agreement between the creditor states respecting Germany, January 20, 1930.

With others:

Agreement with Austria, January 20, 1930.

Agreement with Bulgaria, January 20, 1930.

Agreement with Hungary, with annexes embodying general agreement relating to the Agrarian Fund “A” and fund “B”, etc.; put in final form at Paris April 28, 1930.

Agreement with Czechoslovakia, January 20, 1930.

Arrangement between the creditors respecting Austria, Hungary, Bulgaria, and liberation debts, January 20, 1930.

The German laws for carrying out the treaties of the Hague conference of 1929 and 1930, to amend the bank and Reichsbahn laws, and to give effect to the German-American debt agreement were enacted on March 13, 1930 (Reichsgesetzblatt, 1930, ii, No. 7).

The New (Young) Plan entered into force on May 17, 1930 with retroactive effect to September 1, 1929. It superseded the provisions of part VIII of the treaty of peace. The Reparation Commission, with respect to its functions under all four treaties, was in liquidation.

In the view of the United States Government, the New (Young) Plan jeopardized the priority which it had obtained for its special claims to payment. The “unofficial observer” informed the Agent-General for Reparation Payments (Reparation Commission, Annex 4142A) that “the United States of America reserves all of its rights under existing treaties and the Paris Agreement of January 14, 1925” and that acceptance of payments would not “indicate an acceptance by this Government of the Young schedule of payments or the waiving of the priority which the United States enjoys at present in respect of army cost payments.”

The Agent-General notified the Reparation Commission on May 15, 1930 of this statement. The agreement between Germany and the United States of June 23, 1930 (see p. 942) reconciled American interests with the New (Young) Plan.


An important feature of the New (Young) Plan was the inclusion in the annuities of “out-payments” which consolidated the overlapping debts and credits of the various creditors of Germany. The Committee of Experts made provision for these “out-payments” in [Page 395] a “concurrent memorandum” issued simultaneously with, but not a part of, their main report. The governments of Belgium, France, Great Britain and Northern Ireland, Greece, Italy, Portugal, Rumania, and Yugoslavia concluded an arrangement on January 20, 1930 (104 League of Nations Treaty Series, p. 421) with the German Government to carry out the recommendations of the memorandum.

The memorandum and arrangement recognized that there was a network of intergovernmental indebtedness in existence as a consequence of the war of 1914–18, and that the ability of the states creditors of Germany to pay the debts of their governments was related to their receipts from Germany and its former allies on the reparation account. Further, the experts were aware that the service of intergovernmental debts involved payments across the international exchanges which were not offset by commercial transactions and which consequently created a constant abnormal strain upon the international exchange system. The memorandum and arrangement constituted a first effective step of debtors to the United States Government to connect their obligations to pay the United States with the German obligation to pay them.

The President of the United States on June 22, 1921 submitted to the chairmen of the Ways and Means Committee of the House of Representatives and of the Finance Committee of the Senate a draft proposal for settlement of intergovernmental debts prepared by the Treasury (S.2135, 67th Cong., 1st sess.) which read:

An Act To enable the refunding of obligations of foreign governments owing to the United States of America, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of the Treasury, with the approval of the President, is hereby authorized from time to time to refund or convert, and to extend the time of payment of the principal or the interest, or both, of any obligation of any foreign Government now owing to the United States of America, or any obligation of any foreign Government hereafter received by the United States of America (including obligations held by the United States Grain Corporation), arising out of the European War, into bonds or other obligations of such, or of any other, foreign Government, and from time to time to receive bonds and obligations of any foreign Government in substitution for those now or hereafter held by the United States of America, in such form and of such terms, conditions, date or dates of maturity, and rate or rates of interest, and with such security, if any, as shall be deemed for the best interests of the United States of America, and to adjust and settle any and all claims, not now represented by bonds or obligations, which the [Page 396] United States of America now has or hereafter may have against any foreign Government and to accept securities therefor.”

This bill was reported to the Senate by the Committee on Finance (S. Rept. 264, pts. 1 and 2, 67th Cong., 1st sess., serial 7918) on August 20, 1921. The committee’s majority approved the proposal “as affording the best and most practicable method of handling the matter”. It noted that in proposing to accept obligations of countries other than the debtor countries, the Treasury did not intend “to accept any German bonds unless it becomes necessary or desirable to do so in some now unforeseen special cases”. A minority of six Senators said the bill ought not to pass. “Considerable misunderstanding” existed as to the purpose of the legislation as a consequence of the ensuing debate, which resulted in the introduction of H. R. 8762 in the general form of the legislation realized. “The popular belief,” said the report from the Committee on Ways and Means upon that proposal (H. Rept. 421, 67th Cong., 1st sess., serial 7921) dated October 20, 1921, “seems to be that authority is sought by the Secretary either to exchange the obligations of one country for the obligations of some other country or to cancel a portion or all of the principal and interest due”. A minority again argued for legislative rather than executive action.

The legislation which was eventually approved on February 9, 1922 (42 Stat. 363) differed materially from the original proposal. It created the World War Foreign Debt Commission, the members of which, except the Secretary of the Treasury, as chairman, were to be appointed by the President by and with the advice and consent of the Senate. The commission was authorized within three years to refund or convert obligations of foreign governments held by the United States (including obligations held by the United States Grain Corporation, the War Department, the Navy Department or the American Relief Administration) arising out of the war of 1914–18, into bonds or other obligations of such foreign governments “in such form and of such terms, conditions, date or dates of maturity, and rate or rates of interest, and with such security, if any, as shall be deemed for the best interests of the United States of America: Provided, that nothing contained in this act shall be construed to authorize or empower the commission to extend the time of maturity of any such bonds or other obligations due the United States of America by any foreign government beyond June 15, 1947, or to fix the rate of interest at less than 4¼ per centum per annum.”

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Section 3 of the Act prohibited “the exchange of bonds or other obligations of any foreign government for those of any other foreign government, or cancellation of any part of such indebtedness except through payment thereof.” The authority of the commission was to cease with the refunding or conversion of’ obligations and the commission was to transmit to the Congress copies of refunding agreements entered into, with the approval of the President.

The passage of the American law had a reaction on August 1, 1922 when the British Foreign Office addressed a despatch to the representatives of France, Italy, Serb–Croat–Slovene State, Rumania, Portugal, and Greece, which together owed £3,400,000,000 to the United Kingdom, which in turn owed the United States £850,000,000.

The Balfour note (United Kingdom, Misc. No. 5 (1922), Cmd. 1737) reverted to this “unexampled situation” because recent events left “little choice in the matter”. The United States Government was exercising undoubted rights in requiring the United Kingdom to pay the accrued interest, to convert an unfunded into a funded debt and to pay it by a sinking fund in 25 years. This debt was not an isolated incident but was one of a connected series of transactions and “if our undoubted obligations as a debtor are to be enforced, our not less undoubted rights as a creditor cannot be left wholly in abeyance”. The debts were incurred and the loans made “not for the separate advantage of particular states, but for a great purpose common to them all.” Among the current economic ills “must certainly be reckoned the weight of international indebtedness, with all its unhappy effects upon credit and exchange, upon national production and international trade.” Though also a creditor on balance, “the policy favored by His Majesty is … that of surrendering their share of German reparation, and writing off, through one great transaction, the whole body of inter-allied indebtedness.”

The British note stated that “half the £2,000,000,000 advanced to allies were provided, not by means of foreign loans, but by internal borrowing and war taxation.” With reference to the arrangement with the United States, it was asserted “that, though our Allies were to spend the money, it was only on our security that [the United States] were prepared to lend it.” The role assigned to Great Britain in the “cooperative effort … of infinite value” was scarcely “one of special privilege or advantage”.

A copy of this dispatch was transmitted to the Department of State (file 800.51 W 89/28), and communicated to the Treasury Department.

[Page 398]

The World War Foreign Debt Commission concluded with the Government of the United Kingdom a draft funding agreement covering a principal sum of $4,600,000,000, representing the face value of demand notes and accrued interest thereon at 5 per cent, repayable in 62 years by a sinking fund, with the outstanding principal bearing an average of 3.306 per cent interest. As this agreement did not meet the conditions of the provisos of section 2 and section 3 of the act of February 9, 1922 as to maturity and interest, it was submitted to Congress, which adopted it as an amendment to that law by an act approved February 28, 1923 (42 Stat. 1325). A funding agreement followed. Subsequent funding agreements of its general character were submitted to the Congress as Senate documents, and separate acts embodied the terms reached. With respect to the debts to the United States affected by the contention of the debtors that they were part of a total war obligation, settlements were made as follows:

Country Agreement with debtor Act of Congress Principal funded
Great Britain June 19, 1923 Feb. 28, 1923
(42 Stat. 1325)
France April 29, 1926 Dec. 18, 1929
(46 Stat. 48)
Italy Nov. 14, 1925 April 28, 1926
(44 Stat. 329)
Belgium Aug. 18, 1925 April 30, 1926
(44 Stat. 376)
Yugoslavia May 3, 1926 March 30, 1928
(45 Stat. 399)
Rumania Dec. 4, 1925 May 3, 1926
(44 Stat. 385)
Greece Jan. 18, 1928 Feb. 14, 1929
(45 Stat. 1176)

From the point of view of the creditors of Germany, the rigidity of their agreements with the United States imposed upon them the burden of providing much larger and more complicated exchange payments than they regarded as otherwise necessary. Being creditors of Germany they were desirous of using their receipts from that government to pay their other indebtedness.

With these considerations in mind, and taking into account the insistence of the creditors that their requirements from Germany were dependent upon their own obligations to make out-payments, the Committee of Experts incorporated in the New Plan an annuity [Page 399] system designed to meet the situation. The fixed condition which they faced was the requirement in the agreements made by the United States Government with its debtors that payments should extend over a period of 62 years from 1923 or thereabouts. The annuities that Germany was to meet were, therefore, to continue from September 1, 1929 until March 31, 1988, a period of 59 years. This period was divided into two parts. The first period of 37 years, extending until March 31, 1966, during which Germany was to pay on both reparation and out-payments accounts, was determined by the time required for amortization at one percent per annum. The further period of 22 years from April 3, 1966 to March 31, 1988, during which Germany’s obligations were for out-payments only, was determined by the life of the United States debt agreements.

The out-payments annuities, which excluded Germany’s obligations under its separate agreement with the United States, constituted the bulk of the requirements in the first 37 years. Up to March 31, 1966 Germany was obligated to pay 79,483,300,000 Reichsmarks of which 50,738,100,000 Reichsmarks was to be devoted to out-payments and only 28,745,200,000 Reichsmarks (32.9 percent) to reparation. In the subsequent period until March 31, 1988 out-payments were to amount to 34,422,600,000 Reichsmarks, with no payments on reparation account. Of the total of 113,907,700,000 Reichsmarks payable in 62 years, 84,548,700,000 Reichsmarks (74.2 percent) was assigned to out-payments.

The arrangement of January 20, 1930 made the amount of the stipulated out-payments contingent upon any modification of obligations from which the creditors might effectively benefit. In the first 37 years Germany was to benefit from any remission to the extent of two thirds of the net relief available, the other one third to be retained by the creditors of Germany as an advance payment on Germany’s outstanding obligations. In the last 22 years the whole of any remission was to be applied to the reduction of Germany’s liabilities. The inter-Allied debts which were taken into consideration in calculating out-payment annuities were stated in the arrangement of January 20, 1930 to be the following:

To the United States of America
  • Great Britain: Agreement of June 19, 1923
  • France: Agreement of April 29, 1926
  • Italy: Agreement of November 14, 1925
  • Belgium: Agreement of August 18, 1925
  • Yugoslavia: Agreement of May 3, 1926
  • Rumania: Agreement of December 4, 1925
  • Greece: Agreement of January 18, 1928
To Great Britain
  • France: Agreement of July 12, 1926
  • Italy: Agreement of January 27, 1926
  • Rumania: Agreement of October 19, 1925
  • Yugoslavia: Agreement of August 9, 1927
  • Portugal: Agreement of December 31, 1926
  • Greece: Agreement of April 9, 1927
To France
  • Rumania: Agreement of January 17, 1930
  • Yugoslavia: Agreement of January 20, 1930
  • Greece: Agreement of January 20, 1930 dealing with the war debt (provisions relating to the pre-armistice debt—tranche A).


After a period of severe world-wide depression, on June 20, 1931 the President of the United States issued a statement in which he said: “The American Government proposes the postponement during one year of all payments on intergovernmental debts, reparations and relief debts, both principal and interest, of course, not including obligations of Governments held by private parties. Subject to confirmation by Congress, the American Government will postpone all payments upon the debts of foreign governments to the American Government payable through the fiscal year beginning July 1 next, conditional on a like postponement for one year of all payments of intergovernmental debts owing the important creditor powers” (Department of State, Press Releases, June 20, 1931, p. 482).

The proposal of this “Hoover moratorium” that the payment of intergovermental debts should be suspended for the year ending on June 30, 1932 affected the pattern of international indebtedness in several respects:

It would suspend payments on the funded debts owing to the United States on account both of wartime (pre-armistice) and of supply and relief (post-armistice) loans. Nine tenths of the value of the 15 funded debts was in the pre-armistice obligations of four states, Great Britain, France, Greece, and Italy. War and supply [Page 401] debts were funded with Belgium, Czechoslovakia, France, Rumania, and Yugoslavia, while supply and relief accounts existed with Austria, Estonia, Finland, Latvia, Lithuania, and Poland.
Suspension of payments under the New (Young) Plan would involve adjustments with regard to (a) the out-payments which constituted the bulk of the annuity and which were ear-marked for servicing, among others, the pre-armistice debts to the United States of Great Britain, France, Italy, Belgium, Greece, Rumania, and Yugoslavia; and (b) the suspension of the non-postponable portion of the annuity, amounting to 673,800,000 gold marks.
Suspension of other debts, those included in the “out-payments” as defined by the arrangement of January 20, 1930 relating to the “concurrent memorandum”, and those not so linked with German obligations, as well as non-German obligations.

The concern of France in preserving the continuance in principle of the non-postponable (or unconditional) annuity under the New (Young) Plan and in adjusting arrangements with respect to deliveries in kind was relieved by the conclusion at Paris on July 6, 1931 of an agreement between the French and United States Governments (Department of State, Press Releases, July 6, 1931, p. 41; file 462.00 R 296/4524). This agreement embodied observations by France on a number of points which did not directly concern the United States. One of these was provision for convening a committee of experts of the interested states which should “reconcile the material necessities with the spirit of President Hoover’s proposal”.

This International Committee of Experts was appointed by Germany, Belgium, the United Kingdom, France, Italy, and Japan. Its report of August 11, 1931 was accompanied by a protocol concerning Germany signed, in addition to the governments named, on behalf of Canada, Australia, New Zealand, the Union of South Africa, India, Greece, Poland, Portugal, Rumania, Czechoslovakia, and Yugoslavia. Annexes provided in detail (a) for continued payment of the unconditional annuity under the New (Young) Plan in monthly instalments, which were to be immediately loaned to the German Railway Company after deduction of service of the German Government International 5½ percent Loan, 1930, and (b) for limited continuance of deliveries in kind. Further protocols concerned Czechoslovakia and the French, Belgian, Rumanian, Portuguese, Greek, and Italian war debts and Hague annuities due to [Page 402] the United Kingdom (Report of the International Committee of Experts, Misc. No. 19 (1931), Cmd. 3947).

These arrangements for carrying out the Hoover moratorium did not effect a fundamental improvement in the economic situation. German banks had been closed from July 13 to 15 and foreign-exchange restrictions multiplied thereafter. The London experts on July 23 asked the Bank for International Settlements “to set up without delay a committee of representatives nominated by the governors of the central banks interested to inquire into the immediate further credit needs of Germany and to study the possibilities of converting a portion of the short term credits into long term credits”. This committee, which was nominated by the governors of the nine principal central banks and the Federal Reserve Bank of New York, met at Basel August 8 and concluded its report on August 18. (Bank for International Settlements, Report of the Committee appointed on the Recommendation of the London Conference, 1931.) The committee, of which Albert H. Wiggin of New York was chairman, urged “most earnestly upon all governments concerned that they 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.” It found that during the seven years 1924–30 Germany’s foreign indebtedness grew faster than its foreign assets by 18,200,000,000 Reichsmarks. The total of foreign investments in Germany was given at 25,500,000,000 Reichsmarks, with German investments abroad of 9,700,000,000 Reichsmarks, leaving the net debt to foreigners at 15,800,000,000 Reichsmarks. The influx of capital and receipts for services amounting to 21,200,000,000 Reichsmarks during 1924–30 enabled Germany to pay 10,300,000,000 Reichsmarks as reparation and to pay for 6,300,000,000 Reichsmarks of imports over and above exports which included deliveries in kind, with 4,600,000,000 Reichsmarks for interest and foreign devisen.

The Standstill Agreement, which provided for the delayed realization of private foreign accounts, was first concluded on September 17. On September 21 the United Kingdom suspended the gold standard, and 14 other countries had followed that example or introduced exchange restrictions by the end of October.

On November 19, 1931 the German Government made the request provided for in the second sentence of section 119 of the New (Young) Plan, which reads: [Page 403]

“Upon the declaration of any postponement the Bank for International Settlements shall convene the Special Advisory Committee. At any other time when the German Government declare to the creditor Governments and to the Bank for International Settlements 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, the committee shall also be convened.”

The Bank for International Settlements convoked the Special Advisory Committee which, under the chairmanship of Alberto Beneduce of Italy, made a report signed at Basel on December 23, 1931. This committee gave credence to the claim 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.” With reference to the larger question the report said:

“Again, the adjustment of all inter-governmental debts (reparations and other war debts) to the existing troubled situation of the world—and this adjustment should take place without delay if new disasters are to be avoided—is the only lasting step capable of reestablishing confidence which is the very condition of economic stability and real peace” (Bank for International Settlements, Report of the Special Advisory Committee, December 1931).

On December 16, 1931 it was reported by the Secretary of State to the Congress of the United States that the President’s proposal had been accepted, subject to legislative approval, by Australia, Austria, Belgium, Bulgaria, Canada, Czechoslovakia, Estonia, Finland, France, Germany, Greece, Hungary, India, Italy, Japan, Latvia, Lithuania, New Zealand, Poland, Portugal, Rumania, South Africa, United Kingdom (Department of State, Press Releases, Dec. 16, 1931, p. 582). On December 23, the President approved a joint resolution of Congress (47 Stat. 3) providing for postponement with Austria, Belgium, Czechoslovakia, Estonia, Finland, France, Germany, Great Britain, Greece, Hungary, Italy, Latvia, Lithuania, Poland, Rumania, and Yugoslavia. Agreements with the debtors of the United States were concluded in May, June, and September 1932 to give this moratorium effect.

This law stipulated that each agreement “on behalf of the United States shall provide for the payment of the postponed amounts, with interest at the rate of 4 per centum per annum beginning July [Page 404] 1, 1933, in ten equal annuities.” Article 3 of the London protocol of August 11, 1931 provided for the payment of the reparation tax due by the German Railway Company in 10 equal annuities from July 1, 1933 at the rate of 3 percent. The joint resolution of Congress had further stipulated “that no such agreement shall be made with the government of any country unless it appears to the satisfaction of the President that such government has made … an agreement in respect of [its] debt substantially similar to the agreement authorized by this joint resolution.” In view of this condition the 16 governments which joined in the protocol of August 11, 1931 signed at Berlin on June 6, 1932 (Martens, Nouveau recueil général de traitćs, 3e série, xxvii, 16) a protocol which raised the interest on the German Railway Company obligations from 3 percent to 4 percent, making the annuity 123,315,115 Reichsmarks instead of 117,831,000.


The governments of Germany, Belgium, France, United Kingdom, Italy, and Japan at Geneva on February 13, 1932 announced their intention of convoking a conference at Lausanne “to agree to a lasting settlement of the questions raised in the report of the Basel Experts on the measures necessary to solve the other difficulties which are responsible for, and may prolong, present world crises.”

Gathering on June 16 at Lausanne, Switzerland, the governments of the United Kingdom, France, Italy, Belgium, and Japan signed a declaration that “the execution of the payments due to the Powers participating in the conference in respect of reparations and war debts should be reserved during the period of the conference.” This declaration carried forward the “Hoover moratorium” beyond its original term, and made continued relief from what the Bank for International Settlements called “the growing financial paralysis of the world” by extension of the moratorium the basic assumption of the agreement reached at Lausanne. Failure to realize that assumption accounted in part for the inability to make the Lausanne agreement effective.

In addition to Germany and the states signing the Declaration of June 16, Australia, Canada, Greece, India, New Zealand, Poland, Portugal, Rumania, Czechoslovakia, Union of South Africa, and Yugoslavia at the close of the conference signed on July 9, 1932 an agreement which was calculated to put an end to reparation (United Kingdom, Final Act of the Lausanne Conference, Misc. No. 7 (1932), Cmd. 4126).

[Page 405]

Article 1 of this agreement reads:

“The German Government shall deliver to the Bank for International Settlements German Government 5 per cent redeemable bonds, to the amount of three milliard reichsmarks gold of the present standard of weight and fineness, to be negotiated, under the following arrangements:—

“(1) The Bank for International Settlements shall hold the bonds as trustee.

“(2) The Bonds shall not be negotiated by the Bank for International Settlements before the expiry of three years from the signature of the present Agreement. Fifteen years after the date of the said signature the Bonds which the Bank for International Settlements has not been able to negotiate shall be cancelled.

“(3) After the above period of three years the Bank for International Settlements shall negotiate the Bonds by means of public issues on the markets as and when possible, in such amounts as it thinks fit, provided that no issue shall be made at a rate below 90 per cent.

“The German Government shall have the right at any time to redeem at par, in whole or in part, the Bonds not yet issued by the Bank for International Settlements. In determining the terms of issue of the Bonds, the Bank for International Settlements shall take into account the desirability of giving to the German Government the right to redeem the Bonds after a reasonable period.

“(4) The Bonds shall carry interest at 5 per cent, and sinking fund at 1 per cent. as from the date on which they are negotiated. They shall be free of all German taxes, present and future.

“(5) The proceeds of the Bonds, as and when issued, shall be placed to a special account, the allocation of which shall be settled by a further agreement in due course between the Governments, other than Germany, signatory to the present Agreement.

“(6) If any foreign loan is issued by the German Government, or with its guarantee, at any time after the coming into force of the present Agreement, the German Government shall offer to apply up to the equivalent of one-third of the net cash proceeds of the loan raised to the purchase of Bonds held by the Bank for International Settlements. The purchase price shall be such that the net yield on the Bonds so purchased would be the same as the net yield of the loan so raised. This paragraph does not refer to loans for a period of not more than twelve months.

[Page 406]

“(7) If, after five years from the signature of the present Agreement, the Bank for International Settlements considers that the credit of the German Government is restored, but the quotations of its loans remain none the less below the minimum price of issue fixed under paragraph (3) above, the minimum price may be varied by a decision of the Board of the Bank for International Settlements, which decision shall require a two-thirds majority.

“Further, at the request of the German Government, the rate of interest may be reduced below 5 per cent, if issues can be made at par.

“(8) The Bank for International Settlements shall have power to settle all questions as to the currency and denomination of bonds issued, and also all questions as to charges and costs of issue, which it shall have the right to deduct from the proceeds of the issue. In considering any questions relating to the issue of Bonds, the Board of the Bank for International Settlements shall take the advice of the President of the Reichsbank, but decisions may be made by a majority vote.”

The Lausanne agreement of July 9, 1932 was to put an end to and be substituted for the reparation regime provided for in (1) the agreement on the final acceptance of the plan of the Committee of Experts of January 20, 1930 (104 League of Nations Treaty Series, p. 243); (2) the agreement of August 11, 1931 (Department of State, Press Releases, Aug. 14, 1931, p. 151; London, United Kingdom, Report of International Committee of Experts, Misc. No. 19 (1931), Cmd. 3947); and (3) the agreement signed at Berlin on June 6, 1932. The Lausanne obligations would “completely replace the former obligations of Germany comprised in the annuities of the New Plan”. The 1932 agreement was to come into force when the ratifications of Germany, Belgium, France, the United Kingdom, Italy, and Japan were deposited in Paris. Such a deposit did not occur. The obligations of the agreement of January 20, 1930 were therefore not abrogated, and the debt certificate evidencing obligations under the New Plan was not returned to the German Government.

The non-ratification of the Lausanne agreement was due to the failure to obtain reconsideration of other intergovernmental debts. By the procès-verbal, initialed on July 2, 1932, on behalf of Belgium, Great Britain, France, and Italy, and communicated to Germany, this interrelation was asserted. The procès-verbal reads (Further Documents relating to the Settlement reached at the Lausanne Conference, [Page 407] Lausanne, June 16–July 9, 1932; Misc. No. 8 (1932), Cmd. 4129):

“The Lausanne Agreement will not come into final effect until after certification as provided for in the Agreement. So far as the Creditor Governments on whose behalf this procès-verbal is initialled are concerned, ratification will not be effected until a satisfactory settlement has been reached between them and their own creditors. It will be open to them to explain the position to their respective Parliaments, but no specific reference to it will appear in the text of the agreement with Germany. Subsequently, if a satisfactory settlement about their own debts is reached, the aforesaid Creditor Governments will ratify and the agreement with Germany will come into full effect. But if no such settlement can be obtained, the agreement with Germany will not be ratified; a new situation will have arisen and the Governments interested will have to consult together as to what should be done. In that event, the legal position, as between all the Governments, would revert to that which existed before the Hoover Moratorium.

“The German Government will be notified of this arrangement.”

At the plenary meeting on July 9 the British, French, and Italian Government spokesmen put on record the following declaration:

“The effect of the Declaration of the Conference signed on the 16th June, 1932, is extended to cover the suspension of payments due in respect of such War Debts until the Lausanne Agreement with Germany which we are signing today has come into force or until a decision has been notified that it will not be possible to ratify that Agreement.”

The Department of State issued a statement on July 9, in which it was said (Press Releases, July 9, 1932, p. 30):

“The American Government is pleased that, in reaching an agreement on the question of reparations, the nations assembled in Lausanne have made a great step forward in the stabilization of the economic situation in Europe.

“On the question of war debts owing to the United States by European Governments there is no change in the attitude of the American Government …”

Attached to the Final Act of the Lausanne Conference was a resolution inviting the League of Nations to convoke at a convenient [Page 408] date a conference on monetary and economic questions, the United States to be represented in the preparatory committee on the same basis as the principal inviting states. The resolution included an agenda for the contemplated conference. The Council convened a Preparatory Commission of Experts which drew up a Draft Annotated Agenda (League of Nations, Doc. C.48.M.18.1934. II.Spec.1.) which on its publication January 19, 1933 was accepted as a sound analysis of the critical monetary and economic problems confronting the world.

The President of the United States, since March 4 Franklin D. Roosevelt, held personal exchanges of views with 53 countries in advance of the conference (Department of State, Press Releases, May 27, 1933, p. 386).

The conference convened at London on June 12, 1933 and adjourned on July 27, without reaching conclusions on the essential phases of the economic problem (League of Nations, Official Journal, 1933, p. 1470). Inability to adjust differences of view with respect to monetary and credit policy and international exchanges was the chief reason for lack of results. Before the conference the United States passed an act “to relieve the existing national emergency”, approved May 12, 1933, sec. 43 (b) (2) of which authorized changing the metallic content of the dollar (48 Stat. 31, 52).

Great Britain made an agreement on July 4, 1934 with the German Reich for the continuance of the service of German Government loans with sterling funds (168 League of Nations Treaty Series, p. 79; 177 ibid., p. 477; 181 ibid., p. 434; 185 ibid., p. 437). These arrangements were modified and superseded by a transfer agreement signed at London, July 1, 1938 (194 ibid., p. 235) with a supplementary agreement on August 13, 1938 (ibid., p. 257). The 1938 agreements made provision for Germany’s servicing foreign obligations of the Austrian Federal Republic but “without admission of legal liability”.


Payments Credited to Germany

[Page 409]
Credited by Reparation Commission: Reichsmarks
Value of ceded property 2,553,905,000.00
Payments, 1920 and 1921 3,970,835,000.00
Payments, 1922 1,402,686,000.00
Ruhr period, Jan. 11, 1923–Aug. 31, 1924 894,231,000.00
Payments and adjustments, Sept. 1, 1924–Jan. 20, 1930 1,604,060,401.59
Total 10,425,717,401.59
Transfer under Dawes Plan, Sept. 1, 1924–May 17, 1930:
1st annuity year, 1924–25 893,241,499.40
2d annuity year, 1925–26 1,175,876,966.72
3d annuity year, 1926–27 1,382,088,379.35
4th annuity year, 1927–28 1,739,297,195.41
5th annuity year, 1928–29 2,452,842,213.37
Sept. 1, 1929–May 17, 1930 305,642,494.38
Total discount on advance payments of service of railway bonds and industrial debentures 29,278,031.48
Total 7,978,266,780.11
Transfers by Trustee (Bank for International Settlements):1
May 17, 1930–Mar. 31, 1931 1,312,026,920.10
Apr. 1, 1931–Mar. 31, 1932 961,294,221.99
Apr. 1, 1932–Mar. 31, 1933 299,365,265.74
Apr. 1, 1933–Mar. 31, 1934 102,224,750.80
Apr. 1, 1934–Mar. 31, 1935 23,060,374.86
Apr. 1, 1935–Mar. 31, 1936 (including balances) 125,774,503.56
Total 2,823,746,037.05
Held2 as at Mar. 31, 1937 220,744,930.00
Grand total 21,448,475,148.75

The Reparation Commission utilized payments effected by Germany outside of the Dawes Plan from November 11, 1918 to January 20, 1930 amounting to 10,425,717,401.59 gold marks, of which 537,921,670.97 gold marks canceled “C” bonds. By categories the amount was distributed as follows: [Page 410]

Cash 2,345,061,818.98
Reparation Recovery Act 372,625,524.74
Armistice and treaty 3,490,326,281.99
Against “C” bonds 432,037,816.32
Total 4,294,989,623.05
Cessions and public debt 3,006,742,166.45
Army of occupation costs 778,923,731.11
Grand total 10,425,717,401.59

German borrowings abroad have frequently been connected with discussions of the payments of reparation. Undoubtedly the foreign exchange acquired from external German loans was extensively used in effecting reparation payments. According to the Foreign Bondholders’ Protective Council, Inc., Annual Report, 1940, there were 62 issues of German dollar bonds guaranteed by the government and 68 issues without government guaranty of a total value of $1,524,655,000 and outstanding value of $840,389,113, all of which were in default as a result of the German moratorium of June 9, 1933 and subsequent action.

German external obligations in 1940 were held to include loans negotiated by Austria before March 13, 1938. The Austrian loans were issued in 13 currencies in addition to dollars and were nearly half of the amount outstanding in 1940. The combined German and Austrian obligations in 1940 in currencies other than dollars were—

[Page 411]
1939 Issued Outstanding Total in U.S. dollar equivalents1
Issued Outstanding
£ Sterling 67,758,100 51,407,388 $300,507,173 $227,991,766
Swiss francs 337,279,000 270,103,270 75,887,775 60,773,236
Swedish kronor 154,366,800 129,761,406 36,893,665 31,012,977
Lire 644,250,000 522,994,015 33,501,000 27,195.689
Francs 3,250,029,500 2,759,101,740 81,250,737 68,977,542
Florins 82,020,000 67,874,052 43,470,600 35,973,248
Belgas 43,003,000 37,803,907 7,246,005 6,369,958
Belgian francs 10,000,000 6,239,500 333,000 207,775
Reichsmarks 36,000,000 31,905,685 14,400,000 12,762,274
£ Egyptian 200,000 138,770 957,600 664,431
Drachmai 2,000,000 503,600 36,400 9,166
Austrian schillings 50,000,000 41,576,000 9,450,000 7,857,864
Czech crowns 364,612.000 359,313,000 12,615,575 12,432,230
Pesetas 33,940,500 33,940,500 3,607,875 3,607,875
Total $620,157,405 $495,836,031

According to article 231 of the treaty of Versailles, article 177 of that of Saint-Germain-en-Laye, and article 161 of that of Trianon, Germany, Austria, and Hungary were-jointly responsible for reparation.

Payments and deliveries to January 20, 1930 were credited to other ex-enemy states as follows:

Gold crowns
Austria 8,379,227.54
Hungary 65,246,778.00
Gold francs
Bulgaria 42,965,168.03
Property cessions 23,460,000.00

Property cessions by Austria-Hungary raised difficult questions of evaluation on account of the organization of the former Dual Monarchy. The property involved was state property such as public buildings and railroads and public debts. Czechoslovakia, Italy, Poland, Rumania, and Yugoslavia each was entitled to receive credits in these categories, but the property had been variously held by the Empire of Austria, the Kingdom of Hungary, and the Austro-Hungarian Monarchy in common. The problem of evaluation involved credits for delivery to each of these three political entities (including division of the common holdings) and credits on account of shipping and rolling stock of divers ownership; all of which was to be allocated among five cessionary states. In the Committee on Ceded Properties of the Reparation Commission three groups had arrived at minimum and maximum evaluations by January 20, 1930. The three minimum evaluations were: [Page 412]

Gold crowns
French and British members 8,210,797,478
Italian members 11,936,680,754
Common delegation (Czechoslovak, Pole, Rumanian, and Yugoslav) 4,109,881,125

An estimate of non-German reparation by the Portuguese delegation put the total at 15,000,000,000 gold marks.

Conspectus of All Payments To Be Made Under the New (Young) Plan, 1930–66

Annuity Year Year ending March 31 Germany (Reichsmarks) Bulgaria (Gold francs) Hungary (Gold crowns) Czecho-slovakia (Reichsmarks)
Young annuity United States Belgium
1 1930 676.9 65.9 16.2 5.0 7.0 10.0
2 1931 1,641.6 66.3 21.5 10.0 8.0 10.0
3 1932 1,618.9 66.1 21.5 10.0 9.0 10.0
4 1933 1,672.1 66.1 21.5 10.0 10.0 10.0
5 1934 1,744.9 59.4 26.0 10.0 11.0 10.0
6 1935 1,807.5 59.4 26.0 10.0 12.0 10.0
7 1936 1,833.5 59.4 26.0 10.0 13.0 10.0
8 1937 1,880.3 59.4 26.0 10.0 13.0 10.0
9 1938 1,919.8 57.2 26.0 10.0 13.0 10.0
10 1939 1,938.1 57.2 26.0 10.0 13.0 10.0
11 1940 1,983.4 59.4 26.0 10.0 13.0 10.0
12 1941 2,096.1 59.4 26.0 11.5 13.0 10.0
13 1942 2,114.6 66.1 20.1 11.5 14.0 10.0
14 1943 2,131.9 66.1 20.1 11.5 14.0 10.0
15 1944 2,128.2 66.1 20.1 11.5 13.5 10.0
16 1945 2,141.4 66.1 20.1 11.5 13.5 10.0
17 1946 2,137.7 66.1 20.1 11.5 13.5 10.0
18 1947 2,133.4 66.1 20.1 11.5 13.5 10.0
19 1948 2,149.1 66.1 20.1 11.5 13.5 10.0
20 1949 2,143.9 66.1 20.1 11.5 13.5 10.0
21 1950 2,240.7 76.1 9.3 11.5 13.5 10.0
22 1951 2,283.1 76.1 9.3 12.5 13.5 10.0
23 1952 2,267.1 76.1 9.3 12.5 13.5 10.0
24 1953 2,270.1 76.1 9.3 12.5 13.5 10.0
25 1954 2,277.2 76.1 9.3 12.5 13.5 10.0
26 1955 2,288.5 76.1 9.3 12.5 13.5 10.0
27 1956 2,283.7 76.1 9.3 12.5 13.5 10.0
28 1957 2,278.1 76.1 9.3 12.5 13.5 10.0
29 1958 2,285.7 76.1 9.3 12.5 13.5 10.0
30 1959 2,317.7 76.1 9.3 12.5 13.5 10.0
31 1960 2,294.5 76.1 9.3 12.5 13.5 10.0
32 1961 2,304.4 76.1 9.3 12.5 13.5 10.0
33 1962 2,322.2 76.1 9.3 12.5 13.5 10.0
34 1963 2,314.1 76.1 9.3 12.5 13.5 10.0
35 1964 2,326.5 76.1 9.3 12.5 13.5 10.0
36 1965 2,326.0 76.1 9.3 12.5 13.5 10.0
37 1966 2,352.7 76.1 9.3 12.5 13.5 10.0
Totals 76,925.6 2,557.7 607.6 420.2 473.5 370.0
[Page 413]
  1. The general bond of the 800,000,000 gold marks German loan of October 10, 1924 is printed in Reparation Commission, Documents, xiv, 318. It met the greater part of the first annuity of 1,000,000,000 gold marks.

    The four additional annuities, in gold marks, were: September 1924–August 1925, 1,220,000,000; September 1925–August 1926, 1,200,000,000; September 1926–August 1927, 1,750,000,000; September 1927–August 1928, 2,500,000,000.

  2. The international agreement in regard to the German 5½-percent loan, 1930, was signed at Paris June 10, 1930 and determined the text of the general bond between Germany and the Bank for International Settlements (United Kingdom, Foreign Office, Treaty Series No. 7 (1931), Cmd. 3761).
  3. Does not include servicing of Austrian Government International Loan 1930, and Czechoslovak, Bulgarian, and Hungarian accounts. The German External Loan 1924 was not serviced in July 1934 and thereafter through the Bank for International Settlements. The German Government International 5½-percent Loan 1930 was not fully serviced by Germany after July 1933. Transfer arrangements with respect to loans were later made by several governments with Germany.
  4. In Swiss gold francs, consisted of annuity Trust Account Deposits, 153,157,500; German Government Deposit, 76,578,750; French Government Guarantee Fund, 42,818,835.73.
  5. Dollar equivalent at average exchange rate for 1939, according to Federal Reserve Board, Banking and Monetary Statistics. Exchange rates employed were £ sterling ($4,435); Swiss francs ($0,225); Swedish kronor ($0,239); lire ($0,052); francs ($0,025); florins ($0.53); belgas ($0.1685); Belgian francs ($0.0333); Reichsmarks ($0.40); £ Egyptian ($4,788); drachma! ($0.0182); Austrian schillings ($0,189); Czech crowns ($0.0346); pesetas ($0.1063).