Papers Relating to the Foreign Relations of the United States, 1923, Volume II

462.00 R 29/2700

The German Embassy to the Department of State

The German Government has always maintained the point of view and considers itself obliged by the international discussion at the present time to emphasize anew that questions upon which the reconstruction, also desired by Germany, of the devasted areas and besides that the restoration of the sound economic life and peace of Europe depend, can only be solved by mutual understanding.

The occupation of the Ruhr is diametrically opposed to such aspirations and it therefore provoked the passive resistance of the Ruhr population.

The German Government shares the desire of all soberminded people that the daily increasing tension be relaxed and the wanton destruction of economic values cease. The German Government therefore has decided to make another attempt to arrive at an understanding without, however, abandoning its legal standpoint or desisting from the passive resistance, which will be continued until the areas occupied in excess of the stipulations of the Treaty of Versailles have been evacuated and the conditions on the Rhine restored according to the terms of the Rhineland agreement.²²

Notwithstanding the events of the last few months Germany has adhered to her willingness to do all in her power in order to make reparations and especially to reconstruct the devasted areas. Every effort, however, to convert this willingness into the form of practical proposals is rendered more difficult by the fact that owing to the condition of Germany’s financial and economic situation it is not possible to arrive at a tangible basis in fixed and definite figures for computing Germany’s economic and financial capacity. Therefore every solution must be sufficiently elastic to take the present impossibility of a reliable computation into consideration.

It should furthermore be noted that Germany owing to the lack of surplus from her own production will in the near future be unable to raise any large amounts of capital from her own resources, and that consequently she needs foreign loans which, however, can only be obtained after German credit has been restored. Taking these facts into consideration and in conformity with the general idea of the plan prepared by it for the conference in Paris in last January the German Government summarizes its proposals for the reparation’s problem and the political questions connected therewith, as follows:

The sum of Germany’s total obligations in cash and kind under the Treaty of Versailles to be fixed at 30 billion goldmarks of which twenty billions be raised before July 1, 1927, five billions before July 1, 1929, and five billions before July 1, 1931 by a bond issue at normal rates of interest on the international money market.

1.) The first twenty billion goldmarks to be offered for subscription immediately. Interest on bonds up to July 1, 1927, to be taken out of the proceeds of the loan and for purposes of security to be paid into a special fund under control of the Reparations Commission. If twenty billion goldmarks cannot be raised by means of a loan before July 1, 1927, interest of five per cent to be paid on that sum from said date in addition to one per cent for amortization.

2.) In case the two amounts of five billion goldmarks each cannot be raised fully by issues of bonds at normal rates before the dates fixed, an impartial international commission shall decide whether, when and how the amounts not yet accounted for are to be raised. The same commission would decide in July 1931 whether, when and how after July 1, 1923, the interest not provided for in the first instance is subsequently to be raised. As impartial international commission either the syndicate which puts up the first loan of twenty billion goldmarks or a committee of international businessmen according to the suggestions of Secretary of State Hughes—a committee on which Germany is to be represented with rights equal to those of other nations, is to be chosen. As third alternative the German Government proposes a court of arbitration composed of a representative of the Reparations Commission and a representative of the German Government together with a chairman whom the President of the United States would be requested to nominate in case the two other members fail to agree as to the nomination.

3.) Germany, in account of her obligations by the provisions of the existing treaties will also make payments in kind, the extent of which to be settled by detailed agreements.

The German Government is persuaded that by this offer it goes to the extreme limit of what Germany can do in employing all her strength and after the fresh grave disturbance and weakening of the German economic system by the occupation of the Ruhr, she questions whether this proposition does not exceed Germany’s capacity to pay. Moreover, the German Government is convinced that no impartial person taking into account the curtailment of the basic productive capacity of Germany and the diminution of the resources she possesses as the result of the heavy payments she has already made, can arrive at a higher valuation if he judges objectively. If this point of view should not be shared by the other side the German Government proposes in conformity with the suggestion made by the Secretary of State Hughes to submit the entire problem of reparations to an international commission free of any political influence. The entire property of Germany and all sources of income of Germany and of the German States are already pawned by the Treaty of Versailles. Only by way of negotiations with the International Loan Syndicate and the Reparations Commission it can be established how this mortgage is to take a concrete form for the purpose of serving the issue of the loan and which detailed guarantees are to be given. Besides that the German Government is willing according to the agreements still to be made, by appropriate measures and also by way of legislation to provide that the entire economic system of Germany has to contribute so as to assure the interest on the loan. The deliveries in kind to be guaranteed by private conventions covering long periods and stipulating penalties for non-fulfilment.

The execution of the obligations devolving upon Germany depends upon the stabilization of German currency. If German currency can be stabilized at the same time that the reparations problem is settled permanently, the fears of other industrial countries regarding German competition will simultaneously disappear. After the stabilization it will also be possible to create order in the household of the Ueich necessary to Germany and her creditors.

To accomplish this program and also in the interests of the creditors who subscribe to the loan it is necessary that for the future there be no seizure by force of guarantees and no application of sanctions and that Germany be freed from unproductive expenses and from the political and economic chains that still weigh upon her. To this end the unification of the administration throughout German territory should be restored as soon as possible and there should be no further application of treaty rights to interfere with Germany’s rights of equality and after German currency has been stabilized, Imports from Germany should be freed from the restrictions due to the fall of the Mark.

To further the peace of Europe by common economic effort and In order to re-establish the natural economic relations between producers and consumers, a basis is to be established for the unhampered exchange of vitally important commodities between the countries concerned by private economic conventions, among these above all by long-termed private contracts for the delivery of coke and coal.

The German Government with the same interest of peaceful cooperation between Germany and France in view as was her intention when she proposed the conclusion of the Rhineland pact is willing to accept any agreement calculated to secure peace and based on reciprocity. The German Government is more especially prepared to accept any agreement binding Germany and France to submit all conflicts which cannot be settled in the diplomatic way, to a peaceful international procedure, that is to say juridical conflicts to arbitration and all other conflicts to reconciliation after the example of the Bryan agreements.

The German Government proposes to enter negotiations on the preceding basis. The starting point of these negotiations must be that the status quo ante be re-established within the shortest possible delay. This includes that the territories occupied beyond those authorized by the provisions of the Treaty of Versailles be evacuated, the conditions in the Rhineland re-established conforming to the agreements, the arrested Germans liberated, and their homes and positions restored to those who have been expelled.

The German Government has addressed the same note to the Royal Belgian Government, the French Government, His Britannic Majesty’s Government, the Royal Italian Government and the Imperial Japanese Government.

Washington , May 2, 1923 .

22. For text of agreement, see S. Doc. 81, 66th Cong. 1st sess.; or Great Britain, Cmd. 222, Treaty Series No. 7 (1919): Agreement between the United States of America. Belgium, the British Empire and France and Germany with Regard to the Military Occupation of the Territories of the Rhine, Signed at Versailles, June 28th, 1919.