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

462.00 R 29/2804

The German Ambassador ( Wiedfeldt ) to the Secretary of State

[Translation]

Washington , June 7, 1923 .

Mr. Secretary of State: The German Government has received different replies from the Allied Governments to its note of May 2nd. In order to avoid everything which might render more difficult the continuation of the interchange of views the German Government considers it should in its counter-reply confine itself to those points on which the Allied Governments, as expressed in their replies, held similar views. Owing to this consideration my Government has instructed me to transmit the enclosed memorandum to the Government of the United States of America.

In doing so, I may remark that the same communication is being made to His Britannic Majesty’s Government, to the French Government, to the Royal Italian Government, to the Royal Belgian Government and to the Imperial Japanese Government.

Accept [etc.]

O. Wiedfeldt

[Enclosure—Translation]

Memorandum

1. The German Government after careful and conscientious examination expressed its sincere opinion as to what Germany is able to pay in reparations. The German Government would not act honestly nor bring the problem nearer to its real solution, if, merely in order temporarily to alleviate the political difficulties of the day, it were to promise more than what according to its conviction, the German nation by exerting all its powers is in a position to fulfil.

The question of Germany’s capacity to pay is, however, a question of facts about which various opinions are possible. Germany does not fail to recognize that under the present circumstances it is exceedingly difficult to achieve a reliable estimate. For this reason the German Government proposed to accept the verdict of an impartial international body as regards the amount and the mode of payments to be made. A more convincing proof of Germany’s will to do reparations is unthinkable. The German Government is willing to produce all material for a reliable judgment on the question of Germany’s capacity to pay. The German Government will on demand grant every facility to investigate Germany’s state finances and also give all information desired as regards the economic resources of Germany.

2. The German Government had contemplated the floating of large loans in order as soon as possible to pay the creditor nations large amounts of capital. As long as the floating of loans in large amounts proves to be impracticable, the German Government is also willing to agree to a system of annuities instead of sums of capital.

3. As the Allied Governments lay stress on receiving now already more detailed information as regards the choice and nature of the guarantees contemplated by Germany, the German Government suggests the following guarantees for the accomplishment of the final reparations plan:

a. The state railways with all their constructions and assets to be severed from the other capital of state and to be converted into a separate estate independent as regards its proceeds and expenditures from the general administration of finances, and to be placed under separate administration. The state railways to issue gold bonds amounting to ten billion goldmarks which are to be entered as a first lien on the separate estate bearing 5% interest as after July 1st, 1927, thus guaranteeing an annuity of 500 million goldmarks.

b. In order to guarantee a further annuity of 500 million goldmarks as after July 1st, 1927, the German Government will immediately call upon the entire German economic system, i. e. the industries, banks, commerce, traffic, and agriculture to act as a guarantee which as a first lien amounting to ten billion goldmarks will be entered in the industrial, urban, rural, and forest real estate of Germany. The annuities of 500 million goldmarks will either be raised indirectly by universal taxation comprising also other property or directly only by the mortgaged objects.

c. Besides that the duties on table luxuries and the duties on tobacco, beer, wine and sugar, as well as the proceeds of the monopoly for the sale of spirits, are to be pawned as a guarantee for the annuities. The gross receipts of these taxes and of these duties amounting during the last years before the war to an average of approximately 800 million marks, have however since, owing to the loss of people and territory as well as owing to reduced consumption, declined to one quarter of their former value. But these receipts will, with the recuperation of German economics, rise automatically.

4. Lastly, the German Government considers itself bound to lay stress on the following:

In such a large and complicated question decisive progress cannot be made by written expositions but only by oral intercourse at a conference. Germany’s capacity to pay depends on the mode of solution of the entire problem. The method of payment can only be agreed upon in direct conversation with those entitled to receive payment. The establishment of guarantees in their details makes the co-operation of those necessary for whom the guarantees are to be established. For a solution of these questions oral discussions are necessary.

Germany acknowledges her obligation to pay reparations. The German Government reiterates its request to call a conference in order to agree upon the best mode to fulfil this obligation.

Washington , June 7, 1923 .