462.00 R 296/16

The Secretary of State to the British Chargé (Chilton)

My Dear Mr. Chilton: I thank you for sending me the Aide-Mémoire recording the communication which you made to me on the thirteenth instant. I enclose a memorandum recording my reply thereto.

Permit me to add that while, of course, I shall treat your communication as confidential in accordance with your request, it is necessary for me to reserve the right to publish my reply in case the fact of the suggestion of your Government or of my answer should become public, or should be made known to other Powers, and it should be important that the attitude of the American Government should be made clear.24

I am [etc.]

Charles E. Hughes

The Secretary of State to the British Chargé (Chilton)


In reply to the communication of His Majesty’s Chargé d’Affaires, of October thirteenth, the Secretary of State desires again to express the deep interest of the United States in the economic situation in Europe and its readiness to aid in any practicable way to promote recuperation and a re-establishment of economic stability. The Government of the United States has viewed with deep concern the lack, as His Majesty’s Government expresses it, of that unity of thought on the part of the European Powers essential to common action. The views of the Government of the United States as to the importance of agreement among the Allies and the relations of the Government of the United States to the questions involved were set forth in the statement of the Secretary of State to which His Majesty’s [Page 71] Government refers, and these views are still held. It is observed that His Majesty’s Government states that Great Britain and Germany made it clear that the proffered assistance would be warmly welcomed by them, and that His Majesty’s Government has always heartily approved the suggestion, then made by the Secretary of State, whenever it has been revived, and that so far as His Majesty’s Government is aware the sole reason why the proposal has not been proceeded with has been lack of unanimity among the interested Powers.

It is believed that present conditions make it imperative that a suitable financial plan should be evolved to prevent economic disaster in Europe, the consequences of which would be world wide. It is hoped that existing circumstances are propitious for the consideration of such a plan inasmuch as the abandonment of resistance on the part of the German Government will present a freer opportunity and an immediate necessity for establishing an economic program. The Government of the United States is therefore entirely willing to take part in an economic conference, in which all the European Allies chiefly concerned in German reparations participate, for the purpose of considering the questions of the capacity of Germany to make reparation payments and an appropriate financial plan for securing such payments. It is deemed advisable, however, to emphasize the following points:

Confirming what was said by the Secretary of State in his statement of last December to which you refer, the Government of the United States has no desire to see Germany relieved of her responsibility for the war or of her just obligations. There should be no ground for the impression that a conference, if called, should have any such aim or that resistance to the fulfillment of Germany’s obligations has any support. It should be evident that in the effort to attain the ends in view, regard must be had to the capacity of Germany to pay and to the fundamental condition of Germany’s recuperation without which reparation payments will be impossible.
Such a conference should be advisory; not for the purpose of binding governments who would naturally be unwilling to pledge their acceptance in advance, but to assure appropriate recommendations by a thoroughly informed and impartial body intent upon the solution of the difficult pending problems upon their merits.
The Secretary of State notes the observation in the communication of His Majesty’s Government that the European problem is of direct and vital interest to the United States “if for no other reason because the question of interallied debt is involved therein.” The Government of the United States has consistently maintained the essential difference between the questions of Germany’s capacity to pay, and of the practicable methods to secure reparation payments from Germany, and the payment by the Allies of their debts to the United States which constitute distinct obligations. In the statement [Page 72] of the Secretary of State, to which His Majesty’s Government refers, it was said:

“The matter is plain enough from our standpoint. The capacity of Germany to pay is not at all affected by any indebtedness of any of the Allies to us. That indebtedness does not diminish Germany’s capacity, and its removal would not increase her capacity. For example, if France had been able to finance her part in the war without borrowing at all from us, that is, by taxation and internal loans, the problem of what Germany could pay would be exactly the same. Moreover, so far as the debtors to the United States are concerned, they have unsettled credit balances, and their condition and capacity to pay cannot be properly determined until the amount that can be realized on these credits for reparations has been determined.

“The Administration must also consider the difficulty arising from the fact that the question of these obligations which we hold, and what shall be done with them, is not a question within the province of the Executive. Not only may Congress deal with public property of this sort but it has dealt with it. It has created a Commission and instead of giving that Commission broad powers such as the Administration proposed, which quite apart from cancellation might permit a sound discretion to be exercised in accordance with the facts elicited, Congress has placed definite restrictions upon the power of the Commission in providing for the refunding of these debts.”

It is hardly necessary to add, as it has frequently been stated by the Government of the United States, that while the American people do not favor cancellation of the debts of the Allies to the United States or of the transfer to the people of the United States of the burden of Germany’s obligations, directly or indirectly, the Government of the United States has no desire to be oppressive or to refuse to make reasonable settlements as to time and terms of payment, in full consideration of the circumstances of the Allied debtors. It may be added that the establishment of sound economic conditions in Europe, the serious reduction of military outlays and the demonstration of a disposition of European peoples to work together to achieve the aims of peace and justice will not fail to have their proper influence upon American thought and purpose in connection with such adjustments.

In further reply to the communication of His Majesty’s Government it may be said that the Government of the United States is not in a position to appoint a member of the Reparation Commission inasmuch as such an appointment cannot be made without the consent of the Congress. The Secretary of State has no doubt, however, that competent American citizens would be willing to participate in an economic inquiry, for the purposes stated, through an advisory body appointed by the Reparation Commission to make recommendations, in case that course after further consideration should be deemed preferable.

As to the further question, whether American cooperation in an inquiry for the purposes described in the communication of His Majesty’s Government could be hoped for in case unanimity of the European Powers could not be had, the Government of the United States must again express the view that the questions involved cannot [Page 73] be finally settled without the concurrence of the European Governments directly concerned. Other governments cannot consent for them; and it would manifestly be extremely difficult to formulate financial plans of such importance and complexity without the participation of those whose assent is necessary to their fulfillment. In view of the existing exigencies it is hoped that the project of such an inquiry as is contemplated of an advisory nature, might commend itself to all these Powers and that the question suggested will not arise. But if it should arise, through lack of unanimity on the part of the European Powers, the Government of the United States must reserve decision as to its course of action in order that the developments in such a contingency may be fully considered and that course taken which will give best promise of ultimate success in securing the desired end of reestablishing the essential conditions of European peace and economic restoration. To the attainment of that end it may be repeated the Government of the United States desires to lend its assistance in any manner that may be found feasible.

  1. The Department’s reply was made public on Oct. 26.