800.51 W 89Belgium/34b: Telegram

The Secretary of State to the Ambassador in Belgium (Phillips)


32. (1) Thomas W. Lamont called at the Department on May 25 to discuss the negotiations for proposed loan of $50,000,000 from J. P. Morgan and Company to Belgium. After consultation with the President and with the approval of Secretary of the Treasury Mellon and Secretary of Commerce Hoover, I informed Mr. Lamont that the Government of the United States would not look with favor upon any further loans to Belgium until that Government took definite steps in the direction of funding its indebtedness to the United States. I gave Mr. Lamont the substance of our recent note to Belgium and emphasized fact of Belgium’s discrimination against us in the matter of post-armistice relief debt. He said that his firm would not make loan if the United States objected. He also read me a cable from his European representative saying that the Belgians had stated that they were unable to take any steps toward funding their indebtedness to the United States until a new Government had been formed and until they had prescribed and passed their budget; and that they thought that they would be able to discuss a refunding arrangement about September. I informed Mr. Lamont that I regarded this prospect as unsatisfactory, that it was merely a repetition of what had taken place in the past, and that this was not the first time that the Belgian Ambassador was going over to discuss situation with his Government. If his Government could now negotiate for and contract a loan for $50,000,000 with American bankers, it should certainly take up negotiations on the debt to this Government.

(2) You will immediately seek appointment with the appropriate Belgian officials and will make the following oral statement:

The Belgian Government is at present negotiating with American bankers for sale to the American public through them of $50,000,000 of Belgian bonds. While the Government of the United States does not wish to oppose flotation by Belgium in the American market of loans essential to the financial reconstruction of Belgium, nevertheless [Page 115]the Belgian Government will appreciate that the Government of the United States has a responsibility which must lead it to see that national interests are protected. Further delay on Belgium’s part in funding its indebtedness to the Government of the United States might lead to differences between the two Governments which should be avoided. A settlement is clearly in the interests of both Governments. The Government of the United States will not interpose objection to flotation in the United States of proposed $50,000,000 loan by Belgium on condition that Belgian Government undertake at once to refund its entire indebtedness to the United States on following principles:98

  • “(a) In accordance with the policy prescribed by the debt funding act and the position consistently maintained by the Government of the United States, this Government looks solely to Belgium for payment of its indebtedness which on May 15, 1925, with principal and accrued and unpaid interest, aggregated over $480,000,000 and which, with the exception of about $2,000,000, is all payable on demand. Germany may not be substituted directly or indirectly for Belgium in respect of the pre-armistice debt.
  • (b) Settlement to be submitted to the approval of Congress, may be made along the lines of the British-American debt funding agreement,99 with amortization of the principal of the debt in sixty-two years and annual payments representing interest and installments of principal.
  • (c) Such postponement or payment of the earlier installments of interest or modification of rates of interest as may be required by the fiscal and economic condition of Belgium.”

No objection will be interposed by the Government of the United States to floating of proposed loan should it receive a communication in writing from the appropriate Belgian officials that Belgium accepts principles set forth in paragraphs (a), (b), and (c) of above statement and will send at earliest possible moment a commission to the United States to negotiate settlement with our Debt Funding Commission.

Settlements on substantially same basis have been reached with Great Britain, Finland, Hungary, Lithuania, and Poland.1

(3) You may hand to appropriate Belgian officials informal memorandum containing quoted paragraphs (a), (b), and (c) above.

(4) Please cable Department on action taken.

  1. Quoted passage not paraphrased.
  2. Combined Annual Reports of the World War Foreign Debt Commission, 1922–1926 (Washington, Government Printing Office, 1927), p. 106.
  3. See ibid., pp. 106, 120, 132, 144, and 156.