800.51 W 89Czechoslovakia/105: Telegram

The Minister in Czechoslovakia (Einstein) to the Secretary of State

41. Your 29, July 21, 6 p.m. Have received 15-page note signed by the Minister for Foreign Affairs.12 In this, after reiterating statements already transmitted, Czechoslovak Government:

1. Gives formal assurance of recognizing $80,234,000 as its debt to the United States.

2. In accordance with the desire of the American Government it will proceed either to verify the unconfirmed balance or else adjudicate this in round figures without verification.

3. The Czechoslovak Government is not at present in a position to make a concrete proposition [as?] regards the payment or funding of the debt. In order, however, to show its intention to fulfill its obligations and to carry these out immediately it proposes to the United States Government without prejudice to other eventual decisions, to insert at once in the 1926 budget the sum of $2,500,000 to be paid during 1926 as a first installment on their recognized debt of $80,234,000.

Not knowing the financial situation in 1927, it cannot yet state what sum will be reserved for the next payment in 1927. The payment effected in 1926 will, however, be followed regularly by other annual payments. It thereby wishes to give concrete public notice [of] its intention to carry out its obligations. It hopes that the United States Government will likewise show good will. The Czechoslovak Government does not wish at once to ask for a moratorium but would be obliged to do so if the negotiations with the Debt Commission at Washington were to impose annual charges greater than its actual situation could bear.

4. The Czecho[slovak] Government does not submit any proposed basis regarding its debt to the United States:

(a)
Because the total sum has not been definitely established, although this need not prevent negotiations nor the payment of installments.
(b)
The Czechoslovak Government is not yet in a position to determine with certainty its actual or future financial situation; it believes that all negotiations for the remittance war and post-war debts should be based on the capacity to pay. It does not seek to assimilate nor to link its indebtedness with the different obligations of Allied or enemy states and recognizes that the United States Government regards the Czechoslovak debt as an obligation of a different nature from these.
(c)
It believes that [as] the United States Government has adopted the principle of proceeding with debt settlement in accordance with the particular situation in each debtor state, the Czechoslovak Government has no wish to appeal to the United States Government by the example of other states but desires to bring its attention to its own flagrant situation. A brief statement of this follows. It says that if in view of these circumstances we must prepare for a settlement of our debt to the United States we shall find ourselves “singularly embarrassed.” There follows an account of the financial sacrifices made by Czechoslovakia since the war in stabilizing exchange and in taxation. The hope is expressed that Czechoslovakia will not be penalized for these efforts which have assisted European reconstruction but will be able to enjoy the application of the same principles which underlay the reconstruction of Austria,13 of Hungary,14 and the Dawes Plan.15

For all these reasons it is difficult for the Czechoslovak Government to submit to the United States Government a full proposal for the settlement of its debts, instead it asks the United States Government to express its desires.

To prove the wish to carry out its obligations, Czechoslovakia will begin the payment of the debts even before the settlement is agreed upon unless future negotiations should otherwise provide. The rest can be left to the generosity of the American Government for whose services gratitude is expressed. The Czechoslovak Government is ready to negotiate the question either by diplomatic channels or by a special commission in accordance with the preference of the United States Government. In order, however, to give full information and the necessary instructions to the Czechoslovak delegates, the United States Government is asked to take into consideration the ideas expressed in this note and if possible reply to the suggestions submitted.

Text of the note with comments will be sent by pouch.

Einstein
  1. Not printed.
  2. See Foreign Relations, 1922, vol. i, pp. 613 ff.
  3. See ibid., 1924, vol. ii, pp. 325 ff.
  4. See Great Britain, Cmd. 2105 (1924): Reports of the Expert Committees Appointed by the Reparation Commission.