800.51 W 89France/52: Telegram
The Ambassador in France (Herrick) to the Secretary of State
8. Your number 2, January 2, 5 p.m. Following is translation of Clémentel’s memorandum on the state of French opinion relative to France’s debt with regard to the United States.
“1. For a long time French public opinion believed in a general cancelation of debts contracted between the Allies during the war. France was conscious of having given to the common cause more than any other nation in the world; she had sacrificed the greatest number of men; she gave her richest provinces for battlefields. She thought she was right in expecting the Allied nations to forgive her the sums she had asked of them in order to conduct the common war, as she herself would have forgiven her Allied debtors.
Furthermore this attitude of French opinion found its justification as regards the debt contracted towards the United States in the speeches that were made in 1917 in the American House of Representatives and the Senate and which it is unnecessary to recall here.
A perfect expression of French opinion at the end of the war and during the first years which followed the cessation of hostilities is summed up in Mr. Lloyd George’s speech in the House of Commons in February 1915: “A war alliance cannot be concluded on principles of limited responsibility. If one of the nations of the alliance has instructed and armed more men than another allied country is able to do it should use them against common enemy without considering the fact that the others cannot for the time being furnish a similar contribution. The same principle applies also to a nation which has greater resources in capital or credit. It should use them to the greatest extent for the good of the alliance even if the other nations may or may not be capable of making a similar contribution.”
2. Little by little however beginning with 1919 French opinion realized that the United States would never agree to a general and complete cancelation of interallied debts. It then appeared to it fair that the problem of interallied debts should at least be dealt with in its entirety and united with that of reparations. France on the one hand has lent, itself, considerable sums to poorer Allies and these sums amount to almost half of her external debt. She had on the other hand provided for the reconstruction of the devastated regions which constitute a heavy charge on her budget. Germany, who should have met these expenses, has not done so.
French opinion could, therefore, legitimately ask that France should only pay her creditors in proportion to the payment made by her debtors. Such an opinion tended to a general compensation of interallied debts and to subordinate France’s payments for the settlement of her debts to those of Germany for the reconstruction of the devastated regions.
[Page 141]This opinion, which appears so eminently fair, is moderate, since it places on the same footing the debts between Allies contracted in a common cause and Germany’s debt for the reparation of the ruins which she caused. It was expressed many times by the British and French Premiers; but it was not accepted by the Government of the United States.
3. However, the French Government has never repudiated the war debts of its country. But it would be very difficult to make French opinion accept a method of settlement in accordance with the principles which have always been maintained by the American Government: Integral maintenance of the nominal amount of the debt; treating this debt independently of payments by Germany.
But the adoption of such principles can only be reconciled with very easy conditions of settlement. It is in particular indispensable that the amortization table should show a long moratorium and very small annuities at the start in order to permit France: one, to wait until the Dawes Plan has entered into a period of effective application; two, to settle external commercial debts and in particular the debt due by reason of the purchase of American stocks; three, to wait for the time when the expenses resulting from the war (pensions, annuity allowances for reconstruction) shall begin to decrease.
It is under these conditions that French public opinion may be led to adopt such a plan as the following which is only submitted in a purely unofficial and private manner: Fixing the nominal amount of the debt to the amount of this debt in capital, that is to say at $2,933,000,000; complete moratorium for 10 years beginning from September 1, 1924; rate of interest and amortization in connection with the following table (in millions of dollars):
| Number of annuities |
Rate of interest | Annuity value | Capital to be [amortized] at the end of each period |
| 10 | 0 | 0 | 2933 |
| 20 | ½ | 30 | 2611 |
| 20 | ½ | 40 | 2045 |
| 20 | ½ | 50 | 1210 |
| 20 | ½ | 65 | 1210 |
In order to combine in a certain measure the value of the annuities and France’s capacity of payment, a principle which is in [conformity] with all the American declarations, it should be understood that on the day when Germany shall fulfill only a portion of the obligations stipulated by the Dawes Plan the portion of the French annuity corresponding to the interest on the debt would be reduced in the same proportion. The payment of a certain percentage of part of this annuity corresponding to the amortization could also be deferred and carried over to the following year. The nominal capital of the debt would remain unchanged.
The same rules would apply in case only a partial German annuity should be paid to France according to one of the methods stipulated in the Experts Plan.
American stocks:
French public opinion realized that the nature of this debt is quite different. The French Government has always regularly paid [Page 142] the interest on the price agreed upon and it has no intention of asking for a reduction of this debt as the one that it requests regarding the war debt.
It should be pointed out, however, that by reason of the fall of the franc the sale [of] the stocks, bought for $400,000,000 only produced an approximate figure of $220,000,000 and thus constitutes a very burdensome transaction for France. Remembering that at the time of the cession of these stocks the American representatives declared on many occasions their desire that this transaction should not result in a loss to France, the French Government hopes that the American Government will consent either to reduce the nominal amount of its credit to a price nearer the real sale price of these stocks or to grant a reduction in the rate of interest being paid on the cession price.
In admitting, for example, that the rate should be fixed retrospectively at 2 percent from 1919 France would remain liable for a debt of $350,000,000 which she could amortize in 20 years by an annuity of $22,000,000.
Conclusion:
Since the Armistice, France has made heavy payments abroad and in particular to the United States on account of its so-called ‘commercial’ war debt. These payments can be evaluated at approximately the following amounts (in millions of dollars):
| Commercial debt | American stocks | Total | |
| 1920 | 70 | .. | 70 |
| 1921 | 31 | 20 | 51 |
| 1922 | 30 | 20 | 50 |
| 1923 | 29 | 20 | 49 |
| 1924 | 28 | 20 | 48 |
The figures quoted are calculated after deducting the new loans issued on the American market and the treasury credits opened to France in 1920. It is therefore truly a question of real disbursement[s] the total of which has had to be transferred to America and which have weighed heavily on our Treasury and the balance of our payments abroad.
Similar payments must still be made in the coming years according to a decreasing scale.
In order [that] transfers on account of the political debt may be possible it is therefore indispensable that the annuity destined for the service of the political debt should be very small at the beginning and increase in proportion to the extinction of the commercial debt.
The plan of settlement adopted must, none the less, consider the transfer problem as a whole in conjunction with the exchange rate and the eventual use of bonds for example in part payment.”
I have informally and personally made the three following suggestions of changes in Clémentel’s memorandum: (1) that there should be eliminated from the unofficial memorandum the clause [Page 143] relating to the debt payments being dependent on the working out of the Dawes Plan; (2) that no reference should be made to American stocks (surplus food supplies, equipment, etc., belonging to the American Expeditionary Forces which were turned over to France after the Armistice); (3) instead of a flat rate of one-half percent interest for the whole time there should be periods when some method, should be set up when an advance interest rate may be considered.
I had hoped to receive an indication of how Herriot received this suggestion before cabling full text.
I must emphasize the fact that Clémentel does not consider his memorandum a “definite offer” but rather a tentative personal and unofficial suggestion.
- Telegram in four sections.↩