800.51 W 89France/348a: Telegram

The Secretary of State to the Ambassador in France ( Herrick )

194. (1) In view of the erroneous statements as to the Franco-British settlement appearing in the American press the Secretary of the Treasury today issued the following statement

“The settlement of the French obligations to America has been made along somewhat different lines from the settlement of French obligations to Great Britain. With the British, banking advances and commercial obligations for war stocks have been treated separately from the war debt proper. If, however, we compare the settlement of all of France’s indebtedness to England with the settlement of her indebtedness to America, France has had generous treatment from us. Particularly is this true during the first five years, which will be most difficult for France. The present Caillaux-Churchill settlement18 does not differ materially from the tentative Caillaux-Churchill agreement of last August, an analysis of which appears in the documents of the Caillaux negotiations with the American Commission of September last, which was released to the press October 1, 1925.

The American settlement with France embraces all of France’s indebtedness, and represents in the opinion of the American Commission France’s capacity to pay. For obligations incurred by France to America after the war ended, France owes us today $1,655,000,000. The present value of the entire French-American settlement, at the rate of interest carried in France’s existing obligations is $1,681,000,000. In effect, therefore, America has cancelled the obligations of France for all advances during the war, and France in the Mellon-Berenger [Page 100] agreement has undertaken only to repay the advances and obligations subsequent to the Armistice. No other creditor of France has accorded such generous treatment.”

(2) Department’s 366 October 1, 7 p.m.20 contains documents analyzing tentative British-French agreement mentioned in the foregoing statement.

(3) Press reports from Paris indicate great satisfaction in France over the British settlement and corresponding bitterness against United States. I see no ground for considering the British settlement to be more lenient than the American settlement with France. Due weight should be given to the fact that the American settlement covers large sums advanced to pay for material sold, exchange transactions, maturing of French commercial debt obligations and advances to the Bank of France. While we do not yet know what arrangements will be made for the payment by France of the Bank of England debt, it is understood that most of France’s commercial debt due Great Britain as well as a material part of the Bank of England advances have already been repaid. In comparing the amounts of the two debts it should be noted that the capital sum advanced by Great Britain, not including advances to Bank of France and to cover surplus material sold, was about 445,000,000 pounds, which was increased by compound interest to 653,000,000 pounds, while capital of American advances was about $3,340,000,000, as compared with $4,025,000,000 funded. As to rates of interest, see page 71 of Clementel inventory21 (transmitted with letter from Logan Dec 30, 192420) with respect to British debt; American debt was funded at four and one-fourth per cent interest to 1922 and three per cent thereafter.

Repeat foregoing by telegraph to American Missions in Europe. Refer missions mentioned in last sentence of Department’s 366 October 1, 7 p.m.22 to text thereof which was then forwarded to them, and mail text of that message to other missions. Also furnish all missions with translation of second, third and fourth paragraphs under heading “interest” on page 71 of Clementel inventory.

  1. For the agreement signed July 12, 1926, by Winston Churchill, British Chancellor of the Exchequer, and Joseph Caillaux, French Minister of Finance, see Great Britain, Cmd. 2692, French War Debt (1926): Agreement for the Settlement of the War Deot of France to Great Britain.
  2. Not printed.
  3. Inventaire de la Situation Financière de la France au Début de la Treizième Législature, présenté par M. Clémentel, Ministre des Finances (Paris, Imprimerie Nationale, 1924).
  4. Not printed.
  5. Not printed; its last sentence read: “Mail text to Embassies London, Rome, Brussels and Legations Prague, Bucharest and Belgrade.”