462.00R296/2779: Telegram

The Chargé in France ( Armour ) to the Secretary of State

146. Reparation 206. From Wilson.

Last night I was told that the four principal creditor groups had arrived at agreement among themselves regarding their demands [Page 1046] on Germany and that at a meeting, to be held this afternoon, they planned to submit definite proposals to the Germans. These proposals, I was told, affected our interests in two particulars: (1) Cancellation of all Army costs in arrears; (2) Present value of mixed claims awards to the United States should be covered over period of fifty-eight years. Effect would be to reduce to approximately 20 million marks on account of mixed claims during first years of the new settlement, then gradually increasing to about 36 millions in later years.

This morning I saw Lamont and he confirmed foregoing in substance, though he added that nothing had yet been definitely settled. I pointed out to him obvious injustice to the United States of these provisions, and fact that the Government of the United States would never agree to them. What appeared particularly objectionable to me was that should the Allied creditors and Government of Germany come to an agreement on the size of the annuities, basing the agreement on assumption that the United States would waive its Army costs and agree to spread payment of its mixed claims over fifty-eight years, and later on they learned that this assumption was not true, undoubtedly much embarrassment would be caused. Should that happen, either the creditor powers would have to take less than they expected or Germany would have to pay more, and in either case they would try to lay the blame on the United States.

Later on I saw Young, and, as it seemed to me so wholly necessary that there be no misunderstanding with regard to the position of the United States, I left a personal letter with him, text of which follows:33

“I am writing you personally in regard to a situation which causes me much concern. I was advised last night, I believe reliably, that the Allied creditor groups have now reached an agreement among themselves regarding their demands on Germany and that at a meeting to be held this afternoon they will submit proposals to the German experts as to the annuities to be paid under the proposed settlement. I understand that among these proposals are two which affect the interests of the United States as follows: (a) That all Army costs in arrears should be wiped out; and (b) that the present value of the United States mixed claims awards should be satisfied over a period of fifty-eight years—this would have the effect of reducing the mixed claims payments from 45 million marks, which is the amount annually received from the present Dawes annuities, to 20 million marks during the first years of the proposed new settlement, increasing gradually in the future to approximately 36 million marks annually.

With regard to the foregoing I venture to submit the following observations:

[Page 1047]

(a) The proposal to wipe out all Army costs in arrears is manifestly inequitable to the United States.

According to figures available as of August 31st, 1928, the British Army costs in arrears had received approximately 87 percent of satisfaction; the French costs had been satisfied by 90 percent and the United States costs by only 29 percent. The unpaid costs as of the date in question, and which would be waived under the new proposal, amount to approximately 123 million marks for Great Britain, 141 million marks for France and 886 million marks for the United States. Moreover, of the large percentage of satisfaction which Great Britain and France have received, the major part was paid during the first few years following the war. The United States received no effective payments on account of its Army costs (with the exception of one relatively small payment at the time of the January 1925 agreement) until September 1926. The position of the United States Army costs claim was clearly recognized by the other powers in the January 1925 agreement which granted a prior charge on cash made available for transfer out of the Dawes annuities after the service of the German external loan and costs of commissions. Personally I am convinced that the Government of the United States will not be willing to waive in toto its unpaid Army costs.

(b) The Settlement of War Claims Act which provides for the payment of the adjudicated claims of American citizens and the ultimate return of German property held by the Alien Property Custodian is based on the assumption that the United States would continue to receive annually until the satisfaction of these claims the sum of 45 million marks as provided for under existing arrangements. I feel that it would be impossible for the United States Government to agree to any reduction in the annual amount of payments on account of mixed claims.

Please let me restate in other terms what I understand the effect of the present proposals to be:

Under existing arrangements the United States receives 4 percent of the standard Dawes annuities, id est, 100 million marks out of 2,500 millions; the new arrangement as I understand it would propose that the United States receive slightly over 1 percent of the new German annuity, id est, 20 million out of 1,800 millions.

I hope you will appreciate the spirit in which I am writing you. I am not in any way seeking to interfere or to hamper your work, the difficult and arduous nature of which I fully appreciate. I do, however, feel it my duty to write you personally as to the foregoing in order to furnish you information which it is possible you do not possess and in an effort to avoid, which I know you desire as well as I, any possible embarrassment arising subsequently as to these matters.”

Young informed me that this afternoon the four principal creditor groups were going to present their proposal to the German representatives in definite form. He said that the American experts had declined to sign the proposal or to assume any responsibility for it. At present Young’s idea seems to be that the American experts will [Page 1048] reserve right to request appointment of subcommittee to consider claims of governments other than those represented by the four principal creditor powers and that we could officially state our position at that time. Young said he fully agreed that they could not recommend any proposal based on such drastic cut in American share. He emphasized fact that matters are still in state of flux and subject to change.

I was told by Fraser34 that last night Parmentier approached him in some doubt apparently as to whether the Government of the United States would accept proposed changes affecting its participation. Fraser told him that he thought decidedly it would not, but that he could not speak, of course, for the Government. I have told Fraser that he is quite at liberty to tell Parmentier that he has mentioned matter to me and that I had strongly expressed myself that the Government of the United States will not give its consent to proposals such as these and that; they should not be under any misapprehension in regard to the matter.

I have fully talked over the foregoing with Kellogg and with Armour, both of whom concurred in sending of my letter to Young. Kellogg is telegraphing you personally regarding these new developments.

I have just learned that Young is sending another message to be transmitted to you which I may shortly expect to receive. Wilson.

Armour
  1. Telegram in three sections.
  2. Quotation not paraphrased.
  3. Leon Fraser, financial expert assisting the American members of the Committee of Experts.