462.00R296/2786: Telegram

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

149. Reparation 208. [Paraphrase.] I am transmitting herewith, at Young’s request, the text of the proposal submitted to the Germans at plenary meeting this morning by the experts of the four principal creditor powers. It was decided by the Committee to regard the proposal as secret and at the meeting on Monday to consider the question of publication. This morning there was no discussion of the proposal. Text as follows: [End paraphrase.]

“Memorandum by the experts of the four chief creditor countries.

1. On the 28th March the conference received, without prejudice, as a basis of discussion and as representing the area within which such discussion should proceed, the memorandum of the chairman together with a memorandum prepared by the four chief creditor powers. In pursuance of the arrangements then implied, the experts of each delegation have mentioned individually to Dr. Schacht the amounts which each of them was entitled to claim on the one hand as a fair representation of the minima in the chairman’s report and on the other hand as an appropriate statement of their claims in the particular circumstances. The particular circumstances include of course their existing rights under the Dawes Plan in the light of the discussions which have taken place upon the position of Germany in relation to that plan and also the arrangements which have been provisionally suggested for replacing it.

2. In due course Dr. Schacht informed the groups as a whole what these individual representations would mean in the aggregate; and the experts of the four chief creditor countries have, in accord with him, decided to give joint consideration to the position so aggregated in accordance with the statements in their original memorandum. In the process they paid most careful regard to the various representations they [that?] have emerged during the course of their previous deliberations as to the German viewpoint, in details relating to the duration, the character and the progression of the annuities.

They have accordingly agreed to put before the Committee of Experts a series of annuities as shown in the annexed table which, taken as a whole, represents in their opinion a moderate burden to meet the minimum requirements of the creditors. It is moreover framed in such a manner as to give the maximum consideration to the German viewpoint. For example, the following features of the proposal are specially emphasized:

(a)
It establishes a scale of payments according to which the next annuity to be paid under the Dawes plan will be reduced by more than one-quarter.
(b)
During the next ten or fifteen years while economic life is still further developing, the rise in the annual payment is exceedingly gradual and the annuity never reaches the standard payment by Germany under the Dawes Plan nor even approaches it until after many years.
(c)
The benefit to Germany is in fact greater than this because the standard payment of the Dawes Plan would have been progressively increased by the index prosperity which will be abolished if the new plan is accepted.
(d)
During this time Germany will have enjoyed an economic consolidation of the relief given during the earlier years which must act as a material assistance in meeting the heavier but greatly mitigated burdens in the later years. On a reasonable computation the difference in the period from the 19th to the 37th year compared with the annuities payable under the Dawes Plan, including the index, must represent a relief approaching fifty percent.
(e)
In order to meet the express views of the German experts, Germany will assume after the 37th year only the ‘obligations mentioned in the annexed table.

3. A calculation of a flat annuity equivalent in its present value at five and a half percent to this scale of annuities for the first 37 years shows that the burden has been reduced approximately to 2,198 millions per annum plus the sum of 25 million gold marks which the creditor powers have agreed to put forward as representing the special claim of Belgium on account of marks and which has not been heretofore included in the Dawes Plan payments.

Under these conditions the probable annuities payable under the operation of the Dawes scheme over 37 years are reduced by more than one-third and Germany’s total reparation obligations are made definite in duration and amount and represent a burden which Germany may safely assume on her own responsibility if she accepts the constructive program now proposed.

As in the judgment of the experts of the four chief creditor powers the Dawes Plan as a financial burden is not unduly onerous upon Germany. The object of the changes now proposed is rather to substitute a more normal and natural machinery. These modifications are a striking renunciation by the creditors of a large part of their claims but the proposal has been drawn only with special reference to its applicability to the substituted machinery involving for the creditor countries the advantage of mobilization and commercialization.

In an analysis of the scheme it should be added that it is intended to divide the annuities into an unconditional part and a “postponable” part affording to Germany powers of postponement calculated by reference to these which the creditor powers themselves enjoy in respect to their war debt liabilities. Accordingly, the obligation to transfer those amounts in foreign currencies is relieved by substituting the obligation to pay the equivalent in marks within Germany. The details are being worked out for the more precise information of the German group.

In order to convenience German economy in relation to deliveries in kind and to prevent any ill-effect from a too sudden cessation of the [Page 1053] system in force it is proposed that for a period of years that facility should remain in existence on a diminishing scale as follows:

1929–30, 600,000,000 gold marks;
1930–31, 550,000,000 gold marks;
1931–32, 500,000,000 gold marks;
1932–33, 450,000,000 gold marks;
1933–34, 400,000,000 gold marks;
1934–35, 350,000,000 gold marks;
1935–36, 300,000,000 gold marks.

Apart from the [scale] of annuities in view of the status and facilities provided by the proposed bank which alone made that scale feasible and acceptable to the creditor Germany is to be under an obligation to provide towards the capital of the bank an amount of capital in marks to be agreed and to be paid in installments in the early years. The ownership of the capital so provided will vest in the creditor governments and the German Government in proportions to be determined, and Germany will also profit by the utilization of these funds.

It is obvious that in the event no agreement upon the figures the only solution would seem to be the settlement of the number of annuities, under the Dawes Plan the amounts being therein determined.

Table of annuities German fiscal years. Figures in millions of Reich marks:

Year Amount Year Amount
1929–30 1,800 1938–39 2,225
1930–31 1,825 1939–40 2,250
1931–32 1,875 1940–41 2,275
1932–33 1,925 1941–42 2,300
1933–34 1,975 1942–43 2,325
1934–35 2,025 1943–44 2,350
1935–36 2,075 1944–45 2,375
1936–57 2,150 1945–46 2,400
1937–38 2,200 1946–47 2,425

From 19th year to and including 27th [37th?] year, id est from 1947–48 to 1965–66, the annuity remains constant at 2,450 millions.

Year Amount Year Amount
1966–67 1,703 1977–78 1,802
1967–68 1,702 1978–79 1,813
1968–69 1,712 1979–80 1,838
1969–70 1,745 1980–81 1,849
1970–71 1,760 1981–82 1,866
1971–72 1,770 1982–83 1,871
1972–73 1,779 1983–84 1,882
1973–74 1,782 1984–85 1,862
1974–75 1,785 1985–86 1,087
1975–76 1,791 1986–87 1,094
1976–77 1,796 1987–88 913.”
Armour
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