462.00R294/714: Telegram

The Ambassador in Germany (Schurman) to the Secretary of State

247. From Wilson.

1. German Government agrees to waive the safeguard clause provided it is understood that in the event the other powers should raise objections at The Hague to our aide-mémoire, making it impossible for Germany to put the agreement in force without changing the Young Plan, then Germany would reserve the right to reopen negotiations with us. The German Government desires that this understanding be recorded in a strictly confidential minute of our meetings (not to be communicated to the other powers) in the sense of the following:

“The German Government reserves the right to enter into new negotiations with the Government of the United States in case that the inviting creditor powers or one of several of them, alleging that the conditions accorded to the United States were more favorable than those affecting the remainder of the annuities, should make their definite approval of the experts’ plan dependent on the condition that the German Government should consent to a corresponding change of the regulations of the plan.”

[Page 1103]

I might add that the Germans now express the opinion after reading the notes of the four powers, see my 241, November 29, 6 [5] p.m., that when the latter have cognizance of the terms of our agreement they will probably not raise objections. However, the German Government feels it necessary to put on record a statement such as the foregoing in order to protect themselves in the eventuality of unexpected opposition from the other creditors.

2. As a counterpart to the waiver of the safeguard clause, the Germans request the following draft for the new paragraph numbered 4 of the agreement which is an amplification of the Department’s proposal in its 83, November 19, 2 p.m., paragraph (a) and which would satisfy the Germans as to the renunciation on our part of not only financial pledges but also the right to employ sanctions:

“Security. The United States hereby agrees to accept the full faith and credit of Germany as the only security and guaranty for the fulfillment of Germany’s obligations so that in this respect Germany will be in the same position as other powers under their existing World War debt funding agreements with the United States.”

Germany would accept the foregoing without waiting for the conclusion of negotiations with the French on the same point (see paragraph (a) my 215, November 12, 5 p.m.). However if a formula such as the above clearly implying the renunciation of sanctions is not acceptable to the United States, then Germany would have to reserve this point until the French negotiations are concluded in order not to prejudice her position. As of possible interest, it appears that the French are willing to agree that there can be no question of sanctions so long as the Young Plan continues in effect but that in the event of a break-down of the plan then all rights under the Treaty of Versailles come into force again. The Germans contest this and claim that with the entrance into force of the Young Plan all sanctions definitely disappear. Probably a vague compromise will eventually be reached susceptible of interpretation in opposing senses in order to satisfy public opinion in both countries. [Paraphrase.] If Department prefers, there is possibility I think that German Government might agree that the above-suggested paragraph should end with word “obligations,” and that remainder should be embodied in a minute of our meeting as interpretation of paragraph in question with understanding that it could be made public. [End paraphrase.]

3. The German Government asks that in the new paragraph 6, payments before maturity (see paragraph 5, Department’s 84, November 19, 3 p.m.) provision be made granting Germany 5½ percent discount on advance payments. I have expressed my personal opinion that it would be impossible for us to agree to this and have pointed out the obvious difficulties it would raise in connection with ratification [Page 1104] by Congress. [Paraphrase.] The Germans have asked me, however, to submit their request to Department, although it is my impression that they are not attaching great importance to it, but that they want to be in position to state that they have done everything possible in the matter. [End paraphrase.]

Their argument is that under paragraph 154 of the Young Plan Germany has the right to redeem any part of the not yet mobilized annuities at 5½ percent and that Germany should not be treated less liberally in this respect by the United States, than by the other creditors. They interpret paragraph 154 as covering the nonmobilizable portion of the annuities as well as the mobilizable. Personally, I should question this interpretation, although, as a practical matter, the creditor Governments would doubtless be delighted to have the conditional annuities redeemed on a 5½ percent basis.

4. We are now in complete agreement on all points, except the three mentioned herein above, although I have still reserved a final reply as to paragraph 3, method of payment, see Department’s 87, November 22, 7 p.m.82 [Wilson.]

  1. Not printed.