462.00R294/714: Telegram

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


103. For Wilson. Your No. 247, December 2, 3 p.m.

(1) Since this Government’s refusal of safeguard clause is final and decisive, and is independent of attitude which may be taken by other creditor powers, this Government considers the strictly confidential understanding which Germany has suggested to be unnecessary and undesirable. Proposals of this Government contemplate that the other creditor powers shall make known their acquiescence in terms of proposed agreement between the German Government and the Government of the United States before Congress is requested to authorize the Secretary of the Treasury, with the President’s approval, to execute the agreement. The proposed agreement, furthermore, will not be executed until all acts necessary to bring Young Plan into operation have been fully completed.

(2) In reconsidering new paragraph number 4 of draft agreement, it appears to Department that this paragraph might be construed in Congress as conflicting with authority of the latter as expressed in Settlement of War Claims Act of 1928. To obviate any [Page 1105] possible misunderstanding, Department desires to add a proviso, which will make the paragraph read as follows:83

“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 hereunder; provided, however, nothing contained herein shall be construed as requiring the United States to release any German property which it now holds other than as heretofore or hereafter authorized by the Congress of the United States”.

The part of the security provision as suggested by the Germans following the word “obligations” is void of meaning in view of fact the security provisions in the existing World War debt-funding agreements between the United States and debtor countries are not uniform.

Department does not perceive that text it proposes differs from that proposed by the Germans with respect to “clearly implying the renunciation of sanctions,” the matter to which they attach importance.

(3) The Government of the United States is unable to accede to Germany’s request for 5½ percent discount on advance payments. Respecting the mixed claims payments, through the joint operation of present text on payments before maturity and last sentence of paragraph 1 (a) of draft agreement, Germany receives, in effect, 5 percent discount on all advance payments on account of mixed claims, for reason that immediate application of an advanced payment to claims outstanding would shut off 5 percent interest which they carry. A rate of discount on advance payments greater than that borne by awards would cause deficiency in amount necessary to make payment in full of the awards with interest to date of payment.

As regards Army costs arrears, it is believed that Congress would not consider granting any discount on advance payments.

The Government of the United States will not consent, therefore, to insertion of new paragraph for any discount provision in advance payments in the draft agreement.

  1. Quotation not paraphrased.