462.00R296/5233
Memorandum by the Under Secretary of State (Castle) of a Conversation With the German Ambassador (Von Prittwitz)
The Ambassador came to me because he was unable to see the Secretary to deliver an urgent message from his Government. This was a statement as to the present German financial position which the German Government felt the President should have before talking with M. Laval. The Ambassador pointed out that this, the most recent statement, showed that the situation as to foreign loans was worse than had been reported by the Wiggin Committee. He said that assistance would be absolutely necessary since the gold reserve had reached a dangerously low point. He said that, of course, it [Page 332] was essential that the President and M. Laval should reach some kind of an agreement as to a continuation of the moratorium and some final solution for the reparation question in order to give courage in Germany. The Ambassador said that if things remained as they were and an extension of the short term loan was confirmed for a longer time, it was still difficult to know what Germany would do by the first of February, and that if these loans had to be repaid at that time it would, of course, mean a complete financial crash.
It was clear that Germany could not begin next year paying any reparations. I told him that this was exactly the kind of statement which would make it impossible for Germany to get any help at all; that, as I had repeatedly told him, the world was not going to help Germany any more unless Germany showed some willingness to help herself; that I did not think the condition in Germany was any worse than in many other places; that I thought if Germany would “buck-up” and try to do something for herself, it would help everybody else. I spoke of the balance of trade being favorable, but the Ambassador said that really did not help as much as it looked because there was no reserve in Germany and, therefore, practically the entire amount which came in during any one month had to go out to pay for the next month. In other words, it was largely a cash transaction. I told him that this did not greatly appeal to me because it was obvious that month by month Germany must retain the balance of payments. The Ambassador said that this would be true except for the fact that a certain amount of the foreign currency which should be secured by sales of goods remained outside of Germany. He hastened to add that the German Government was trying its best to control this.
He ended by saying, on instruction, that the aim of Dr. Bruening was to maintain the present private economic system; that he hoped to continue to do this, but that the situation for him became more difficult all the time.