462.00R296/3948: Telegram

The Chargé in Germany (Gordon) to the Secretary of State


68. Reference is made to paragraph 3 of my No. 67, June 2, 9 p.m.

There is increasing opposition to the proposed emergency decree. This is closely related to the pressure for revision of reparations which, even if embarrassing to the Government, is agitated for actively in other quarters. The national convention of the Social Democratic Party which is now in session has strongly urged revision. Also the Reichstag members of the People’s Party led by Dr. Curtius have just passed a resolution declaring that the German people can bear further sacrifices only if the Government which demands those sacrifices simultaneously and of its own will begins negotiations for the revision of reparations. The intention of the Government now is to have President von Hindenburg issue this decree and with it a manifesto to the German Nation setting forth the necessity for the decree—this to be done while Chancellor Bruening is in England. The manifesto will no doubt lay stress on reparations questions. I under [Page 5] stand that the new decree includes increased taxes on certain staple commodities and on income as well as cuts in war pensions and doles. The decree is certainly drastic and even the Government expects attempts at public disorder and other trouble.
The Department will have gathered from previous reports that Kempner, who has quite often acted unofficially as a negotiator for the German Government, has very close ties with powerful French banking circles. Kempner stated, in a conversation reported in my telegram yesterday, that he had been sounding out these circles for some days in an unofficial way and that he had been told that if our Government should give them the “pretext” to take action they could do something about reparation revision, since they were more prepared to act than is the general supposition. I have not been able to check this statement, but the other statements reported in the telegram to which I refer and in my telegram No. 65 of May 29 have been checked in as many quarters as possible.
I believe that the German Government is not yet prepared to suggest definite schemes for reparation revision and that it still wants to make a distinction between specific and general discussions at Chequers and to travel at its own speed (see the fourth paragraph of my telegram No. 67). Events here are moving very rapidly (the situation, for instance, has changed materially since Friday last) and it appears from here that (if the phrase may be used) the buck is rapidly being passed to us, and the moment when the German Government will take definite steps toward the revision of reparations is approaching rapidly also. For instance, last night an influential Government official who is known for his clear thinking said that representations will be made to the interested Governments with a view to readjusting reparations. (See my telegram of yesterday, paragraph 5). He said these representations would come within 4 to 6 weeks after the new decree is promulgated. Incidentally, it may be noted that there is a decided lack of agreement here as to the procedure for reparation readjustment in spite of all the measure of agreement on the necessity for such readjustment. There is doubt whether to default in payment, to seek an agreement with creditor nations, to request an investigation by the Bank for International Settlements, or to declare a moratorium.

The two telegrams under reference and the code text of this telegram have been mailed to London.