462.00R296/4090a: Telegram
The Secretary of State to the Ambassador in France (Edge)
268. 1. We think you ought the first thing tomorrow morning to make clear to the French authorities that the President considers that anything short of a clean sweep and postponement of all intergovernmental payments for one year will not accomplish his purpose. This is the restoration of public confidence throughout the world which is today of such vital importance; nothing short of the accomplishment [Page 56] of such a major purpose would justify him asking the American people to make the largest sacrifice of all nations involved in such postponement.
2. It has not been suggested that there should be any change in any international agreement either in relation to our debts or to reparations—only that the application of the agreements shall be suspended for 1 year; that such contracts being in full force and effect, payments would be resumed at the end of the year in the normal fashion. We cannot see the validity of the contention that the agreements in any fashion are destroyed by failure to maintain current payments, and obviously if the French wish to require it, all parties should confirm the fact that the agreements are in no way invalidated by the postponement.
3. We have not developed the method by which postponed amounts would be refunded.
4. If the President’s proposal of the 20th is not accepted it will, of course, be withdrawn, and the Germans will unquestionably make the necessary postponements of all conditional payments as provided under the Young Plan. The result will be that France will receive her proportion of the unconditional payments, amounting, on our calculations, to a maximum of 441,000,000 Reich marks or $110,000,000. She would, of course, be obligated to make her payments to the United States and to Great Britain under her agreements with them. The payments to the United States in the next fiscal year amount to $50,000,000 and it is our understanding that they amount to $60,000,000 to the British Government. The net result would be if the President’s plan is withdrawn that France would have no net returns during the year anyway. It may be possible that France would make deferments of part payments under her debt agreement with us and the British, but the non-postponable payments to us and the British even after such deferments would be $50,000,000, so that after having turned down the President’s plan and returned the world to panic, the net result of her having herself declared her inability to meet the full payments to the United States and Great Britain would be only $60,000,000. Another calculation based upon an interpretation of Annex VIII of the Young Plan would indicate that in case Germany defers all conditional payments France would receive only $62,000,000 instead of $110,000,000 above mentioned and her situation would be that much worse.
5. If France should insist on receiving her share of unconditional payments, directly or indirectly, it is inevitable that all other creditors entitled to unconditional payments must make a like reservation. The net result would be that the only contribution passed on to Germany would be the contribution made by the United States Government, and the American people would be the only ones who would be asked to pay the price of relieving an economic crisis in Europe which is of more [Page 57] concern to the French people than to our own, as there are no possible social contagions or revolutions or other disturbances in Germany that can possibly affect the United States, whereas they can in a major degree affect the tranquillity and economic security of France. No American administration could possibly entertain any such proposal.
6. The suggestion in the press attributed to French sources that the unconditional reparations be collected in Germany and reinvested in Germany by the Bank of International Settlements is equally impossible. It would not give budget relief in Germany. It would be considered simply a subterfuge by our Government. Any such plan would imply that a corresponding amount of the debts to the United States would be reinvested in France and other countries during the years and the whole plan becomes a negation of the President’s proposal and loses its entire world effect.
7. The President’s plan was evolved after consultation with the leaders of both parties in the House and Senate. He was only able to secure their adhesion by an undertaking on his part that this would be a complete, clean sweep of all intergovernmental debts, and any breach by which this would be negatived will necessitate the withdrawal of the plan because of his undertakings made here.