462.00R296/4110f: Telegram
The Secretary of State to the Chargé in Great Britain ( Atherton )60
[Paraphrase]
Washington
, June 24, 1931—8
p.m.
184. You are requested to see that Secretary Mellon receives the following telegram before taking the train on Thursday morning for Paris:
[From Mills.] The following paragraphs represent the President’s views and mark the limits beyond which he is not desirous of proceeding. He has requested that I submit them to you.
- (a)
- It is presumed that you have already read the note addressed to the United States by the French Government. Should this not be the case, request a copy of it from Lacourgailett [Lacour-Gayet].61 Mr. Hoover is surprised and disappointed that the Government of France has not accepted his broad and comprehensive proposal, which, in the present emergency, he is of the opinion is the one demanded and under the circumstances the most beneficial to all nations. In your conversations with the French Ministers the President is desirous that you urge this point of view as strongly as [Page 66] possible, and wishes you to call the attention of the French to the advantages which would accrue to them as well as to the other European countries should they respond to this Government’s offer in the spirit in which it was offered and without bringing up the technical questions which the Young Plan includes. I suggest in this connection that you read the statement made today in the House of Commons by Chancellor of the Exchequer Snowden.62 The administration hoped that the French response would be of an analogous nature. There is a possibility that the administration may be unable to obtain congressional support on any proposition which varies from the original. We telegraphed Edge our opinion of this yesterday and would like for you to read that cable.63
- (b)
- Aside from its failure to accept our proposal, the French
proposal as embodied in their note of June 24 to the American
Government is from our point of view in two respects fatally
defective:
- 1.
- This proposal provides that the unconditional payments which are to be suspended for 1 year and which may be loaned to Germany and other countries by the B. I. S. must at the expiration of the period of suspension be paid to the creditor nations, that is, assuming that the suspension of unconditional payments is from September 1931 to September 1932, in the period 1932–33 the amount suspended would have to be paid. Thus the creditor nations would be receiving two payments in the second year. Such a proposition contains no element of relief to Germany. On any such basis as this the American Government is not prepared to postpone the payments due it. The President would be compelled to withdraw his proposal should the French insist upon this point.
- 2.
- The amounts deposited in the B. I. S. are to be available for loans to Central European countries as well as to Germany under the French proposal. If the proposal is to receive any consideration by us we are of the opinion that they should be available to Germany exclusively. It may be necessary to make certain adjustments to take care of the situation in some of the smaller countries, but it goes without saying that this is obviously a matter of detail to be given due thought when the technical phases of the whole problem are under consideration.
- (c)
- You should go the limit in endeavoring to persuade the French
to accept our original proposal, but if you find this impossible
you are authorized to suggest that if France will modify its
position to one of the following two plans which I shall
designate as Plans A and B, the President would consent to
discuss the question with party leaders, but beyond this it is
impossible for him to go. In other words, these two plans should
be understood to represent the maximum limit which the
administration could attempt. [Page 67]
- Plan A. The unconditional annuities to which France and other creditors are entitled are to be entered to their credit at the B. I. S. when they fall due, but the B. I. S. will be instructed to reloan those funds in the form of a loan repayable by installments over a 10-year or some such period to Germany. Under this plan the real effect would be to relieve Germany of all payments as absolutely as if the unconditional annuities accruing during the forthcoming fiscal year were funded over a period of 10 years. Having the payments cleared through the B. I. S. in this fashion will be of advantage to France and the other unconditional creditors in that the terms of the Young Plan are strictly and technically observed in so far as they apply to unconditional payments, and the French claim is directly recognized that these payments can under no circumstances be suspended or subjected to postponement. Strict compliance with the terms of the Young Plan is in no way vitiated by the fact that they are reloaned by the creditor governments as a voluntary act. This would constitute no charge on the German budget, as it is understood that the deposits would be made from the railway payments.
- Plan B. For the year beginning September 1, 1931, and ending September 1, 1932, Germany will pay for the account of the creditors entitled thereto the unconditional annuities in reichsmarks to the B. I. S. This deposit will be held in escrow by the B. I. S. to be applied to the satisfaction of the unconditional payments which shall fall due within the year 1932–33. Germany will again make the unconditional payments in reichsmarks in the year 1932 to 1933 which will be due the following year, and that deposit will be in turn held in escrow for a year—thus until the end of the payment period the process will be repeated year by year. The acceptance of this proposal would really result in the suspension for 1 year of the receipts by the creditor nations of all unconditional annuities and would extend for 1 year the total period of payment. Germany, to be sure, would be called upon this year to supply the necessary funds, but, as the charge on the railroads is adequate to meet unconditional payments, this would not constitute a drain on the German budget. Since the payments would be made in reichsmarks, there would be no strain on the exchanges for a period of 12 months. The loan of the funds on deposit by the B. I. S. to Germany would further alleviate the situation there. As in Plan A, the payments would be made from the railway contributions.
- (d)
- In fixing the period over which the nonpostponable annuities that are suspended under the terms of our debt agreements are to be repaid, you should make it very clear that this will be governed by the repayment period during which the suspended unconditional annuities are to be paid back. As an illustration, if France insists that the suspended unconditional annuities must be repaid within a period of 5 years then the nonpostponable annuities due the United States in its debt agreement with France will, if suspended, have to be repaid within a 5-year period. It is the opinion of Dwight Morrow64 that the Senate will not consent to any program which grants more liberal [Page 68] terms to France by the United States than France is willing to grant to the German Government.
- (e)
- A difficult problem is presented by the payment of reparations in kind. Neither Germany nor the creditor nations, we presume, would desire that existing contracts be disturbed in any way. This is one of the technical questions, we realize, which should be dealt with in later negotiations, but we must insist, in principle, that all payments of reparations in kind made during the suspension period shall diminish Germany’s unconditional payments by those amounts and shall be credited to her unconditional payment account.
- (f)
- On Friday Chancellor Bruening is to be in Paris, we understand. That you learn from him just how far Germany is willing to go to meet the French demands we consider most desirable. However, until you have communicated with us again, we do not deem it advisable that you acquaint the Germans with our position in the matter. Mills.
Stimson