462.00R296/3954: Telegram
The Chargé in Great Britain ( Atherton ) to the Secretary of State
175. Reference is to your No. 154 of June 6, 11 a.m.11 On his return from Chequers tonight, the Prime Minister saw me for an hour. The conversations there, he stated, took place without notes and for that reason his talk to me might not coincide with the purely official résumés to be given by the Foreign Office to the French and Italian Ambassadors tomorrow. He asked, consequently, that I make no reference to his remarks at the Foreign Office and that you do not refer to them in talks with British officials in Washington.
Reference was made by the Prime Minister to the general world economic depression and to his belief in the desirability of international conversations, not, he said, that he was wholly abandoning the line of thought contained in his letter (see Embassy’s 67 of March 5, 1 p.m.).12 He then detailed the background (see Embassy’s 170, June 5, 6 p.m.)11 against which the invitation had been extended to the Germans to visit England and also the reasons for the subsequent postponement to the present date. He had been happy, he said, at first to bring Germany in a friendly and social manner into European deliberations but that he was nonplused, as the time for the Chequers visit grew nearer, by the probability that Germany’s economic situation would overshadow all other phases of Bruening’s conversation with him. He had, he added, questioned Bruening with regard to the Berlin manifesto on Saturday with its hopeful political introduction which had come to him as a complete surprise. Bruening had replied that some helpful potion had to be administered since the new “prohibitive taxes” were so unpalatable to Germany. The text of the manifesto, to date, is not available here.
Mr. MacDonald stated that during the conversation Bruening stressed the adverse economic plight of the Reich, increasing unemployment added to ever higher taxation, which, however, did not yield the anticipated revenue. Bruening assured Mr. MacDonald, nonetheless, that his Government would strive to carry on. The German Chancellor pointed out that taxes were eating up the capital essential for German industry. Much of this capital had been provided in the past by the United States, but this had now ceased. Bruening declared [Page 7] that it would be of the utmost assistance to Germany at this juncture to have fresh capital from France or the United States.
Bruening said that as regards reparations not only German but world economic conditions had entirely changed since the Young Plan was accepted 14 months ago. The Prime Minister interrupted the Germans at this point to explain that England could discuss the question of reparations payments only after consultation with the United States and France. England, the Prime Minister explained, was but a channel in that the amount of reparations received was paid out to America to satisfy the British debt to the United States. Mr. MacDonald then said that he took special pains to explain that England, at this time, would be entirely unwilling to broach any question of reparation debts to the United States. Any such step might, Mr. MacDonald explained, embarrass the President in a pre-election year. This point, the Prime Minister explained, he gave as his personal point of view. He also thought that the American Secretary of State, although he was coming to Europe this summer, was far more concerned in the European disarmament question than reparation debts. Mr. MacDonald, at this point, also reminded the Germans that the Young Plan13 had anticipated such a crisis as the present one by permitting Germany on her own initiative to request a moratorium. Adverse consequences in Germany had resulted, Bruening stated, from the collapse of Austrian finance. Bruening believed, however, that Germany could, in spite of many unfavorable factors, carry on at least until November before requesting such a moratorium. In Bruening’s opinion November was for many reasons a critical month. He mentioned specifically that the possible withdrawal of short-term loans in Germany might precipitate a crisis. The Prime Minister said he could not attempt to remember the figures, but that the amount of these short-term loans was surprising.
Mr. MacDonald then asked about the Reich’s foreign policy between now and November. The Germans intended, according to Curtius, to be represented at Geneva at the forthcoming meetings on the economic committee of the Briand plan. This might afford an opportunity for Germany to seek alleviation from its economic plight. It was pointed out by Curtius that the procedure on the Austro-German Customs Union question had been satisfactorily settled and that the Prime Minister might be assured that Germany had no surprise card to spring between now and November.
The German presentation of their case, Mr. MacDonald said, was made in a most friendly and sociable manner. No suggestion or plan was advanced to which the British were asked to adhere. The [Page 8] official communiqué set forth such general conclusions as were reached. See my No. 174 of June 7, 8 p.m.14
Curtius’ discussion of the political situation in Germany emphasized the consequences which a collapse of the Bruening Government would have in the rest of Europe. Either the Communists or the Hitlerites might come into power after a change of government, which might be brought about by higher taxes and unemployment together with decreasing relief measures. Repudiation was advocated by the Communists and while the followers of Hitler, being inexperienced in office, might not advocate extreme measures, they might arouse such dissatisfaction as to disrupt the Reich and pave the way for the Communists.…
Mr. MacDonald added that the European situation was moving in a dangerous direction. I asked him whether he feared a war. He replied, “No, revolution.” He continued that there would be no revolution in England as the British Government was caring for the unemployed. Hence they would not alter the system of unemployment insurance, despite its defects, because it was saving the United Kingdom. Germany was not in a position to follow the same policy. Mr. MacDonald then said that an equal danger to Europe was French domination. He asserted that nationalistic considerations dominated French finance and French policy, that the French loans to Czechoslovakia, Rumania, Poland, and Yugoslavia were based on French aggrandizement, and that it was idle to expect an international character from French banking or diplomacy.
Mr. MacDonald added that the Germans were entirely satisfied with the final text of the official communiqué of the Chequers conversations, despite the very great difficulty of drafting any statement.
In conclusion, Mr. MacDonald observed that, personally speaking, he would study the advisability of lending gold to Germany if he were in control of the American and French gold reserves. Mr. Montagu Norman,15 however, who had visited Chequers this morning, had told him that despite the present crisis in Germany matters were not so desperate as the German Chancellor believed. Mr. Norman said that in spite of similar warnings to the world that Germany could not weather a severe economic crisis, he had seen Germany go through three severe crises in recent times and that he felt Germany would come through all right this time as well.
Mr. MacDonald is preparing a personal communication to Secretary Stimson. He hopes to give it to me for cable transmission early next week.