462.00R296/5042
Memorandum by the Acting Secretary of State99
I asked Mr. Sackett whether he had heard from Mr. Mellon about the conversations going on in Paris and told him that it looked as though we had almost reached a deadlock with France. I told him that, if nothing was accomplished, the President was considering renewing his offer originally made to individual nations. This offer would naturally be made to France, as well as to anyone else, but I pointed out that, even if France refused to come in, there would be great relief to Germany. I told him the President would like to get Germany’s reaction on this suggestion.
I asked Mr. Sackett to find out for us confidentially what the Germans were planning to do on July 15th, in case the President’s plan fell through. I asked him also to let us know what the financial situation in Germany really was, whether it is what we believe it to be, in other words, very bad and, if bad, whether prior to July 15th they were planning to make some kind of a statement. I particularly warned Mr. Sackett that he was not to say anything to the Germans, especially in relation to the July 15th payment, that would seem to be in any way a suggestion from us that these payments should not be made. I pointed out to Mr. Sackett further that the British were going to talk to the Germans about the Customs Union and that I had told them that Mr. Sackett was going to talk about the battleship. This he said had already been done. I told him that some kind of a gesture from the Germans would be most valuable.
Mr. Sackett said that, in his talk with the Chancellor and the Foreign Minister, he had told them how serious the situation was and added that, if they had come to a decision on any question and had any suggestions to make, we wished they would make them to him immediately. Mr. Sackett said they also asked certain questions regarding the interpretation of various clauses in the French reply; that he had called up Mr. Mellon and got his interpretations; that he was going back to the Germans in a short time. He said that Mr. Mellon had suggested that he call me back later to get instructions as [Page 110] to whether Mr. Mellon’s interpretations were accurate. In the first place the Germans wanted to know what our idea was about deliveries in kind and wanted to know also whether it was possible to have any negotiations as to the 500 million payment, which was to be turned back to the Germans. I told Mr. Sackett that we had insisted on that from the beginning. He said Mr. Mellon thought it could not be done, but Mr. Sackett thought it could be done by having a special deposit in the bank, not under the statutes of the bank, with instructions to loan to Germany because if it could not be loaned to Germany the Germans would oppose the whole plan. He said even if they had to pay this money it would contribute to their relief at least one-third. Mr. Sackett said that if part of this payment were reloaned to other countries, it would be politically disastrous to the present government.
The Ambassador said that, after talking with the Chancellor, he was going to call up Mr. Mellon and asked whether he should call me. I told him to call if he had any real reaction which gave him anything interesting to say.
I told Mr. Sackett that we understood perfectly, we thought, the German position on the point of loaning part of the German payment to Central Europe and that we knew the French wanted this done for political reasons. We feel, in all probability, that some of these nations will need help in the course of the next year and we feel, therefore, such help can be given by the various Central banks just as it was recently given by the Reichsbank. I said, also, that if the Reichsbank should take part in such financing, it would be a very good thing for Germany. Mr. Sackett pointed out that in his last telegram to us1 he gave what seemed to him the possibility of a compromise and asked that we instruct Mr. Mellon along those lines. I pointed out to him again that, if Germany would take the British suggestion, give up the Customs Union and if they accepted our suggestion on the naval question, the French would have very little more to say. Mr. Sackett answered that they will not do either of those things except on a promise that the French would accept the American proposal in toto, that is they want a quid pro quo. I reminded him that using the President’s proposal as a lever was pretty bad business. Mr. Sackett said he realized we could not do this, but that the British could. I told him that I would talk to the British Ambassador.
I ended by asking the flat question as to whether he thought the Germans would be willing to make sacrifices and he said he felt they would.