462.00R296/4235: Telegram
The Ambassador in France (Edge) to the Acting Secretary of State
[Received July 2—7:42 a.m.]
392. Yesterday Von Hoesch, the German Ambassador to France, asked for an engagement. Later Mr. Mellon and I received him at the Embassy residence. Von Hoesch stated at the outset that he had received a telephone call from Chancellor Curtius [sic] who had talked with Ambassador Sackett and in view of that conversation felt that it might be helpful if the German Ambassador discussed the situation with us. We reviewed the negotiations to this point and emphasized that the chief matter of disagreement was the insistence of the French Government that any loans made to Germany should be applied, in the event of Germany’s declaring a moratorium, as a credit on the guarantee fund. The German Ambassador seemed quite familiar with these matters and suggested at last that as a concession Germany might issue bonds to the French Government payable in the 25-year period 1933 to 1958, the bonds covering the amount of the loan to Germany by France. We shall advance this idea as a possibility when the point is discussed in the conference tonight, although [Page 121] neither Mr. Mellon nor I believe that the French will consider the suggestion very attractive.
We made every effort to point out clearly to the German Ambassador that it was important for Germany to be as liberal as possible in trying to solve this problem and that the negotiations might very possibly fail if the French were not satisfied on this particular point. We made the suggestion that Germany might possibly continue deliveries in kind and apply them on their debt or give security of some other type that would be considered practical from a banking standpoint. We said that after we had discussed this point more fully with the French we would get in touch with him again.