462.00R296/4276: Telegram
The Ambassador in France (Edge) to the Acting Secretary of State
408. Mr. Flandin delivered to me at 8 o’clock tonight the following brief outlining the viewpoint of the French Government in connection with the discussion of the disputed question of deliveries in kind.
“The French Government maintains that the contracts for deliveries in kind made between private individuals, do not fall within the category of strictly intergovernmental obligations and that the execution of existing contracts must be assured outside of President Hoover’s plan, as was done, upon the proposal [of] the President himself in the servicing of the Young and Dawes loans.
The American Government affirms on the contrary that deliveries in kind in so far as they constitute a charge upon the budget of the [Page 158] debtor government and a corresponding benefit to the budget of the creditor government, fall within the provisions of the President’s proposal relating to the complete suspension of all intergovernmental payments.
The French Government wants to make clear that it has never proposed the making of new contracts during the year of suspension although one may well question whether in the interest of the debtor it would not be opportune, as has been recommended by all qualified experts, to facilitate rather than to practically forbid payments in kind which would free it from the future obligation of money transfers.
The French Government also wants to recall that it never asked to receive by means of deliveries in kind payments from Germany in addition to the unconditional annuity. It proposed on the contrary to deduct the amount of such deliveries, continued during the year of suspension, from the unconditional annuity.
Such a proposition would thus free to this extent the German economy from the subsequent transfer in francs corresponding to the reimbursements of the loan granted by the B. I. S. for the account of France to the German railways. It would thus constitute [contribute?] to the restoration of confidence in German currency by reducing in the future the amount of the foreign monies to be transferred by Germany.
The French Government could not moreover conceive that the American Government, when it proposes to refer the question to a committee of experts with the proviso ‘that any solution arrived at should be in the spirit of the original proposal of President Hoover’, means by that to prejudice the decision of the experts and in case the mechanism of the deliveries in kind should continue to function, put France in such a position that it would have to pay back to the B. I. S. for reloaning to the German Economy the counter value of the deliveries in kind that it would have received during the suspension year.
The American Government cannot be ignorant of the fact that the French Government, in order to favor the development of deliveries in kind, consents to reduction of its credit for the benefit of contractors and that its budget is thus burdened correspondingly. Nor can it be ignorant of the fact that deliveries in kind are in a large measure set apart for works of public or general utility which may entail financial participation of the statutes under one form or another and that such works would doubtless not be carried out other than by deliveries in kind. It would be inadmissible that in a crisis which affects French industries as well as foreign industries the Government of the Republic should levy, upon the receipts of its budget already showing a deficit, which deficit will be aggravated by the suspension of the payments of Germany, the sums destined to pay for purchases to be made in Germany as deliveries in kind. The French taxpayer, who is one of the most heavily taxed in the world, would never consent to this. Moreover there is no reason to emphasize how much such a solution would be contrary to President Hoover’s proposal which provided for a general suspension of intergovernmental payments but not the granting of governmental credits to failing Germany.
[Page 159]The final result, consequent upon the position taken by the American Government, will therefore be at least, in so far as France is concerned, the stopping of deliveries in kind. It is hardly probable that this solution would be considered by world opinion as ‘a means to hastening the end of the present world economic depression’, even according to the terms of the American aide-mémoire. The French Government could not in any case accept any responsibility whatever under this circumstance.
The Government of the Republic would have difficulty in understanding why the negotiations, during the course of which it has given proof of the highest spirit of conciliation, should be broken off on the question of deliveries in kind. It did not ask the American Government to intervene in support of the French thesis which obviously should be discussed not only with Germany but with the other creditor powers. It cannot admit, however, that a commission which moreover counter-charges the responsibility of intervention in this question, should in advance raise obstacles to the French proposals by judging them incompatible with the Hoover proposal. The Government of the Republic, which is preoccupied solely with putting into effect measures useful to the general economy and with remedying the monetary crisis of Germany, dares to hope that the American Government will recognize that France by the very virtue of the conventions she signed at The Hague, has the duty to reserve the question of deliveries in kind”.
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