The Ambassador in France (Edge) to the Secretary of State
[Received October 1—2:25 p.m.19]
622. I received Flandin, French Minister of Finance, at his request yesterday afternoon at the Embassy residence. Flandin had previously indicated that as soon as opportunity afforded, he would like to have an opportunity to discuss with me, informally but uninterruptedly, various problems which mutually concern France and the United States. He made it clear upon his arrival that the discussion would be most informal and unofficial, merely representing his personal view, although the influence of Flandin is universally admitted and recognized in French administrative circles. Anything which he might say unofficially can be reasonably construed as representing policies he would endorse officially.
The Minister of Finance began with a very gloomy picture of what had already happened financially and said he feared still greater financial catastrophe to come unless some dramatic move to restore confidence was initiated and carried out and that apparently the United States and France were the only two nations able and equipped to lead such a movement. Flandin’s first concrete suggestion was that Germany must be still further relieved and that Germany could not be expected to continue full payments under the Young Plan20 at the end of the present moratorium period, and that in order to exert helpful influence on existing conditions, it was necessary that something should be done as soon as possible rather than by delay and lack of action to continue to encourage uncertainty. He proposed that it was his belief that the elimination of the conditional reparation payments from Germany would be favorably considered by France, retaining only the unconditional payments—which, as you know, are placed by France in a distinct and separate class—provided the United States would grant to France a substantial reduction in the French war debt. Continuing, he repeated the old argument that when the war debt agreement sponsored by the United States had been ratified by the French Parliament, it had been coincident with the passing of a resolution that any reduction in German reparations would be contingent on a reduction of the war debt of France.
In my reply to Flandin, also entirely unofficially and informally, which I took care to emphasize, I expressed it as my personal judgment [Page 245]that his proposal was completely impossible; that in effect it would simply mean next summer the German debt to France would be transferred to the United States, something which the American people would never countenance. I repeated that unless France had something attractive and very definite to connect with such a proposition which would insure substantial budgetary reductions both abroad and at home, a proposal such as Flandin had made would merely add to the uncertainties rather than accomplish anything in the way of begetting the confidence which he stated was so important. Our familiar argument, that it was a great mistake for the French people not to realize that these war debts were as just and valid as the loans being made to Germany, England, or other countries at the present time, was repeated by me; that France always seemed to forget that every dollar of the amount agreed upon in the debt settlement had been loaned to her after the Armistice. After this old threadbare argument had been threshed out on both sides and I had further indicated to the Minister of Finance that if he was going to save the world he would have to dig a great deal deeper, he brought up the subject of the security France demanded if she were to consider favourably armament limitation. Flandin admitted frankly that he understood perfectly that no agreement or alliance would be entered into by the United States Government to defend any country in case of attack but he wondered in connection with the Kellogg-Briand Pact if some type of understanding could not be arrived at through which in case of violation of the Pact the United States at least would agree to offer no help and would refuse to trade with an aggressor nation. His conversation at this point was very similar to Lord Tyrrell’s conversation (refer to Embassy’s telegram No. 599, 3 p.m., September 25). Moreover, he pointed out that if an arrangement of this sort could be reached, he believed so far as he was concerned that it could be made a part of a general plan for definite limitation of armaments and a readjustment of war debts and reparations. The Finance Minister stated that he realized fully that the United States must determine the aggressor and violator of the Pact. Indeed, Flandin went further in these directions than any other French official to whom I have previously talked. Flandin discussed the fact that the reduction of appropriation for national defense on the percentage basis would be quite possible, provided (this point was repeatedly emphasized) satisfactory assurance could be given that Germany too would not beat the devil around the bush and would also maintain at a low level all appropriations that might lead to military development such as police organizations, etc.
We then talked about a method by which the German reparations situation might be approached and Flandin clearly admitted that in [Page 246]his opinion the Young Plan could not be maintained in its entirety, which has been referred to earlier in this telegram. The Finance Minister favored some sort of plan which would fix a final sum of indebtedness due from Germany and to the United States on account of war debts and accepting from Germany government bonds covering their complete indebtedness which should be distributed according to plans that might be fairly drawn up. Put in another way, he seemed to favor the transferral of reparation payments to bonded indebtedness again with a proviso that if a further revision was made in Germany’s favor there would be no further repudiation and that Germany would pay. Naturally, this brought up the question of possible methods of guarantees beyond those which the Young Plan provides. The Finance Minister was not ready to suggest a method but he repeated his opinion that after a third revision Germany must be compelled to pay and a method must be devised to make this clear. Throughout the conversations Flandin emphasized his conviction that the situation was so serious that it was necessary for both the United States and France to reach common ground upon which to proceed and that it was by no means impossible on the part of France to agree to limitation of armaments and that France in common with all other countries was facing great budgetary difficulties. I asked the Finance Minister whether Laval, when he arrived in the United States proposed to discuss these questions as comprehensively as had been done by Flandin. It was Flandin’s view that he hoped he would, but that Laval might need some encouragement to go so far, as he was a cautious man. It was my endeavor to impress him with the urgency of making Laval realize that he should put all the cards on the table as things were in a state of impasse.
I indicated to Flandin at various times during the conversation that while naturally the United States was very much interested and desirous of being of any possible help throughout the world, still if France or other nations were not prepared to meet the well-known policy of the United States at home, we, of course, could continue along as we had done in the past and, although, like everybody else, we had our own economic troubles we had no fear but that we would in the end come through with a bank balance on hand. The Finance Minister endeavored to meet these indications of possible isolation with the usual plea that he was positive the United States would not take this position and that the United States had too much at stake financially not to take a real interest in the world’s affairs and to adopt an isolation policy. I believe my conversation with Flandin will interest the Department in view of Laval’s visit, and it is my personal opinion that Flandin made this visit to me for the sole purpose of opening up these possibilities in an unofficial manner.