033.5111 Laval, Pierre/124: Telegram

The Ambassador in France ( Edge ) to the Secretary of State


673. Last night, Flandin, Minister of Finance, called at the Embassy. He was anxious, he stated, that I should know the position which the Bank of France had taken in cooperating with the French Government to assist in circumventing the raid on the dollar. Approximately $600,000,000 now on deposit in the Federal Reserve Bank and various American private institutions would not, Flandin assured me, be withdrawn in any part by the Bank of France. His decision had not, Flandin wanted me to know, been reached without considerable difficulty. The Minister stated that a number of the directors of the Bank of France had insisted upon withdrawals in order that the Bank should not be caught as they were with 2 billion francs invested in sterling when Great Britain went off the gold standard. Withdrawals by private banks or individuals could not be prevented by them, Flandin [Page 250] said. Every effort, however, had likewise been made by him and his associates to minimize these withdrawals. Flandin stated that Moret27 had consulted with him and indicated that it would be difficult for him (Moret) to withstand the pressure of his directors unless the French Government would back him in his determination not to withdraw French credits because the directors have naturally been disturbed by the loss of 20 percent in their investment in sterling.

Of course, it was obvious that the Finance Minister wanted me to have this story in detail in order that the United States might be impressed with his friendliness. Although I accepted his overtures I could not avoid the suggestion that there would not have been much chance for the franc if the organized group had been successful in their raid on the dollar as they had been in Great Britain with sterling. Even though Flandin admitted this possibility, he, nevertheless, insisted that a great many French bankers felt that the franc was beyond successful attack and that they did not look that far ahead.

The Finance Minister was especially hopeful that a public announcement would be made following the conversations at Washington stressing the determination of France and the United States to maintain the gold standard (see Embassy’s No. 671, 5 p.m., 19th of October28).

Taking a line very much the same as in his previous talk with me, Flandin then reopened the discussion of the possible result of the conversations at Washington on the subjects of disarmament, reparations, war debts, and security (Embassy’s telegram 622 of October 1, 3 p.m.). The previous interview which I had with him, he stated, had been discussed in detail with Laval but they did not feel that it would be possible or practical for any understanding to be concluded in Washington beyond the publicly expressed desire to continue the conversations in Paris and Washington after the two Governmental heads had freely exchanged views and had made a frank presentation of domestic political limitations. The world should be assured, Flandin felt, that common objectives had been agreed upon but that details or methods to put them into effect must necessarily await further conferences. A statement along this line in Flandin’s opinion would be absolutely necessary from a political standpoint. He also expressed the opinion that naturally when Laval returned to France, Parliament, which will convene shortly, will ask for a report on the results of the conversations and that in order to continue the conversations it will be necessary for Laval to secure a vote of confidence. Therefore, if any decision had been reached in advance, the vote of confidence from a political point of view would probably be impossible or perhaps greatly circumscribed [Page 251] with conditions. That a similar situation might exist in the United States was assumed by Flandin.

Flandin stated quite emphatically during the conversation that while France would be willing to explore thoroughly different methods of achieving an agreement as indicated in his previous conversation, France would nevertheless never agree to give up all unconditional annuities from Germany although quite willing to accept payments in kind. Germany’s favorable balance of trade was frequently pointed out by Flandin. Furthermore, he averred that his Government would not, under any circumstances, agree to continue the existing moratorium after July. In answer to my query as to what France’s position would be if the moratorium should not be extended and yet Germany failed to pay the unconditional reparations, the Minister replied by indicating that if Germany repudiated the Young Plan, France had a number of ways along which she could proceed if she were left to her own resources. France could, for example, renounce the commercial treaty which had been negotiated a few years ago and could go back practically to the position they had occupied before the negotiation of the Young Plan. I inferred that this was an unsatisfactory position for France but this brought forth no response. I personally doubt very much whether France would hold out to such an extreme.

Flandin’s desire to present these views to me was, I deduct, first, an attempt to show the obligation which he believes we should feel because of the French position in connection with the raid on the dollar; second, an endeavor to follow this up with an effort to stiffen the position of the French for whatever effect it might have on the conversations in Washington.

  1. Telegram in four sections.
  2. Clément Moret, Governor of the Bank of France.
  3. Not printed.