The Ambassador in Germany (Sackett) to the Secretary of State
[Received 5:11 p.m.73]
5. The uncertainty and confusion in French, German and English official circles as to some definite program to be advanced at the forthcoming Lausanne Conference was emphasized at several informal and unofficial conversations Edge and I participated in or rather listened to during the last 2 days at my house. Ambassador and Mrs. Edge have been visiting us for the purpose of attending a diplomatic dinner given for the French Ambassador and Madame Poncet on Tuesday. After dinner the French Ambassador exhibited much gloom over what he alleged to be the insistence of Germany that the Lausanne Conference should adopt a conclusive understanding that no further reparation payments be required of Germany and expressed himself as fearful of the failure of the Conference on account of such insistence.
However, he had a further conference with Dr. Bruening Wednesday morning. A little later on Wednesday at a stag luncheon to which I had invited several diplomats, German ministers and Mr. Wiggin, 12 in all, Chancellor Bruening stated to Edge and myself that the French Ambassador with, as Bruening understood it, the approval of the British (although Bruening expected to talk further with the British Ambassador on Friday) definitely proposed that on the convening of the Lausanne Conference an extension of the Hoover moratorium74 for a period of 6 months should be immediately arranged, that the French Ambassador had indicated to him that the elections in France the 17th of April would make any official adjustment of reparations before that time practically impossible. The purpose of the 6 months’ extension, the Chancellor said, was to enable the Conference to adjourn until after the French elections and reconvene late in May affording opportunity then to go into the question unembarrassed by elections considerations and secure, if possible, a surcease of reparations payments. He indicated that a conference at that time would probably last some weeks as the questions would be difficult. It appeared to me, although it was not very clearly stated, that if such a 6 months’ moratorium extension were agreed upon that the United States would be approached to permit the Hoover moratorium as to war debts to be extended for a like period. Edge and I, of course, expressed no opinion beyond [Page 639]the consistent statement that every one was familiar with the action recently taken by Congress in connection with the ratification of the existing moratorium and that we awaited Europe’s handling and development of its problems at the proposed Conference. It was mentioned that the Prussian elections also—which are among the most important in Germany—occur in May and this possibly may considerably influence the Chancellor as to compliance with the foregoing suggestion. We mentioned, as was of course well known, that the United States would be engaged in national elections from June until November and domestic interests would be centered there.
The whole situation seems to be an admission that neither France nor Great Britain is prepared at the present time for a final showdown. Any device for gaining time will be eagerly availed of by the former and will not be opposed by the latter. Germany as a matter of expediency will acquiesce.
Mr. Wiggin said to Edge and me that in general his committee had about agreed to a prolongation of the Standstill Agreement75 for 1 year without providing any partial payments on the private debts during the period such as was contained in the present Standstill Agreement but with a side understanding with the Germans that if the Lausanne Conference required of Germany any payments on public debts during that period, the Standstill Agreement would either be ended by mutual consent or a new arrangement effected.
He explained the many difficulties being encountered due to the varying conditions in the different countries. He said the Germans had made many concessions such as that the collateral held by German creditors would be shared with less adequately secured foreign creditors of the same German debtor. An important difficulty still pending was Wiggin’s demand that solvent debtors desiring to make payment be permitted under the new agreement to pay in reichsmarks. As it will not be possible to transfer such reichsmarks out of Germany, Wiggin is trying to arrange that the German Government create a new corporation to which such reichsmarks can be paid as a deposit to the creditor’s account and which deposit account the Government will then guarantee. These deposits thus guaranteed could either be loaned to the Reichsbank so that the liquidity of German financial institutions will be curtailed or be subject to creditor’s withdrawal for investment in German real estate, stocks, bonds, et cetera. He evidently wishes to establish by this method opportunity for creditors to convert perhaps dubious paper into guaranteed deposits, better paper or property if opportunity [Page 640]offers. Wiggin instanced cases of failure of Germany to observe the present Standstill Agreement citing a recent 50 percent payment on the 15 million Bavarian loan instead of the permitted 10 percent which transaction the Reichsbank explained as resulting from an extraordinary communication from the Bankers Trust Company. Wiggin stated his committee was proceeding as if political debts did not exist but had great difficulty in keeping the English from raising the priority question in view of Mr. Baldwin’s recent statement on that subject which called forth Laval’s reply.
Copy to Paris.