462.00R296/5495

The Ambassador in Germany (Sackett) to the Secretary of State

No. 1436

Sir: I have the honor to report that during the, past weeks the developments on the reparation question have been in the foreground of political discussion in Germany, in the press as well as in the numerous meetings of the various political parties. Perhaps never before have political speakers and writers of all shades of opinion shown such unanimity of purpose on any single issue. The conviction that after the expiration of the Hoover moratorium Germany will not be in position to resume reparation payments was general. On this point all political parties were agreed.

However, while both the Nazis and Nationalists wished a more aggressive foreign policy and urged the Government to declare categorically that Germany not only could not but also would not pay reparations, more moderate and responsible elements insisted that any official step which might be interpreted as a willful violation of the existing reparation agreement must be avoided. It was widely agreed that for France reparations constituted a political instrument to prevent Germany’s economic regeneration rather than a financial question, and certain Nationalist journals asserted that in the background of this French policy the “Comité des Forges” was clearly discernible.

The irreconcilable opposition of the Right regarded the situation as “brutally simple.” Laval’s speeches and the general tone of the debate in the Chamber, it was pointed out, showed that “war mentality still predominates on the other side of the Rhine.” The Reich Government must abandon its present policy and assume a diplomatic offensive against France. This, however, could not be expected of a Cabinet which was saddled with the odium of the ill-fated policy of fulfilment. The Brüning Cabinet must therefore resign to make room for a government of those parties which had opposed this policy for years.

The more moderate parties of the Right felt that it was extremely shortsighted of France to antagonize those nations which had helped to prevent her defeat in the war. France was overestimating her power. America was giving her the cold shoulder, England was reluctant to support her, while Italy, as a result of conflicting interests in the Balkans and in the Mediterranean, was certainly not France’s friend. France was still strong, but she was facing the risk of political isolation. Germany had little to gain from such [Page 663]a development. However, France must realize that “splendid isolation” might mean the beginning of the end for her too.

As viewed by the parties of the Left, the problem was to free Germany from the present oppressive reparation burden in a way that would not prove detrimental to Germany’s prestige abroad. Germany’s position was at least morally strong and the Government must therefore watch its step since a faux pas might weaken the present position. It was perhaps a good thing that the Lausanne Conference was not held as scheduled. The views of the two governments were so far apart that it was more than doubtful whether a practical solution could have been reached under the circumstances. The Social-Democrats hoped that the election in the spring would result in a more favorable distribution of political strength in the next Chamber and that an understanding with a new French Cabinet might then be possible.

The French contention that as a result of inflation Germany had been able to wipe out practically all of her internal debt and that in consequence she would be in a more favorable position than other countries if reparations were abolished, was rejected in all quarters. At a recent session of the Reichsrat, Prussia’s representative pointed out that the reduction of the internal debt from 130 billion gold marks to 10 billions constituted an actual loss of capital as a result of the war and inflation. The bitterness which this French argument aroused in Germany may be judged by the sarcastic remark of this high official, to the effect that, if a reduction of the internal debt through inflation was such a blessing, those countries which were envious of Germany might resort to this course.

Aside from this, it was pointed out that payment of reparations depended primarily on whether Germany could raise the required amounts by taxes and budgetary economy and whether she could transfer these sums in foreign exchange. That the screw of taxation could not be tightened any more had been admitted by the Basle report which had been unable to recommend further budgetary economies. Moreover, foreign loans were not available at present and the foreign exchange which Germany derived from her exports was just sufficient to take care of the service on private loans.

Some satisfaction was extracted from the fact that “at the very time when Germany was the object of vile attacks in the French press” the French members of the Wiggin Committee in Berlin had signed a report to the effect that Germany had made great sacrifices to meet her foreign obligations. The report of the Standstill Committee, though its conclusions failed to come up to German expectations, was viewed as an excellent repudiation of the French contention that Germany was acting in bad faith.

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The Social-Democratic Vorwaerts failed to see why France insisted on a guarantee pact with America, pointing out that France already has threefold security, namely, Locarno,2 the Covenant of the League of Nations,3 and the Kellogg Pact.4 One of Hugen-berg’s journals declared that America’s insistence that there was no connection between reparations and war debts was entirely in accord with the German standpoint and that this proved the weakness of the French thesis that a solution of the reparation problem without a preceding promise by America to agree to a revision of war debts was not possible.

Certain Nationalist journals cautioned the Government to watch its step at the Disarmament Conference. It was feared that France might seek to link reparations with disarmament, and the German delegates to Geneva were urged not to permit France under any circumstances to intimidate them or to influence them by seeming concessions on the reparation question.

The demands of the middle parties for a political truce that would enable the Chancellor to achieve positive results for Germany have made as yet no evident impression on the irreconcilable Opposition which derives satisfaction in predicting the worst. The unfavorable turn which developments have taken seems to encourage the Nazis and Nationalists in their attempt to embarrass Dr. Brüning.

M. Laval’s recent speeches, as well as the equivocal attitude of Herriot and other leaders of French Left parties, make the position of those parties in Germany which favored a policy of understanding with France extremely difficult. This is especially true of the Social-Democrats who have supported with conviction and courage the policy of fulfilment, in the face of violent opposition from both the Right and the Communists.

From a tactical standpoint, the Nazis and Nationalists are doubtless operating very skillfully. Their tactics are to shift upon Dr. Brüning and the present Cabinet responsibility for Germany’s eventual failure to obtain a solution of the reparation problem one hundred per cent favorable to Germany. Through intensive agitation they have led large sections of the population to believe that all that is required to relieve Germany of the oppressive reparation burden is to declare officially that Germany not only cannot but also will not pay reparations. The situation has become so that unless the Government counteracts this propaganda effectively [Page 665]any solution favorable to Germany other than the complete cessation of reparation payments may be regarded by many as proof of the inability of the present Government to obtain a satisfactory solution of this vital problem and that only a government dominated by Hitler and Hugenberg could hope to achieve foreign political results.

It is probable that reparations will continue to constitute the axis of the domestic-political troubles of the Reich. At present, opposing factions have succeeded in developing negative strength to a degree which has contributed much confusion to the situation. The element of stalemate in it serves to inflame political passions. Moreover, the suspicion that party maneuvering frequently lacks political sincerity adds to the obscurity of both the issues and the outcome.

One unfortunate development in the foreign political side has been the introduction of the element of national prestige into the Franco-German discussions. It is improbable that reparations can be brought into an atmosphere of purely factual negotiation for the present. The French point of view, as reflected in Berlin, is that Dr. Brüning’s recent denial of Germany’s ability to pay reflects the same psychology as the unhappy attempt at Zollunion and must in consequence be resisted unyieldingly by France.

Respectfully yours,

Frederic M. Sackett
  1. League of Nations Treaty Series, vol. liv, pp. 289–363.
  2. Treaties, Conventions, etc., 1910–1923, vol. iii, p. 3336.
  3. Foreign Relations, 1928, vol. i, p. 153.