The Consul at Basel (Cochran) to the Secretary of State
[Received June 29—2:30 p.m.]
For Castle. Reichsbank today telephoned B. I. S. to state that in spite of the failure of the Lausanne Conference, Germany will not declare a general moratorium. Reichsbank denied that any plan had been discussed or was contemplated for scaling down German private indebtedness. Furthermore Germans will make no exceptional proposals at London Standstill meeting the first week in July although lowering of interest rates may be sought. In answer to the B.I.S. inquiry as to why the Reichsbank termed Lausanne a failure, Reichsbank replied that any solution of the problem which did not definitely assure the German people that they could work ahead toward their own salvation free from economic threats should be considered a failure. Bank of England telephoned today repeating wild rumors from London including one to the effect that the reichsmark would be devalorized as from tomorrow. Reichsbank assurances above stated are considered to refute this rumor.
It is understood here that the Lausanne Conference is today seeking agreement upon formula for the announcement of the position of the various delegations in such a manner that the Conference may appear to be a success. Committees will be appointed and if such a formula is found the Conference will probably be adjourned tomorrow night to meet at the call of the chairman. Among the committees would be one for deliveries in kind since this question is now proving vexatious due to the running contracts which no one is willing to finance to completion. B.I.S. has been requested to help on these contracts but for the present considers that such assistance would constitute extending credit to governments. Germans are trying to get the French to put up at least 50 percent of the balances required on these running contracts.
B.I.S. understands that the French last night offered perhaps unofficially to let the Germans off without further payments of any kind except if and to the extent the United States might insist upon war debts payments. The Germans refused this offer on three grounds.
First, this would leave the future open with the possibility of heavy payments. Secondly, the amount for which Germany thus would be liable might exceed the unconditional part under the [Page 682]Young Plan and, thirdly, Germany is not willing to admit or assume the responsibility of underwriter of Allies war debts to the United States Government.