800.51W89 Belgium/206
The Belgian Embassy to the Department of State
I. The Belgian Government has been pleased to note that the Government of the United States is disposed to take into consideration the proposal to submit the question of the settlement of the inter-governmental debts to a re-examination. On the other hand, with respect to the suggestion for extending the suspension of the payments due to the United States during this examination, the Government of the United States has observed that no new fact had been brought to its knowledge which might be submitted to Congress in justification of this suggestion. The Belgian Government accordingly believes that it is meeting the desire of the Government of the United States in setting forth its views on this subject.
II. Belgium cannot refrain from recalling in the first place her special situation. Her restoration was one of the fourteen points laid down by President Wilson and it was unanimously accepted by all the belligerents as one of the necessary bases of peace. From this fact she acquired a moral right which she desires hereby to reaffirm. The Belgian Government nevertheless found itself constrained to take account of economic realities. In view of these realities it consented to the moratorium proposed by the President of the United States, in June, 1931, and adhered to the Lausanne agreements. These economic realities have been authoritatively set forth by the experts of all countries who have made clear that debtors can, in the long run, meet their obligations with respect to foreign countries only by the exportation of goods or by services. The present paralysis of the money market hardly permits any other form of payment. But the obstacles in the way of exchange have increased and have resulted in the throttling of exportation. No country has suffered more in this respect than Belgium, whose national economy is principally based on international trade. She has continued to adhere to one of the most liberal tariff policies now in effect and for years she has continued to strive against excessive protectionism. Furthermore, after the failure of the attempts to organize international action to this end, she recently took the initiative in concluding a Convention with other States open to the adherence of all countries with a view to the progressive lowering of customs barriers. The American Government was good enough to express the sympathetic interest with which it followed this move. The Belgian Government is, therefore, in no wise responsible for the present paralysis of international commerce and it feels that it has done everything in its power to prevent it.
[Page 705]III. The depression made evident that the transfers necessary for the payment of the inter-governmental debts threatened to throw the balance of payments still further out of adjustment and to aggravate the disorganization in which the world is engulfed. In the hope of contributing thereby to economic recovery, the Belgian Government therefore accepted the moratorium which the Government of the United States proposed in June 1931. It abandoned temporarily, in a spirit of international solidarity, a claim which the country considered as sacred, notwithstanding the fact the consequences were certain to fall particularly heavily on Belgium. Before this, at the Conferences of London in 1924,56 and at The Hague in 1929 and 1930,57 Belgium had, in the same spirit, through her adherence to the Dawes Plan58 and to the Young Plan,59 accepted appreciable reductions in reparations.
The payments which were due to Belgium from Germany and of which she was deprived by the moratorium of 1931, amounted to nearly a billion francs, or about ten percent of the total budget of Belgium. This loss was, however, partially compensated for by the fact that, at the same time, Belgium was relieved of the obligation of paying the annuities due from her to the Government of the United States and to the British Government. Nevertheless, the net loss of which the Belgian Treasury was thus deprived remained high, amounting to almost a half billion francs.
IV. During the conference which met at Lausanne in the month of June last—the purpose of which was to seek by united action the final settlement of the financial problems bequeathed by the war, and to obviate the dangers which more and more menace the world—Belgium agreed to extend the suspension of the German reparations payments. In line with the proposal which the President of the United States had made the year before, it was her understanding that the suspension was to be extended to all the inter-governmental debts, and was in no case to involve for Belgium more onerous conditions than those which the moratorium of the preceding year had entailed. This understanding was based on the fact that since the month of June 1931 the economic and financial situation had become more and more disturbing and that consequently the measures which [Page 706] had seemed necessary at the time were, a fortiori, necessary under present conditions. These measures were in conformity with the conclusions submitted by the Consultative Committee which met at Basel in December, 1931; they were in harmony with the suggestions expressed after the interview between the President of the United States and M. Laval in October of that year.60
V. The obligation to make the payments due the United States would add a new sacrifice to the loss which the Belgian treasury already suffered as a result of the moratorium of last year and would raise the total sacrifice which would be required of her to nearly one billion francs. The Belgian Government is not unaware that, in the opinion of the United States Government, the problem of war debts is distinct from that of reparations. But it does not see how, if Belgium is to pay her inter-governmental debts, she can avoid turning to her own debtor, claiming from the latter the payment of the sums due her. This action would lead to new international complications In the last analysis, it would make it evident that while, on the one hand, it is impossible to bring about the transfer of the funds necessary for the payment of the inter-governmental debts without causing dangerous economic and political complications, it is, on the other hand, impossible to raise internally in Belgium the sums needed for the payment without dangerously increasing the dis-equilibrium of the budget and the difficulties of the Treasury. The Belgian Government has already emphasized how deeply the depression has affected the economic life of the nation by paralyzing international trade. Unemployment has increased alarmingly, affecting approximately 40% of the registered laboring population. As a result, expenditures for relief have increased, while the receipts of the Treasury have markedly declined. The deficit in the budget has increased considerably during the past two years, notwithstanding stringent measures of economy. The Belgian Government desires at this point to recall to mind that it did not hesitate to support the proposals made in July by the President of the United States in regard to the reduction of armaments.61 To cover the deficit, Belgium has had to resort to borrowing, both at home and abroad. New loans for large amounts will be necessary. Belgium could not resume service on her inter-governmental debts by her own resources and would be obliged to appeal to foreign credit. But that would be merely to substitute one creditor for another; and, moreover, the possibilities for a small country to borrow under present conditions are limited.
[Page 707]The Belgian Government is convinced that a careful examination of the situation—for which it is prepared to furnish all necessary information—would show that the depression, by occasioning the collapse of its own debtors, has brought it face to face with serious difficulties and that Belgium would be exposed to grave dangers if she were asked to resume payments, the suspension of which was considered imperative a year ago.
- For proceedings of the London Conference and texts of agreements adopted, see Great Britain, Cmd. 2270, Miscellaneous No. 17 (1924): Proceedings of the London Reparations Conference, July and August 1924. ↩
- Great Britain, Cmd. 3484, Misc. No. 4 (1930): Agreements Concluded at the Hague Conference, January 1930. ↩
- Great Britain, Cmd. 2105 (1924): Reports of the Expert Committees Appointed by the Reparation Commission. ↩
- Great Britain, Cmd. 3343 (1929): Report of the Committee of Experts on Reparations. ↩
- For text of joint statement, see Foreign Relations, 1931, vol. ii, p. 252.↩
- See telegram No. 295, July 2, 10 a.m., from the Acting Chairman of the American delegation to the Disarmament Conference, p. 253.↩