800.51W89 Great Britain/365

The British Embassy to the Department of State

1.
His Majesty’s Government having received the note addressed to them by the United States Government on December 7th observe with satisfaction that the United States Government welcome the suggestion for a close examination between the two countries of the whole subject dealt with in the British Note of December 1st. His Majesty’s Government feel that it will be appropriate to reserve for this joint examination their comments on certain of the views expressed [Page 777]in the United States note of December 7th, but they think it right to state that after further careful consideration they see no reason to modify their general conclusions set forth in their Note of December 1st.
2.
His Majesty’s Government will, therefore, in the present communication, deal only with the last portion of the United States Government’s note which relates to the immediate question of the payment on December 15th. His Majesty’s Government observe that the United States Government recognize the difficulties of effecting transfer but they remain convinced that no solution other than suspension would obviate these difficulties. They note therefore with profound regret that—notwithstanding the arguments contained in the British Note of December 1st—the United States Government have decided not to recommend this solution to Congress.
3.
In view of this decision His Majesty’s Government have determined to make payment of the amount due on December 15th under the Funding Agreement of June 18th, 1923 but they think it desirable to take the opportunity of stating clearly their position in regard to this payment and of explaining the circumstances in which they have arrived at that conclusion.
4.
For reasons which have already been placed on record His Majesty’s Government are convinced that the system of inter-Governmental payments in respect of the War Debts as it existed prior to Mr. Hoover’s initiative on June 20th, 1931, cannot be revived without disaster. Since it is agreed that the whole subject should be reexamined between the United States and the United Kingdom this fundamental point need not be further stressed here.
5.
In the view of His Majesty’s Government therefore the payment to be made on December 15th is not to be regarded as a resumption of the annual payments contemplated by the existing agreement. It is made because there has not been time for discussion with regard to that agreement to take place and because the United States Government have stated that in their opinion such a payment would greatly increase the prospects of a satisfactory approach to the whole question.
6.
His Majesty’s Government propose accordingly to treat the payment on December 15th as a capital payment of which account should be taken in any final settlement and they are making arrangements to effect this payment in gold as being in the circumstances the least prejudicial of the methods open to them.
7.
This procedure must obviously be exceptional and abnormal and His Majesty’s Government desire to urge upon the United States Government the importance of an early exchange of views with the [Page 778]object of concluding the proposed discussion before June 15th next in order to obviate a general breakdown of the existing inter-Governmental agreements.