I sincerely hope that it will be of some help to you.
[Enclosure]
Since the end of the War, it has been the constant opinion, not only
of the succeeding French Governments, but of the Parliament and the
country, that the settlement of interallied debts ought to be made
in relation with the reparations settlement. Such an opinion,
reaffirmed in the Resolution passed by the French Parliament on the
occasion of the ratification of the Mellon-Bérenger agreement90 conditioning
the payments to the United States to the German reparations, was
based upon the principle of the capacity of payment which was
applied by the Government of the United States in its agreements
with foreign debtors.
On several occasions, American statesmen admitted that reparations
and debts were intimately connected. For example:
-
a)
- In a letter dated January 29th, 1919 and addressed to Mr.
Edouard de Billy, at the time French High Commissioner in
the United States, the Secretary of the Treasury Mr. Carter
Glass wrote:
“I fully agree in the principle that the settlement
of the debts should take into consideration payments
on reparations to be received from Germany by your
Government.”91
-
b)
- When the Senate was discussing the agreement between the
United States and Italy, Senator Smoot, on March 25th, 1926,
said:
“Nobody can contest that German reparations will
furnish Italy with a great part of the means of
payment she will need for her payments toward the
United States and Great Britain. It is a fact,
whether we admit it or not.”92
-
c)
- In a memorandum sent on July 4th, 1925 to the French
Ambassador, Mr. Garrard Winston, Undersecretary of the
Treasury wrote:
“The payment will not be contingent upon receipt of
reparations by the debtors, but the probability of
such payments will be taken into consideration in
order to fix the capacity of payment.”93
Although the Young plan did not establish an official connection
between debts and reparations, it was drafted in such a manner that,
in the opinion of the experts, a de facto
bond was created between those two problems. The duration of the
reparation payments was identical with that of the payments to the
United States and the variable
[Page 875]
portion of the annuities covered the payments
to be made by the Allies.
When on June 19th [20th], 1931, President
Hoover asked for a general suspension of intergovernmental
obligations, he carefully asserted that the reparations problem was
purely a European one. Nevertheless the initiative he took resulted
in the rupture of the Young plan machinery. Mr. Hoover admitted that
the “fabric of intergovernmental debts, supported in normal times,
weighs heavily in the midst of the depression.” He opposed the
cancellation of the debts but expressed the conviction that the
American people had “no desire to attempt to exact any sum beyond
the capacity of any debtor to pay” and added: “It is our view that
broad vision requires that our Government should recognize the
situation as its exists.”94
During the conversations which took place in Paris at the time of Mr.
Hoover’s proposal for a moratorium, great pressure was made by
members of the American Government who were in Europe at the time,
Mr. Stimson and especially Mr. Mellon, in order to convince their
colleagues of the French Government to include in the suggested
suspension the unconditional part of the reparations payments from
Germany as fixed by the Young plan. After a long resistance, the
French Government accepted. But, while making that important
concession, it pointed out that, in spite of constant affirmations
on the part of the American Government that no official connection
existed between reparations and debts, the Hoover moratorium had
really established such a connection between those two problems and
that all intergovernmental obligations were interdependent.95 Such was also the
opinion of the Wiggin Committee appointed by the Bank of
International Settlements which recalled that “the German problem is
but a part of a wider problem which affects many other countries in
the world.”96
Such also was the meaning of the Hoover-Laval communiqué of October
25th which reads in part:
“As far as intergovernmental obligations are concerned, we
are agreed that before the expiration of the Hoover year of
suspension, an arrangement covering the period of economic
depression may be necessary, as to the terms and conditions
of which our two governments make our reserves. The
initiative of this arrangement will have to be taken by the
European powers concerned, within the framework of the
existing agreements before July 1st, 1931.”97
[Page 876]
Although when Mr. Laval returned to France he did not take with him a
promise from President Hoover that a reduction of the debt
equivalent to the possible reduction on reparations would be
acceptable to the United States, he had been led to understand that
after the reparations question had been settled among European
powers, the American Government would be willing to cooperate in a
revision of other intergovernmental obligations.
On November 27th, 1931, speaking before the French Chamber of
Deputies, Mr. Laval said: “We shall accept arrangements for a
limited period, but we shall not consent to a revision of
reparations unless reductions at least
equivalent are consented on the debts.” When Mr. Stimson read that
statement, he called in his office the French Ambassador in
Washington, Mr. Paul Claudel, on December 3rd, 193198 and handed
him an aide-mémoire99 in which
it was stated that the American Government did not consider Mr.
Laval’s declarations as representing in any manner an agreement or
an arrangement between the French Prime Minister and the American
Government. Mr. Stimson accompanied the remittance of that document
by the following remarks which are taken from Mr. Claudel’s own
memorandum after his conversation:
“The American Government does not agree that the reduction of
interallied debts might be greater than the reduction of
reparations as the words “at least” used by Mr. Laval might
indicate. All that was said in the conversations between
President Hoover and Mr. Laval is that if the Allied Powers
reached an agreement on the reduction of reparations from
Germany, the United States on their part would not refuse,
provided Congress gives its consent, to negotiate a
reduction on debts. But such a reduction should not exceed
the reduction on reparations.”
In his message to Congress concerning foreign affairs, on December
10th, 1931, Mr. Hoover spoke of the intergovernmental debts and very
likely having in mind his conversations with Mr. Laval, said:
“As we approach the new year, it is clear that a number of
the Governments indebted to us will be unable to meet
further payments to us in full pending recovery in their
economic life. It is useless to blind ourselves to an
obvious fact. Therefore, it will be necessary in some cases
to make still further temporary adjustment.”1 He recommended the reconstitution of the
Debt Funding Commission.
The next day, December 12th, the Secretary of the Treasury, Mr.
Mellon, in a public statement endorsed vigorously President Hoover’s
[Page 877]
proposal for a
re-examination of the European debt to the United States, saying:
“The situation of our debtors has been immensely altered during the
course of the last two years. New questions in relation to these
debts are bound to arise in the course of the next few months. The
Congress should be in a position through a Commission created by it
and composed in part of its own members, to ascertain what the facts
actually are and to deal with the new problems as they arise.”
In an aide-mémoire forwarded on December 29th,
1931 by the Secretary of State Mr. Stimson to the French Ambassador,
Mr. Claudel, he expressed himself as follows:
“Only after the extent of Germany’s capacity or incapacity to
pay has been fairly determined and the manner and extent in
which the resulting sacrifice will be borne by the nations
who are entitled to receive reparations are also determined,
would it be possible to bring such a question before the
people of this country with anything but a certainty of
failure.”2
These words clearly indicate that in the opinion of the Republican
administration, the debts question would have to be re-examined
after the settlement of the reparations question.
It was in those circumstances that the Lausanne Conference3 was
prepared and took place. As it is outlined above, that Conference
was the logical issue of the Hoover moratorium and of the
Hoover-Laval conversations. Europe was following the advice given by
Washington to settle reparations first, with the conviction that
concessions on debts would be made later on by the United States
toward their debtors in a manner equivalent to the concessions to
Germany. The result of Lausanne was a cut of 90% of German
reparations. In the opinion of France, such immense concessions were
to be followed by a corresponding revision of her debts to the
United States. Consequently, it was logical on her part to approach
the United States. This was done on the 11th of November, 1931 [1932]4 and the
French position was fully explained by a subsequent Note sent by the
French Ambassador to the Secretary of State on December 1,
1932,5 as well
as in a speech made by Mr. Herriot to the French Chamber of Deputies
on December 14th, and also in the resolution6 by that
same body on the same date.
