800.51W89 Lithuania/120

The Lithuanian Minister (Balutis) to the Acting Secretary of State

No. 1293

Sir: I have the honor to acknowledge the receipt of your note, dated November 28, 1933, transmitting a statement of the Acting Secretary of the Treasury relative to the amount due from the Government of Lithuania to the Government of the United States of America under the provisions of the Debt Funding Agreement of September 22, 1924, and the Moratorium Agreement of June 9, 1932.

I wish to express my Government’s appreciation of the information submitted by the Acting Secretary of the Treasury regarding his readiness to waive the required thirty days’ advance notice in case my Government desires to make payment in obligations of the United States issued since April 6, 1917.

In order to make clear my Government’s position on the subject of debt payments, it may be opportune and desirable to review briefly the chain of events which lead to the present situation.

1. It will be recalled that in December of last year my Government submitted to the Government of the United States a Memorandum describing in detail the economic and financial conditions in Lithuania and giving the reasons which compelled my Government to request for a reexamination of the Debt Funding Agreement of September 22, 1924. My Government requested the opportunity for a mutual discussion of the problem with a view of bringing the provisions of the said Debt Funding Agreement in line with the changed economic conditions (Note and Memorandum of December 10, 1933 [1932]).26

2. On January 24, 1933, the Government of the United States was good enough to inform the Government of Lithuania of the following:

a)
that the Government of the United States of America “is prepared to enter with the British Government upon a discussion of its debt which must be concurrent with and conditioned upon a discussion of the world economic problems in which the two Governments are mutually interested”;
b)
that the representative of the Lithuanian Government would be offered an opportunity for discussions having “a similar scope and purpose”;
c)
that the said discussions were to take place “after the proposed discussions with the British Government have been completed”,—and
d)
that the appropriate notice of the date for discussions with the Lithuanian Government was to be suggested in due course.

3. The above indicated discussions between the representatives of the Lithuanian and the United States Governments took place at the State Department in Washington, D. C., on May 17, 1933. The discussions [Page 903] covered, however, only a part of the program originally proposed: the economic and financial aspects of the problems (which were to be examined at the International Economic Conference soon to be held in London) were discussed and the views of the respective Governments upon them were exchanged, but the problem of the debt readjustment did not constitute a part of these discussions.

The Lithuanian Government, pressed by the continuous economic difficulties at home and by the necessity of meeting the approaching debt payment of June 15th, was eager to ascertain the prospects of an early reexamination of the entire debt problem. Accordingly, during the said discussions the Lithuanian Minister took the opportunity to inquire orally as to whether it would be possible for the Government of the United States to indicate its attitude regarding this subject. A statement by the Secretary of State, received in reply to this inquiry, was substantially to the effect that the Government of the United States was not prepared as yet to give any definite indication of its attitude upon this matter and that no change in the debt situation had taken place.

4. Confronted by the above situation, the Lithuanian Government, being unable to meet its obligation in full, yet wishing to give proof of its good faith and a demonstration of its desire to discharge its obligations in the best way possible under the circumstances, made a part payment on the instalment due June 15th, and again requested for an opportunity “as soon as possible” to discuss the debt problem “with a view of its proper readjustment to the existing economic conditions” (Note of June 23, 1933).

5. The Government of the United States, in reply to the above request, was good enough to inform me, by its note of June 26, 1933, that it “will be glad to receive the representations of the Government of Lithuania with regard to the entire debt question between the two countries at the date agreed upon.”

6. It was understood that the said “date to be agreed upon” was to be in conformity with the desire previously expressed by the Government of the United States in its note of January 24, 1933,—that is to say, the date was to be set only “after the proposed discussions with the British Government have been completed.”

In view of the above, the Lithuanian Government deemed it proper to wait until the discussions with the British Government were completed and an appropriate date for the discussion of the debt problem with the Lithuanian Government could thereafter be suggested by the Government of the United States.

7. On November 7, 1933, a public statement by the President of the United States of America27 was made to the effect that the conversations [Page 904] with the representatives of the British Government had been concluded; that they had demonstrated “the great difficulty, if not impossibility, of reaching sound conclusions upon the amounts of international payments practicable over any considerable period of time in the face of the unprecedented state of the world economic and financial conditions”; that, therefore, it was decided “to adjourn the discussions until certain factors in the world situation—commercial and monetary—become more clarified.” The statement further said that the British Government continues to acknowledge its debt; that on December 15, 1933, it will give tangible expression of its acknowledgment by the payment of a certain sum; and that in view of these representations the President had no personal hesitation in saying that he “shall not regard the British Government as in default.”

8. Taking into consideration the above circumstances, and in the absence of any notice from the Government of the United States indicating its readiness to enter upon similar discussions of the debt problem with the Government of Lithuania, it became clear to the Lithuanian Government that no reasonable hope could be entertained for a definite solution of the debt problem or for formal discussions regarding this problem in the near future.

9. The situation, as described above, placed the Lithuanian Government in an increasingly difficult position. The economic and financial situation of the country, serious as it was in December of last year, became even more unfavorable during the present year; no signs of any material improvement are now visible, nor can any reasonably be expected in the near future.

The State budget had to be repeatedly and drastically reduced, thus augmenting the difficulties in the discharge of the normal fiscal functions of the Government and still further reducing its capacity to meet its outstanding international obligations.

10. The Lithuanian Government, after a thorough and careful survey of the entire situation facing it at this time, was obliged reluctantly to come to the conclusion that it will not be able to meet the payment due to the Government of the United States on the 15th day of December, 1933, as provided under the terms of the Debt Funding Agreement of September 22, 1924, and the Moratorium Agreement of June 9, 1932.

11. Sincerely regretting the necessity of arriving at the above decision, the Lithuanian Government desires at the same time to give the assurance that it continues to acknowledge its debt and that, in order to give tangible expression of the said acknowledgment, it is ready to make a good will payment commensurate with its present ability.

12. I am, therefore, instructed by my Government to inform you that on December 15, 1933, a payment in the sum of Seven Thousand Dollars [Page 905] will be made by me to the Government of the United States. I am also instructed to express my Government’s sincere belief that, pending such time as will be necessary for the reexamination and final readjustment of the debt problem, the Government of the United States, in view of the above presentations and payment, will not regard the Lithuanian Government as in default, and will offer, at its earliest convenience, an opportunity for the discussion and reexamination of the entire debt problem.

Please accept [etc.]

Bronius K. Balutis
  1. Note not printed; for memorandum, see Foreign Relations, 1932, vol. i, p. 790.
  2. See press release issued by the White House, November 7, 1933, p. 845.