862.51/3930a: Telegram

The Secretary of State to the Minister in Switzerland ( Wilson )

139. Representative Bondholders Protective Council informed Department that in discussions now taking place in Basel between various German creditors the Swiss representatives are renewing insistence on special treatment as regards payments on German securities. As before, if Swiss representatives are supported by their Government to the point of threatening to impose clearings upon German trade, and succeed in securing special treatment, the Dutch and Swedish Governments are likely to insist on similar treatment and the German debt situation will provoke quarrel between the various debtor countries likely to result in the ultimate mutual injury of them all.

Will you therefore see Motta urgently and reiterate the position outlined in Department’s No. 9 of January 22. You may, according to your discretion, develop the idea that if treatment of debts is made the basis of direct bilateral pressures a whole new field of international controversy will be created and the freedom of international finance will be seriously hindered. You may express the view that the American Government appreciates the degree of interest which the Swiss people have in the German debt situation, and how important it is to Switzerland that these debts be met as fully as German capacity permits. But to create dissension among the creditors of Germany by insisting on preferential treatment is likely in the long run to force this Government and other governments to actions which will not improve the quality of Swiss credits.

You may also suggest that by striving to tie debt arrangements with bilateral trade movements it may stimulate a movement in countries like the United States which contribute much to world purchasing power through their tourist trade to make such trade a counter in the controversy.