The Minister in Switzerland (Wilson) to the Secretary of State
[Received 7:55 p.m.]
13. Your 139, April 10, 7 p.m. to delegation Geneva. I learn from Basel this afternoon that Schulthess48 in a public declaration had declared that Switzerland would do its utmost to obtain for its bondholders at least as favorable treatment as they now receive. I therefore thought it well to carry through the step that you had authorized and have just seen Motta.
After recalling Riggs’ conversation and memorandum of January 2449 I told Motta that my Government understood the importance of this matter to Switzerland and had every desire that the Swiss bondholders should suffer in the matter as little as possible. The type of action however which they are contemplating could not be viewed in America as other than discriminatory. Irritation would be caused in creditor countries which might result in measures which would prejudice the value of the German bonds in general. I recognized that Switzerland had struggled along against the tendency toward exaggerated tariffs and contingents and restrictions but had finally been swept into the current. However in this moment Switzerland was inaugurating a new form of economic warfare in introducing discrimination in international finance and they ran the risk of strangling international finance in the same way that international commerce was being strangled by exaggerated nationalism. I pointed out that the introduction of new forms of this suicidal struggle might bring other forms into play. For instance, those factors which constitute the invisible balances, such as freight rates, tourist traffic, et cetera, might become counters in the game. I spoke further on the fact that the President may be authorized shortly to negotiate on tariff matters and deplored the existence of any misunderstanding between Switzerland and ourselves which might unfavorably influence such potential negotiations. I emphasized the danger of loss to all bondholders if the creditors engaged in a struggle among themselves and did not act in concert for the maximum of pressure on Germany.
I have the impression that I carried a measure of conviction to Motta personally since all forms of exaggerated nationalism are repugnant to him. He will transmit my message to the Federal Council but gives me no hope that Switzerland will change its attitude. He explained that the amount involved is so heavy in relation to the population of Switzerland and their adverse balance of trade with Germany [Page 353] is so marked that they feel that they must utilize the especially advantageous position which they hold in relation to Germany in the matter of these bonds notwithstanding the risk involved. Furthermore, he said that Switzerland is living now on its reserve. How long it can keep this up is problematical. Certainly a blow of the magnitude of the forfeiture of the German debts would be disastrous to their economy.