Memorandum by the Assistant Economic Adviser (Livesey)

The oral reply of the German Government to this Government’s oral statement of March 27 that “we expect to receive at least the interest payments” seems to leave the matter in rather good shape. Germany agrees to pay the amount corresponding to interest due March 31. It does not mention the matter of continuation of payments from the German Special Deposit Fund under the Settlement of War Claims Act77 and there is absolutely no commitment on the United States in this regard. Germany does not ask for any statement [Page 477] by the United States that Germany is not regarded as in default. It makes merely the negative request that the United States do not issue a statement that Germany is in default. It also asks that the United States issue a communiqué identic with the one that Germany is to issue on the matter.

Two points may be noted in the German communiqué:

The communiqué speaks of paying the amount of 3,177,125 Reichsmarks but does not identify this amount as the interest payable on postponed payments for account of mixed claims awards and costs of the Army of Occupation;
All students of debt matters will notice that whereas the British note of June 13, 1933,78 and all subsequent notes tendering “token payments” have spoken of making a payment “as an acknowledgment of the debt pending a final settlement”, and the replies of December 1933 have used the formula, “The President states, however, that in view of your representations, of the payment, and of the acknowledgment of the debt, he has no personal hesitation in saying that he does not regard the . . . . . Government as in default”, the German communiqué speaks of its payment as being made “as evidence of its good faith”. In view of the Hitler attitude toward reparations, if for no other reason, the German Government would probably not like to use any phrase directly stating that it is paying interest on or “acknowledges” the obligation to pay the costs of the American Army of Occupation. Incidentally the exchange of notes accompanying the German-American Debt Agreement of June 23, 1930, contains the following reference to the Dawes loan:

“The German Government (the Government of the United States) also desires to expressly recognize, so far as the agreement executed this day between the United States and Germany is concerned, the prior rights of the holders of the bonds of the German external loan as provided in the general bond securing the loan dated October 10, 1924.”

In the circumstances the action appropriate for the United States may be to draft a communiqué of its own to be communicated to the German Embassy immediately, March 30, and to be issued March 31, this communiqué involving a simple recital of facts to which is appended without comment the German communiqué.

I telephoned the text of the German communiqué to Mr. Bell of the Treasury79 as soon as I had taken it down. Mr. Bell read it this morning to Secretary Morgenthau when the latter telephoned in from Sea Island, Georgia. Mr. Morgenthau thought that the above-indicated line of action was appropriate. At my request Mr. Bell [Page 478] prepared and telephoned me the following draft of a statement to be issued March 31 by the Department of State:81

. . . . . . . . . . . . . .

“The German Ambassador has informed the Department of State that the Government today issued the following communiqué:

‘The German Government will pay to the United States Treasury the equivalent in dollars of 3,177,125 Reichsmarks on account of payments due March 31, 1934, under the German-American Debt Agreement.

‘The German Government had sought to come to an understanding with the Government of the United States in a friendly spirit concerning the questions appertaining to the carrying out of the Debt Agreement which have arisen as a consequence of the development of the German foreign exchange situation. Under the prevailing circumstances a definite arrangement could not be reached. Consequently the German Government as evidence of its good faith has arranged for the payment in foreign exchange of the above-mentioned amount in the hope that in the very near future a definite arrangement of these difficult problems satisfactory to both Governments will be reached.’”

In the above text of the German communiqué the words “had sought” are substituted for the words “had endeavored” in Dr. Lohmann’s original translation of the communiqué. This change was made with Dr. Lohmann’s assent. It is believed that the principal difficulty occasioned by the German communiqué is that it might give the impression of much broader discussions than actually took place. The conversations have actually been slight and have concerned the debts payable March 31, 1934, rather than any broad “questions appertaining to the carrying out of the Debt Agreement which have arisen as a consequence of the development of the German foreign exchange situation.” The use of the word “sought” makes the communiqué describe Germany’s desire rather than the recent slight conversations.

  1. 45 Stat. 254.
  2. Foreign Relations, 1933, vol. i, p. 839.
  3. Daniel W. Bell, Commissioner of Accounts and Deposits.
  4. The part of statement here omitted was issued as a press release by the Department, March 31; Department of State, Press Releases, March 31, 1934, p. 178.