462.11W892/2493
The German Ambassador (Luther) to the Secretary of State
The German Ambassador has the honor to make the following reply to the Secretary of State of the United States regarding the Memorandum of the 7th of this month (file number 462.11W892) and supplementing the Embassy’s Memorandum of the 8th of this month:5
By the German-American Debt Agreement of June 23, 1930, the German Government is bound to pay the amounts under that Agreement that have been fixed by the German-American Mixed Commission. The German Government acknowledges that the United States Government has a right to these payments, on the basis of the international treaties which preceded the debt agreement, and that the American Government has pursued a liberal policy toward Germany in this matter, as German property seized in the United States was returned, with the exception of 20 percent, which is still retained as far as large amounts are concerned.
The German Government does not intend to change this legal status. The German balance of exchange is, however, as the United States Government probably knows, completely disorganized at present. The Reichsbank’s holdings of gold and foreign currency amounted to only 131,545,000 reichsmarks on May 23rd of this year; the coverage for the notes in circulation by gold and foreign exchange which can be used as coverage amounted to only 4.6 percent. In consequence of the prohibitive measures of foreign governments, German foreign trade is yielding less and less, so that Germany will probably be compelled to stop entirely the transfer of funds in payment of her foreign obligations within a short time. Under these circumstances, the amount of 40,800,000 reichsmarks that Germany has to pay annually, under the German-American Debt Agreement, for the amounts fixed by the German-American Mixed Commission, also represents an unbearable burden on the German balance of exchange. With regard to the transfer, Germany needs a breathing spell for a period of some time.
The German Government hopes that it will again be possible for it, after this interval, to take up once more, in addition to the obligations for Germany’s commercial debts, also obligations of such a nature as the sums fixed by the German-American Mixed Commission. At the present time, there would be no certainty, however, that the German Government could carry out a concrete program of payment of this kind with exactitude and at a fixed time.
In spite of the development of the German exchange situation, the German Government has shown its good will in connection with the [Page 497] execution of the requirements of payment incumbent upon it by making payments in foreign currency or reichsmarks on the due dates. As far as is within its power, it is also determined in the future, to meet the obligations incumbent upon it with respect to the arrears and the payments falling due in the future, for the sums fixed by the German-American Mixed Commission, up to the utmost limit of Germany’s capacity to pay.
- Latter not printed.↩