The Chargé in Poland (Nielsen) to the Secretary of State
[Received July 23.]
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I then said to the Minister,37 having in mind telegraphic instruction No. 33, June 27, 1936, that it had come to the attention of the American Government that the Financial News of London was reported to have stated that the Polish Government intends to continue in full all payments due in Great Britain, as the balance of trade between Great Britain and Poland is favorable to Poland which is not the case with the balance between the United States and Poland. I inquired whether this statement was correct. The Minister said that his Government had sent an official to London on a mission similar to the mission in the United States of Professor Krzyżanowski but that as yet it has taken no decision as to whether or not it will make a transfer to Great Britain when on October 15 next payments become due on the sterling portion of the 7 per cent. Stabilization Loan of 1927. He made it a point, however, to refer to the power which the British Government possesses to enter into “unilateral clearing arrangements”, stating that the British Government had exercised this power in connection with sums due from Germany and from Rumania. Reading between his words it was apparent that the Polish Government does not care to expose itself to similar action on the part of the British Government, and I am of the opinion that payments in England will be made as they fall due.[Page 418]
I asked what the situation is with respect to countries other than the United States and Great Britain. The Minister replied that he could tell me that the situation with respect to France and Italy is the same as that with respect to the United States, and that when on June 22, 1936, payments were due in France on the 6 per cent, mortgage bonds of the Warsaw Land Association, which he said are held by about 6,500 persons in France, no transfer was made. He added that the French Government was informed in advance that it would be impossible to make the transfer and that the sum due would be deposited in zlotys in banks in Poland that may be named by the holders of the obligation. He added that suspension of transfers would affect a large number of people in France for the reason that considerable French capital is invested in Poland. I understood that he here was referring to investments in industrial enterprises, et cetera.
I then stated that I had received no instructions to make any representations or comment, but that if the Minister would permit me for a moment to speak off the record I should like to say that if the Polish Government contemplated basing the treatment it accords to American holders of Polish obligations on the state of the trade balance between Poland and the United States, and if this treatment should be less favorable than the treatment accorded to other foreign holders of the same obligations, I could foresee a lack of accord between the American and Polish Governments. I said that he doubtless was aware, from reports regarding the repeated representations that have been made to the German Government by the American Government, of the point of view of the latter. The Minister made a gesture of assent and then entered into a brief dissertation to the effect that in the last analysis a debtor country can pay its creditors only in goods and services, and that the restrictions against imports and currency transfers that have been imposed by a considerable number of countries the company of which Poland only recently has been compelled reluctantly to join, had prevented Poland from making such payment. I said I was familiar with these factors and that I assumed that he and his Government were aware that the present Administration in the United States long has urged and striven for, through Secretary Hull and other officials, the removal of trade barriers. The Minister said that in his opinion a solution of the difficulties of debtor countries “must be found on some larger scale than exists at present”.
Mr. Kwiatkowski then said that he would like to speak for a moment off the record and to say that the present situation in Poland is not merely a passing cloud; it will not pass over in a few months. This frank statement is in distinct contrast to the optimism of official statements which without exception have referred to the exchange restrictions in Poland and to the suspension of transfers as “temporary measures”.[Page 419]
Developments in connection with transfers, or failure to make transfers, to foreign countries will be closely watched and reported.
The Polish press has not announced that transfers to the United States have been made in connection with all Polish issues on which payments are due prior to October 1, 1936, nor has it made any reference to the payment due on October 15 on the Stabilization Loan. When I expressed to Mr. Kwiatkowski surprise that these transfers had not been made known he said with a smile: “We don’t want them known”. It therefore seems apparent that the Polish Government omitted with design in its announcement of the suspension of transfers reference to the date on which the suspension would become effective, thereby preserving for itself freedom of action. It is not impossible that the Government decided to make in the United States the payments in July, and in August, and October next that the Minister stated have been arranged, out of a desire to make a particularly gracious gesture to American holders with the hope that it thereby will acquire merit. It is of interest that the Government failed to approve a transfer to France even before the suspension of transfers was announced.
I may add that the Minister showed signs during the conversation of marked depression. He was not as optimistic and animated as I have known him to be on other occasions. His lowness of spirits may have been due in part to fears concerning the success of his economic program and in part to the attack to which he and his program have been subjected in the press and in Parliament as has been reported in other despatches.38