863.51 Relief Credits/413: Telegram (part air)
The Ambassador in Germany (Wilson) to the Secretary of State
[Received June 1—9 a.m.]
281. Department’s 80, May 28, 11 a.m. Leith-Ross, Chairman of the British Trade Delegation here, informed a member of the Embassy staff today that, as he had feared, the German Government in a formal note addressed to him, as President of the Committee of the Guarantor States of the Austrian Loans, refused to recognize any [Page 489] legal obligation to assume Austrian foreign indebtedness or to enter into joint international negotiations concerning it. The text of the German note is being sent in a separate telegram. The note is in reply, Leith-Ross explained, to a communication of the Committee of Guarantor States proposing that upon the recognition by Germany of its responsibility for the guaranteed loans the Guarantor States would agree to elimination of the so called “political clauses” and provisions respecting supervision of Austrian finances.
Leith-Ross said that he thought the German refusal was final and that there was no option but for the individual states to make the best terms they could for their own bond holders. He said that he had pointed out to the Germans that by agreeing to joint negotiations German credit would be enhanced and that the net cost to Germany would have been only slightly greater, say the difference between 95 and 100%, since the principal creditors of the guaranteed loans by reason of their strong trade position vis-à-vis Germany are in a position to enforce their claims by blocking trade payments to that country. Leith-Ross said that not only did the Germans refuse to accept liability in principle for the loans or to engage in joint international negotiations concerning them but had given no indications that they were prepared to make any reasonable settlement with the British holders in connection with the present trade negotiations. He said that in informal conferences Germans had thrown out the idea that if substantial cuts were made in the interest rates of the Dawes and Young plans’ loans,60 that Germany might consent to pay something of the Austrian indebtedness. He said the whole tone of the negotiations were very discouraging, that they are really being conducted by Goering61 and that Goering apparently held the idea that it would be immoral to assume any responsibility for the foreign loans to Austria. He said that it was obvious that Brinkmann,62 who is negotiating for the Germans, had little to say in the matter and was in effect Goering’s messenger boy. Leith-Ross said that he regretted the absence of Schacht in these negotiations because while the latter was a difficult man to negotiate with, he did have a conception of the value to Germany of endeavoring to maintain its credit and an understanding of where Germany’s real economic interests lay. He said he was greatly disappointed that Italy had retired from the Committee of the Guarantor States and added he had been unable to find out whether Italy had reached a private understanding in the matter with the Reich, remarking that, in any case the Austrian debt to Italy was a small matter.
[Page 490]Leith-Ross also indicated that Germany had not shown a disposition to meet the trade concessions sought by the British, namely, an increase in the present percentage of 55 of the proceeds of German exports to Great Britain which must be set aside for payment of imports from the latter country and an increase in German imports of wholly manufactured British goods.
As a result he said, Great Britain would probably denounce the present payment agreement with Germany giving her the required one month’s notice and threaten to block payments to Germany in order to enforce its desiderata as regards trade and debts. While he did not so state, the Embassy learned from other sources that the British Trade Delegation has definitely recommended the denunciation of the payments agreement and the breaking off of the trade agreements and a decision from the British Government is expected possibly today, June 1.
A member of the Embassy staff later spoke with the Commercial Counselor of the Italian Embassy who said that Italy had had no discussions regarding the long term debt of the Austrian Government to Italy for the debt no longer existed. The Italians had since 1935 bought up all of the bonds of the Italian tranche of the Austrian guaranteed loans and had used them to extinguish Italy’s trade debt to Austria.
The Italian Government had, however, asked the German Government to assume responsibility for the Austrian guarantee debt since Italy was still liable as one of the guarantor states for the repayment of this loan in case of default. The Counselor said that at first the German Government had refused to accept liability for these loans but later asked Italy to wait until the Reich had completed its negotiations on the subject with the other Guarantor States which are the principal creditors indicating that the question of repayment of these loans would be solved in these negotiations. Italy agreed to wait.
Copy to London.
- See Foreign Relations, 1924, vol. ii, pp. 1 ff., and ibid., 1929, vol. ii, pp. 1025 ff.↩
- Hermann Göring, Reich Minister for Aviation, and President of the Reichstag.↩
- Rudolf Brinkmann, State Secretary, German Ministry of National Economy.↩