863.51 Relief Credits/497: Telegram (part air)

The Chargé in Germany (Gilbert) to the Secretary of State

634. Department’s 182, October 18, 5 p.m. The following note dated November 17, 1938 (translation by this office) was received from the Foreign Office in reply the note and reminder communications which the Embassy was instructed to deliver with respect to Austrian dollar bonds in the Department’s telegraphic instruction No. 35, April 5, 7 p.m.

“In reply to your communication No. 216 of 1938 relative to service on the Austrian dollar loans, I have the honor to inform Your Excellency as follows:

Replying to your note No. 37 of April 6, 1938, I had promised you in my letter of April 23, 1938—WIIISE2787—that I would revert to the matter as soon as the discussions with the internal authorities were brought to a close. In the meantime, the Embassy has been informed several times orally of the German opinion respecting the Austrian Government debts. When the aide-mémoire May 16, 193873 was submitted Ministerial Direktor Wiehl informed Secretary of Embassy Heath of the declaration which the German Government gave the English Government on May 12, 1938. In accordance with this declaration the German Government after a careful study of the pertinent procedures and principles based on international law, was not of the opinion that it was under any legal obligation to assume the foreign debts of the former Austrian Federal Government; for that reason it was not in a position to give the desired assurances that interest and amortization installments on these debts would continue to be paid; however, it repeated its willingness to include the problem of the Austrian foreign debts in the coming negotiations with the Royal British Government.

In a conversation on July 15, 1938, which dealt with the contents of your note of June 9, 1938—No. 103—you were told, Mr. Ambassador, by State Secretary Freiherr von Weizsaecker that the German Government, supported by historical procedures, took a generally negative stand with regard to the debts of the Austrian Government, since they [Page 496] were brought about in order to support the incompetent Austrian State artificially created by the Paris Treaties.

Later on the question was again the subject of conversations between you, Mr. Ambassador, and Reich Minister of Economics Funk and State Secretary Brinkmann, and again between Mr. Wiehl and Mr. Heath on August 5, 1938. During this conversation Mr. Heath was informed that the German Government would await the outcome of the negotiations with the main creditor countries before replying to your notes. At that time the negotiations with England and France had been concluded, while those with Holland and Switzerland were expected. In the meantime, a conclusion has been arrived at with Holland also; the negotiations with Switzerland are, however, still pending.

In view of these several oral statements, I must decidedly protest against the fact that in your communication of October 19,74 the circumstance that your two previous notes had not yet received any written reply should be termed a disregard of the just rights of the American bondholders, an inequitable consideration of an American interest and a continued neglect. On the contrary, the German Government has been seeking a way which would make it possible for it, in spite of its fundamental rejection of any legal obligation, to give consideration to the American creditors of certain Austrian Government debts in a similar manner as that meanwhile arranged for various other creditors. It has not been possible, however, to find such a way as yet, for the following reasons:

Your communication of October 29 [19] refers to the payments which the creditors [of] certain Austrian Government loans in England, France and several other countries receive on the basis of agreements concluded meanwhile with these countries. These agreements, however, were only possible because of the fact that trade with all these countries results in a considerable export surplus for Germany from which foreign exchange for these payments can be drawn and because special provisions could be agreed upon which guaranteed that the trade surplus would always permit the withdrawal of such foreign exchange. On account of the extremely passive condition of German trade with the United States, which already requires an outlay of considerable amounts of foreign exchange to pay for German imports from the United States, a similar treaty adjustment for payments to American creditors can naturally not be made.

The German Government has made investigations as to whether it might not be possible to make some other adjustment in favor of the American creditors. So far the investigations have not led to any solution; but they are being continued. The German Government would welcome it if the American Government would also undertake similar investigations, and in such a case it would be prepared to enter into negotiations with the American Government also regarding a solution acceptable to both parties.

Accept, Mr. Ambassador, the renewed assurances of my highest consideration. Woermann.”

Gilbert
  1. For substance of aide-mémoire, see telegram No. 69, May 14, 2 p.m., to the Ambassador in Germany, p. 485.
  2. See supra.