Mr. D. Crena de Iongh, Representative of the Netherlands Minister of Finance, and Mr. Ch. J. H. Daubanton, Commercial Counselor of the Netherlands Embassy, to the Adviser on International Economic Affairs (Feis)


Dear Dr. Feis: Supplementing the discussions the Finance Minister of The Netherlands has had with the Under Secretary of State we beg to bring the following to your notice.

The Kingdom of The Netherlands has to deal with two distinctly different problems in connection with its finances. The first is: In what way can we carry on financing our fighting forces in different parts of the world? The second is: How can we acquire the necessary credits now, in order to be in a position to rebuild our industries after the liberation of Holland and in general to restore normal conditions and employment?

These two problems must be kept separate to a large extent, and in order to explain this we have to analyze the financial and political position of The Netherlands.

After the invasion of Holland, our Government decided, without hesitation, to carry on the war against Germany together with our Allies. Actually we decided to do so whatever might happen. Although our fighting forces were not large, especially in the beginning when there was a shortage of everything, our navy and our large merchant marine gave a real and important support to the war effort. We remind you of the important task of our merchant marine in bringing over from the Netherlands East Indies considerable amounts of strategic materials, such as tin and rubber, with the result that certain stockpiles, now badly needed, could be timely built up in the United States of America.

We could finance our war effort only with the balances of foreign exchange our Government was holding outside the country; in other words, by such means as were freely at the disposal of the Government and without the financial assistance of other governments.

It has been the policy of the Government of The Netherlands to pay for the war effort in cash as long as it could afford to do so. Before Japan entered the war, we could get some support in acquiring foreign [Page 450] currency from the Netherlands East Indies, but since that part of the Kingdom has also been occupied, that source was dried up. The means at the disposal of The Netherlands were, firstly, gold belonging to the Government and to the Netherlands Central Bank and shipped out of the country before the invasion; and, secondly, free bank balances in foreign countries at the disposal of the Government.

These available means were increased to a small extent by certain amounts of money raised through taxation imposed on Netherland subjects living outside our country, but mainly by the sale of cargoes destined for the Netherlands but unloaded in the United Kingdom after the invasion and sold on instruction and for account of the Netherlands Government. We also received rather important amounts of money from the proceeds of insurances on ships sunk by enemy action. The result is that we are now financing our direct war effort with money belonging to third parties, although the third parties are Netherlands subjects. The ships, or the insurance money, belong to the ships’ owners, the cargoes of merchandise to different merchants and import firms.

The Government of the Netherlands now has to consider how to finance in future the direct war effort. Our available means, i.e. our assets which we can use for that purpose, are at the moment as follows:

We still have approximately forty million dollars in free gold belonging to the Netherlands Bank. This gold, although originally frozen by the British Government, was put at our disposal in Canada. Moreover, we still have an amount of approximately twenty-five million pounds sterling against a liability as trustees for about the same amount. We also have, however, other liabilities for material and services acquired in England and elsewhere, and for which we have not yet received the bills.

What is the significance of cash for the Government of The Netherlands?

The Lend Lease Administration3 so far has taken the standpoint that war material and other goods could be supplied to allied nations but no cash for the payment of wages and salaries. As a general principle, this is completely understandable if applied to countries which can provide the necessary cash for the out-of-pocket expenses themselves—occupied countries cannot do this—by taxation of their subjects, and if the money raised by taxation is insufficient to pay for the war effort, they can issue additional currency and float internal loans.

However, because our country is occupied by the enemy, we are in a completely different situation—we cannot tax its population and [Page 451] we cannot float internal loans to finance our armed forces. This does not mean, however, that whereas the public debts of our allies are steadily increasing, we should be financially in a better position. Just the reverse is true. Not only have the enemies destroyed part of our country—and I remind you of Rotterdam—but they also stripped our country of all the material wealth it possessed. Although we cannot even make a rough estimate of the value of the stolen and to Germany transported goods and of the loss caused by the destruction of houses, factories, industries, livestocks, etc., we know from available data—for instance, the latest Annual Report of the Netherlands Bank—that our public debt, which before the war amounted to approximately three billion guilders, equivalent to about one and one-half billion dollars, has risen to no less than twelve billion guilders, or about six million [billion] dollars.

What now is the value of cash money for us, as compared to its significance for other countries? For us, cash money carries exactly the same character as commodities do for other countries. We must buy foreign currency exactly as, for instance, England has to buy foods and commodities, and we buy what actually for us is tantamount to a commodity, foreign currency, against our gold holdings or, as explained above, against the proceeds of cargoes and ships.

If our allies could accept our currency, or if we could pay our salaries and wages in our currency, we would be in a like position as that of other countries; but unfortunately, this is not the case.

Are there other possibilities to acquire the necessary funds than out of the assets at our disposal?

We have already explained that we have practically no free assets left. Very shortly after the invasion of Holland, namely on May 24th, 1940, the Government of The Netherlands issued a Royal Decree in which it took title to all property and assets in foreign countries belonging to Netherlands subjects, resident in occupied Netherlands, but with the provision to return those properties, or their equivalent, to the original owners not later than three months after the cessation of hostilities.

The free means at the disposal of the Government do not include the assets to which the Government took title under that Royal Decree. Those assets are also blocked by the so-called freezing measures taken by the American and British Governments. The British Government is negotiating an agreement with the Government of the Netherlands by virtue of which those assets can be freely used by our Government. This agreement although not yet signed, is completed in substance.

Regarding our expenditure for the direct war effort, our Government is of the opinion that since we have almost completely exhausted our available means and have no sources of income whatsoever left, [Page 452] our allies should assist us in acquiring the commodity—in our case, cash—necessary to carry on the fight. The conditions on which such cash can be provided, whether under lend-lease or in another way, are, in our opinion, a matter for further discussion and negotiation.

But we want to stress especially the fact that cash supplied to us will be the complete equivalent of goods supplied under lend-lease to others.

We may also point out that The Netherlands, having a comparatively large navy, now spends no less than 85% of its total expenditure on the direct war effort. Very likely this situation will strongly differ from that of other countries, such as Belgium, Czechoslovakia, Yugoslavia, and others. We have asked ourselves the question: Will it be possible for us, presuming the American and British Governments will give us a free hand to use the above-mentioned frozen assets, to assign these assets for the financing of the war? We believe, however, that these assets should not be used for that purpose. As already explained, Holland has greatly suffered from enemy occupation and it would, in our opinion, be an ill advised Government policy to exhaust, unless forced to do so, the only means at our disposal for post-war purposes.

In our opinion, it is in the interest of the allied cause not only that our armed forces carry on, but also that a country supporting the war effort to the best of its ability shall not be forced into a position resulting, at the end of the war, in its being dependent on, and to a certain extent subjected to, financial conditions completely beyond its control.

The second problem, which was mentioned in the beginning of this letter, is of a completely different character. It is the intention of our Government to use the assets of Netherlands subjects in foreign countries for the purpose of reconstruction of our country.

We are of the opinion that these assets, now frozen through the Royal Decree and the measures taken by allied countries, after the war should remain under the control of the Government by exchange control measures. As a consequence thereof the Netherlands Government would be in a position to use these assets as a guarantee for the liquidation of loans which might be acquired from sources outside our country. The Netherlands Government actually desires to use all or part of these assets as guarantee for credits to be arranged for now.

Even if it were made possible to sell gold belonging to our Central Bank, we would not deem it wise to do so. In the first place, we feel sure that the population of The Netherlands will attach great importance to the conservation of our gold as cover for the bank’s liabilities, and that it therefore would be a mistake to part with our [Page 453] gold. Secondly, we must reserve a part of our gold for a possible participation in an international stabilization fund.

As to the use of the assets belonging to the Netherlands East Indies, we point out that these assets should be reserved for the Netherlands East Indies in the same manner as the assets of the Netherlands should be reserved for the European part of the Kingdom.

The finances of the Netherlands East Indies have always been administered as a separate entity. It is not to be expected that this situation will change after the war. This would be repugnant to the principles recently laid down by our Queen.

Therefore, although in consequence of measures taken by the Netherlands East Indies Government in concert with the United States Government before the Japanese occupation of the Netherlands East Indies, the assets of the Netherlands East Indies in this country are not frozen, yet, these assets, which are held by the Netherlands Government as trustee for the Netherlands East Indies, must not be used for reconstruction of, or otherwise for, the European part of the Kingdom. These assets should be reserved for the reconstruction of the Netherlands East Indies.

We attach hereto (Exhibit No. 1)4 a “balance sheet” of the assets of the Kingdom in the United States of America, Great Britain and Canada. The data of the “balance sheet” must be considered as approximations. In the first place, general world conditions make it very difficult to get all the data required; secondly the data available do not always synchronize; thirdly, different important data are not known to us in detail. We present in the attached “balance sheet” assets as estimated by us, so as to give a picture of the situation, be it not altogether accurate.

It must be remembered that immediately after the occupation of Holland there had been instituted by the Netherlands Indies Government an Exchange Control with requisition of the use of the greater part of privately owned assets, and for that reason we have more accurate information on these assets. No such control, however, had been established in Holland before the occupation, in consequence of which the Netherlands Government does not have precise information on the private assets which were taken under control by the United States of America and the United Kingdom after the fall of the country. The British gave us this information from their records, but the American Treasury has not yet communicated to us any particulars in respect to private assets of Netherlands subjects frozen in the United States of America.

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We have split up the balance sheet as follows:

  • according to assets belonging to the European part of The Netherlands and to the Netherlands East Indies;
  • according to assets in dollars and pounds;
  • according to assets belonging to:
    • the Government
    • the Central Bank
    • private individuals and corporations.

We further present the following résumé of the Budget of the Kingdom for the calendar year 1943:

(In guilders*)

Salaries, wages, pensions, etc. Goods, services, debt services etc.
Department of War 5,884,000 9,531,000
Department of the Navy 22, 390, 000 70, 414, 000
Department of Foreign Affairs 2,853,000 4,382,000
Department of Colonies 2,968,000 5,210,000
Other Departments 4,056,000 6,828,000
Debt Service - - - - - - 2,074,000
38,151,000 98,439,000
Total budget 136,590,000

It is pointed out that a number of items cannot be appraised with any degree of exactness, such as the sums that may have to be expended on new ships, planes, etc. (The possibility of acquiring ships and planes in the United States is at present being discussed with the Department of State by the Netherlands Embassy and with the War Shipping Administration by the Netherlands Economic, Financial and Shipping Mission.) Moreover, the budget figures given above do not include appropriations for unforeseen expenses. Therefore, the estimates may be somewhat lower than the actual figures will prove to be.

We consider it desirable to enter into an agreement for acquiring credits which will enable us to start making plans for reconstruction. We prefer to do this now because we hope to provide for employment and the re-establishment of industries, in Holland as soon as possible, and therefore it is necessary now to reserve available material for our own use. Also, we will open negotiations with different producers for the buying of material or for the contracting for deliveries which can be made immediately after cessation of hostilities when industry will be reconverted to normal production. We therefore [Page 455] intend to try to get credit against collateral which credit we will only take up for reconstruction purposes. We want to stress this definite intention of the Netherlands Government to finance reconstruction, if possible, out of its own means and by its own efforts.

On the basis of the foregoing, we suggest:

I. that you explore the possibilities of lend-lease facilities to cover present budgetary expenses,


that a loan be arranged for these budgetary expenses.

II. that you agree to the negotiation of a loan for reconstruction purposes in the amount of:


along the lines of a draft agreement as presented to the Reconstruction Finance Corporation.

III. that you consider unfreezing the frozen assets of the Kingdom.

(We attach hereto, as Exhibit No. 2, a draft agreement mentioned on page 55).

In closing we beg to inform you that we have been authorized to bring the proposals outlined above to your attention over our signatures, and that at all times we shall be gladly prepared to clarify the views of our Government on the subject-matter, should you desire us to do so.

Very truly yours,

D. Crena de Iongh
Ch. J. H. Daubanton
  1. Functioning under the Lend-Lease Act of March 11, 1941; 55 Stat. 81.
  2. Not printed.
  3. The guilder was quoted before the ivasion of The Netherlands (May 10, 1940) at about $0,53. Consequently, the above figures divided by two would show the approximate equivalent in dollars.
  4. Not printed; it is mentioned in paragraph beginning “The free means at the disposal of the Government”, p. 451.