Foreign Relations of the United States, 1946, Paris Peace Conference: Documents, Volume IV

CFM Files

Observations on the Draft Peace Treaty With Hungary Submitted by the Hungarian Delegation

C. P. (Gen) Doc. 5

Paris, August 26, 1946.

Table

I. Political Clauses

II. Military Clauses

III. Economic Clauses

annexes referred to in the attached observations

Annex 1, “The Hungarian problem in relation to Roumania” has been circulated in French to each of the Delegations.

The maps contained in Annex 2 are on file in the General Secretariat, where they may be consulted by the Delegations.

Annexes 3, 4, 5 and 6 are attached to the present memorandum.

Annexes 7, 8 and 9 have been circulated in French and English to each of the Delegations.

I. Territorial and Political Provisions of the Draft Peace Treaty With Hungary

Preamble.

The Hungarian Delegation has the honour to present the following observations concerning the territorial and political provisions of the draft Peace Treaty with Hungary.

Whereas Marshal Voroshilov has, in the note handed to the Hungarian Government, expressed the appreciation of the Soviet Union to Hungary, not only for having declared war on Germany but also for having contributed effectively to the success of the war waged by the United Nations against Germany, the Hungarian Delegation has the honour to propose that, at the end of the third paragraph of the Preamble, after the words “… with Hungary; and”, the words: “That she contributed to the final success of the war against Germany” shall be added.

The Hungarian Delegation has no observations to make concerning the Article 1; paragraph 1 of the draft Treaty.

Observations of the Hungarian Government, Article 1, para. (2).

Concerning paragraph 2 of the said Article, the Hungarian Delegation has the honour of declaring as follows:

The Delegation takes note of the annulment of the arbitration award of Vienna of August 30th 1940. In this connection, the Delegation only wishes to remark that the initiative for this arbitration came from the Roumanian Government of the time. However, as the Hungarian Delegation argued in the Plenary Session of the Conference, this annulment is not in itself a solution to the serious and delicate problems at issue between Hungary and Roumania.

In fact, more than a million and a half Hungarians are actually living in Roumanian territory. However great may be the goodwill displayed towards them by the Roumanian Government, they are nevertheless subject to all kinds of ill treatment and molestation by the local authorities or by nationalist organizations. Hungarians capable of bearing arms are compelled to undertake forced labour, while the administrations and the officials of the territories inhabited by Hungarians, systematically refuse to learn their language. Hungarians must submit to requisitions and confiscations of every kind. Hungarian schools are hampered in their activity, or forced to close down. The land reform of 1946 has defrauded Hungarian peasants, for a Royal Decree of 1945, No. 645, authorises Roumanians to cancel the contracts made between 1940 and 1944 with Hungarians. Hungarian commercial and industrial undertakings are compelled to accept Roumanians as administrators or managers. Ecclesiastical authorities are subject to every kind of persecution, etc. Full details concerning the complaints by Hungarians against Roumanians will be found in a book entitled “The Hungarian Problem with regard to Roumania”, issued by the Hungarian Ministry of Foreign Affairs (see Annex I).

The Hungarian Government urgently appeals for the suppression of these abuses, and proposes a solution which is just as well as practical. As proposed at the Council of Ministers of Foreign Affairs, the Hungarian Government considers that part of Transylvanian territory should be restored to Hungary; namely, an area of 22,000 square kilometers, little more than one-fifth of the whole of Transylvania amounting to 103,000 square kilometers.

Annexes 2 and 3

According to the provisions of this settlement, the number of the Roumanians in Hungarian Territory is estimated at 880,000, whereas 1,060,000 Hungarians would remain under Roumanian sovereignty. Under these conditions, both States would necessarily be induced to adopt an identical attitude of toleration towards their minorities.

Annexes 4 and 5

The Hungarian Government does not wish to insist on the economic necessities which also point towards such a solution. This mountainous and well wooded territory, sparsely inhabited, would give Hungary the territory it lacks (Annex 6).

The Hungarian Government’s note of April 27th 1946 was conceived in this spirit, as well as the aide-mémoire to the Council of Foreign Ministers in Paris. It was also with this idea in mind that the President of the Hungarian Delegation expressed the desire, in his exposé before the Peace Conference, that direct negotiations between Hungary and Roumania should be undertaken before the final drafting and signature of the Peace Treaties, with a view to arriving by mutual agreement, at a settlement based on ethnic realities.

In any case, such a solution, if adopted, should be accompanied by measures calculated to facilitate reconciliation between Roumania and Hungary. This is what we have already proposed in our note 80/Be of 27th April 1946, in which we referred to the guarantees which should be granted to minorities, in conformity with the principles of the Atlantic Charter, and the policy of Lenin and Stalin.

Observations of the Hungarian Government, Article 1, para. (3).

The Hungarian Delegation has no observations to present concerning paragraph 3. However, in case a new text is adopted, instead of paragraph 2 of the draft, attention is drawn to the necessity of examining to what extent paragraph 3 should be modified, provided such alteration does not affect Soviet territory.

Observations of the Hungarian Government, Article 1, para. (4).

The Hungarian Government takes note of the annulment of the Vienna award of 2nd November, 1938, and of the re-establishment of a common frontier between Hungary and Czechoslovakia as it existed on 1st January, 1938. Only on condition, however, that the return to the territorial status quo would at the same time entail a return to the legal and ethnic status quo of the Hungarian population, which, according to the data of the Statisticky Zpravoday 18th year, number VI, amounted in 1945 to 650,000 persons. What is aimed at is the restoration of citizenship rights to members of the Hungarian minority, and the abrogation of discriminatory laws against them, and at providing guarantees for their national existence.

Should Czechoslovakia propose modifications to the frontier as it existed 1st January, 1938, or should she not be prepared to grant guarantees for the return to the legal and ethnic status quo of 1st January, 1938, Hungary requests that the Czechoslovak proposals should be communicated to her in sufficient time for comment.

The Government of the Hungarian Republic has the honour of drawing the attention of the Peace Conference to the fact that the boundary posts intended to mark the line of the former frontier have been removed or destroyed as a result of the war. It would be desirable to complete Article 1 by a provision stating that the frontier shall be delimited by Mixed Commissions working on the spot. A similar procedure would be necessary if the Conference decided to establish frontiers differing from the former ones.

Observations of the Hungarian Government, Article 2.

The Government of the Hungarian Republic is willing to carry out the provisions of Article 2 of the Draft, and takes note of the fact that similar provisions are contained in the Draft Treaty with Roumania.

But the Hungarian Government wishes to point out that the rights and freedoms enumerated in Article 2 do not contain all the “Rights of Man”, and refers to the exposé the President of the Hungarian Delegation [gave?] to the Plenary Session of the Conference. The enumeration of the rights in question should be completed by an exact description of these rights, such as “the right to elect domicile, freedom to choose school language, freedom to work and to engage in a calling”. The words “without distinction of race, sex, language, or religion” should be completed by the insertion of “of nationality”.

The Hungarian Delegation wishes to point out that the mere reference to the “Rights of Man” does not seem sufficient when defining the statute of minorities, which would require more detailed regulation.

The Government of the Hungarian Republic has exposed its views on this point in an Aide-Mémoire presented on 11th June, 1946 to the Council of Foreign Ministers in Paris. It requests that corresponding provisions should be included in the Peace Treaty with Roumania.

Annex 7.

The Hungarian Delegation has the honour to annex a copy of this Aide-Mémoire (Annex No. 7); and declares its readiness, on a basis of reciprocity, to enter into the same engagements with regard to minorities living in Hungarian Territory.

The Hungarian Government, as regards Czechoslovakia, takes note of the fact that this country being one of the United Nations is bound by the provisions contained in the Charter of the United Nations. The Hungarian Government, in this connection, recalls the interpretation of paragraph 4 of Article 1, which makes the maintenance of the status quo, as far as frontiers are concerned, depend on the maintenance of the status quo concerning the rights of the Hungarian minority in Czechoslovakia.

The Hungarian Government also hopes that in the event of admission to membership of the United Nations, it will have the opportunity of raising the question of the defense of minorities before the appropriate body.

Concerning minorities, the Hungarian Delegation wishes to draw the attention of the Conference to another important question. It is extremely regrettable that the countries of south-eastern Europe at present contain a large number of persons without nationality, which permits the State in which they are living to restrict the application of the “Rights of Man” in their favour. The origin of this state of things is, on the one hand, the complicated and frequently contradictory provisions of the Peace Treaties concluded after the previous world war, which enabled certain States to deny citizenship to the members of an undesirable minority or, on the other, to make regulations, such as those recently adopted by certain States like Czechoslovakia and Roumania, by which members of a “national” minority living on their territory have forfeited the citizenship previously conferred on them, or have had fresh obstacles placed in the way of the recognition of this citizenship.

The Hungarian Delegation, wishing effectively to guarantee the “Rights of Man” and to bring about appeasement among the peoples of the Danube Basin, deems it necessary to complete the Draft Peace Treaty by provisions compelling the States concerned to recognize without reservations the right of citizenship to persons domiciled in their territory.

The Hungarian Delegation refers for more ample details concerning the proposed solution, to the note of Occtober 31st 1945 addressed to the representatives of the Great Powers at Budapest, a copy of which is enclosed herewith.

Annex 8.

With reference to the Czechoslovak and Roumanian provisions mentioned above, the Hungarian Delegation wishes to point out that it refers more precisely to the Czechoslovak Presidential Decree promulgated on 3rd August, 1945, by which Hungarian inhabitants of Czechoslovakia are declared to have forfeited Czechoslovak citizenship. As for Roumania, the Hungarian Delegation refers to the note of 15th July, 1946 handed by the Hungarian Republic to the representatives of the Great Powers accredited in Budapest, copy of which is attached (Annex 9).

Annex 9.

The Hungarian Delegation has no comment to make on the provisions of Part II, namely Articles 3, 4, 5, 6, 7, 8 and 9.

Observations of the Hungarian Government, Article 34.

Concerning part VIII of the Draft Treaty (Final Clauses), the Hungarian Delegation has the honour of making the following observations.

After paragraph (2) of Article 34, add “The Hungarian Government shall accredit to the three heads of Missions, plenipotentiaries whose function would be to transmit to the Hungarian Government messages addressed to it, and to give to the heads of these Missions all necessary information.”

The object of this suggestion is the need for designating special agents to ensure adequate liaison between the different organs concerned.

Observations of the Hungarian Government, Article 36.

As regards Article 36, the Hungarian Government considers that in order to avoid uncertainty, a limit of one year from the signing of the Treaty should be specified for the purpose of acceding to it.

Observations of the Hungarian Government, Article 37.

Concerning this Article, the Government of the Hungarian Republic has the honour to point out that it would be more in keeping with international usage for the Treaty to come into force, not only after it has been ratified by the Great Powers mentioned, but also by Hungary.

In conclusion, the Government of the Hungarian Republic hopes to be allowed to present, if necessary, such further observations or comments as may be required to make known its point of view concerning any solutions which may be proposed.

II. Observations of the Hungarian Delegation Concerning the Military Clauses of the Draft Peace Treaty With Hungary

Concerning these clauses the following comments are submitted:

Articles 10 to 12. No comments.

Article 13. The Hungarian Delegation requests that the restrictions contained in the draft should not apply to “self-propelled or guided missiles or apparatus” with an effective range of less than 100 metres. Such weapons are intended solely for defensive purposes.

Article 14. The Hungarian Delegation requests that the war material necessary for the maintenance of the armed forces authorised in Article 10 shall not include the material required for replacing material deteriorated through ordinary wear and tear, nor material used for purposes of military training.

Article 15. The Delegation requests that the exact meaning of the expression “of German origin” should be specified: since the Hungarian army, as well as the armies of other States, was supplied with material which, although patented in Germany, should be regarded as material of international type. Should the term “of German origin” be interpreted in such a wide sense that it would apply to such international types of war material, Hungary would be faced with an insoluble financial problem, since it would necessitate re-equiping the army with entirely fresh types of war material.

Articles 16 to 18. No comments.

Article 19. The Delegation requests that instead of the words “as soon as possible”, the following should be adopted: “within a period of six consecutive months following the signature of the present Treaty”. In support of this request, it is sufficient to refer to the anxiety prevailing among families of prisoners of war. A fixed period for the repatriation of prisoners of war would contribute greatly to tranquillize these anxieties.

Annexes 2 and 3. No comments.

III. Observations of the Hungarian Delegation on the Economic Clauses of the Draft Peace Treaty

The economic policy of a country is chiefly dependent on its geographical position. This doctrine is applicable to the countries of the Danube basin, whose economic policy must be based on their joint interests.

At the present time, when the conclusion of the Peace Treaties brings the second World War to an end, all countries, whether victorious or vanquished, are at one in their hope that Peace will heal their wounds and give that impulse to economic activity which is undoubtedly the essential factor in any kind of political reconciliation. This is why it is desirable that the essential economic requirements of the Danube Basin, including Hungary, should be taken into account in the Peace Treaty.

The Hungarian Delegation submits detailed proposals concerning the clauses of the Draft Treaty, reserving its right to make further proposals in due course. The Hungarian Delegation ventures to introduce its proposals by the following observations on the economic problems raised by the Draft Treaty.

the economic and financial position of hungary

Preliminary remarks.

Even before the war, Hungary’s position after the Treaty of Trianon was that of one of the poorest countries of Europe, with a very low standard of living and public expenditure absorbing a large proportion of private wealth. The density of the population had made it necessary to proceed with the industrialization of the country, in spite of the lack of raw materials required for this purpose.

In 1938, the last year of Peace, the national income amounted to 5,2 milliard pengoes, equivalent to 1 milliard dollars, barely 112 dollars per annum per head of population, on which 24 dollars were levied to cover public expenditure.

In these circumstances, it is obvious that accumulation of capital was bound to be limited. Even during the most favourable years, savings did not exceed 7.4 whereas in the western countries savings amounted to as much as 15.

Owing to the fundamentally agricultural character of Hungarian economy, the country was unable to react efficiently to the World Crisis in 1931. It was forced to proclaim a moratorium and to grant facilities to agricultural debtors.

The economic consequences of the war.

The German High Command proceeded to occupy Hungary on March 19th, 1944, thus laying the country open to Allied air attack, and afterwards caused it to become an actual theatre of operations. As early as the beginning of the summer, the Germans began to remove the moveable goods of the country. As matters grew worse and worse for Germany, this operation assumed the character of a complete evacuation. The economic position of Hungary, further aggravated by the destruction resulting from warfare, was as follows when liberated by the Red Army:

Out of the 52 milliard pengoes (10 milliard dollars) at which the national capital was estimated, the losses amounted to between 35 and 40, including 6,7 milliards on actual production equipment and 6,1 milliards on trade. Agricultural wealth was reduced by 25% and live-stock by over 50%. Industry lost a third of its fixed capital; 63% of the rolling-stock was destroyed or taken away by the Germans; 25% of the living accommodation in Budapest had become unfit for use, and there were even some towns where damage to dwellings reached 88%.

Such is the devastation caused by the war in the productive capacity and the material wealth of the country.

The Government administrative machinery was completely disorganized, communications entirely paralysed, trade between town and country held up, causing scarcity and famine in the big urban districts.

The result was that, for the year following the Liberation, national income fell to approximately 2,6 milliard pre-war pengoes, equivalent to 500 million dollars.

Inflation.

The lack of balance between production and consumption, and the paralysis of state machinery compelled the Government to tolerate the resumption of free trading. Moreover, the obligations contained in the Armistice Treaty have made it necessary to rehabilitate at least a portion of industrial production, which entails refusing priority to the requirements of the home market. Moreover, for long months, the Government found it impossible to proceed with the assessment or collection of taxes. In any case, there would have been no solvent taxpayers as economic activity was only very slowly reviving. It is this chain of circumstances that resulted in an inflation which might be called unique in economic history. In the financial year from July 1st, 1945 to June 30, 1946, expenditure amounted to roughly 514,4 million pre-war pengoes. During this period, revenue barely attained 54,7 million pengoes, which means that only 10.6% of the expenditure was covered.

The financing of most of the State’s expenditure was therefore dealt with by the issue of more banknotes and by June 1946, one month before stabilisation, the note circulation had reached the astronomic figure of 6,277 trillion pengoes.

Anyone acquainted with the effects of inflation will know that it is the working classes who suffer from it. Such was also the case in Hungary. In spite of increases given to nominal salaries, their purchasing power fell, first from week to week, then from day to day and in the end, from hour to hour. There were days and weeks when the salaries given to wage earners of all types did not exceed 2 or 3% of the real value of their wages in 1938. Even during the most favourable spells, which were relatively brief, the wage-earners never received a salary representing more than 20 to 25% of their purchasing power in 1938.

The above figures allow for such arrangements as direct systems of barter resorted to by the peasants and factory workers so that the latter could obtain food.

It was therefore natural that money should have rapidly ceased to function as a unit of value and even as a means of payment. And so it is that in the middle of the 20th century we find in the very heart of Europe a country which has reverted to the original forms of trade.

Stabilisation.

All those responsible for Hungarian economic activity and the masses themselves plainly realised that the inflation had reached its utmost limits and that stabilisation must be attempted at any price and whatever the sacrifices.

The experts had, of course, hesitated. They considered that the national income was not yet sufficient to support the re-adjustment of the budget and the taxes to meet international commitments. Production was still inadequate to demand, and Hungary still lacked the foreign exchange which seemed absolutely necessary in order to maintain the value of the pengoe on the foreign market. Notwithstanding these fears, stabilisation was imperative for the reasons previously mentioned. It had to be attempted at the first opportunity and that seemed to arise at the beginning of the new harvest.

The agrarian reform which many people thought would entail a fall in production, actually proved, in these exceptional circumstances, the essential factor for the preservation of agricultural production. This was due to the fact that whereas large estates would have felt a shortage of labour, machinery and draught animals, the Hungarian peasant set himself to tilling the soil allotted to him, one might almost say with his bare hands, and, according to statistics, produced in 1946, 9.9 million quintals of wheat, 3.5 million quintals of rye, 4.1 million quintals of barley, 1.7 million quintals of oats, 19.9 million quintals of maize, and 19 million quintals of potatoes. This harvest, as compared with 1936, represents the following percentages: Wheat 36%, Rye 43.7%, Barley 56.9%, Oats 54.8%, Potatoes 88.7%.

The harvest in 1946 is thus rather poor, but it is better than last year. The bread supply is only partially ensured, because the 9.5 million quintals of wheat and rye required for the people’s consumption, and the 1.4 million quintals destined to meet international commitments absorb practically the whole harvest. This entails the use of maize and potatoes as substitutes in order to retain the necessary quantities for sowing.

For the period from January to March, Hungarian industry has, for its part, produced the following percentages as compared with the corresponding period in 1938. Metal-working and machinery, 94.3%; leather and rubber 12.6%; wood, bone and plastics 11.9%; textiles 24.3%; clothing 12.3%; processed food 36.7%. Notwithstanding these figures, the Hungarian Government considered that the situation required, without further delay, either an increase in production or some external assistance. On August 1st a new currency, the florin, was introduced. This unit is based on gold and its value defined as follows: 1 kilog. of pure gold equals 13.210 florins, which represents the value of this currency as 11.74 florins to 1 dollar. At the same time, the Government has incorporated price levels and salaries in a rationing scheme.

The rationing system covered only a certain number of foodstuffs. It was not possible to provide a rationing scheme for industrial products as the output was inadequate.

Compared with 1938, price variations are as follows: The index for foodstuffs stands at 4.1 florins to 1 pre-war pengoe, for industrial products it amounts to 5, rents, on an average, stand at 3, whereas, taken as a whole, wages and salaries only represent 25 to 50% of their pre-war value.

In order to illustrate the standard of living, an outline of the food problem must be given. The rationing scheme provides for the supply of 1,077 calories per day for town-dwellers, 1,084 calories for office workers, 1,481 for light manual labourers and 1,957 for heavy manual workers. Even these rations were only possible with the assistance of U.N.R.R.A.

The greater part of the calories are supplied by bread and flour. It will be sufficient to point out that the standard number in Hungary should be 3,080 calories and that, during the war years 1942 and 1943, the minimum ration never included less than 1,528 calories for the least favoured sections of the population.

Seasonal products which may be bought in the free market, including vegetables, fruit, poultry and eggs, ease the situation to some extent, but in this connection it must be remembered that excessively low wages scarcely allow large masses of the people to raise the standard of living by purchases in the free market. It is the shortage of fats which is specially felt, not to speak of meat which has almost completely disappeared from the market since the latter years of the war. At present the slaughtering of animals for food is forbidden on account of the great reduction of the livestock.

The budget of the Hungarian State.

It is important at this juncture to consider the taxes which the Hungarian State levies on its nationals in order to meet its home and foreign commitments.

The Hungarian budget shows a revenue of 610 million pre-war pengoes and an expenditure of 710 millions. Expenditure is divided into three categories:

• 275 millions for staff salaries and pensions;
• 125 millions for ordinary maintenance costs;
• 310 millions for extraordinary maintenance costs,

including 70 millions for reconstruction and 240 millions for liabilities deriving from the armistice treaty (30 millions for the cost of international supervisory bodies and 210 millions for reparations).

In order to cover the 100 millions deficit, the Government intends to make full use of its right of issue, which it can do by recourse to fiduciary loans, without the inflation which does invariably accompany currency stabilisation measures. It must be pointed out moreover, that for the financial year 1946–1947 the approximate income of the nation will be 3.2 milliard pre-war pengoes and that, consequently, State taxes alone will comprise 19% of the national income. The cost of local administration, amounting to 180 million pre-war pengoes, entails the addition of a further 6% to taxation which therefore amounts to 350 pengoes per head. When these taxes have been deducted there remains an income of 263 pengoes (50 dollars) per capita of the population, a figure which makes any further taxation quite impossible. It is for this reason that the budget makes no provision for the payment of internal or foreign debts, or for financial liabilities deriving from the Draft Peace Treaty now under consideration. In this connection attention must be called to the fact that as payment towards the national debt (2 milliard gold pengoes or 400 million dollars) and foreign debts (900 million pengoes) a sum of 33.5 million pengoes, entails the addition of a further 6% to taxation which therefore amounts to 350 pengoes per head. When these taxes have been de-with creditors. As for the sums necessary for the reparation of damage to Allied property in Hungary, it is impossible to make any estimate, even approximate, as no data are available. But as we have already seen, the budget with its 100 million deficit is for our nationals a burden which cannot be further increased.

In these circumstances, it is impossible for the national income to increase at a more rapid rate. In view of the very low standard of living which Hungary will have to accept as a result of currency stabilisation, there can be no question of allocating more than the 240 million pengoes set aside to cover international obligations.

The international obligations of Hungary may be attributed partly to the war which has been lost and partly to debts contracted before the war.

From a chronological standpoint, our international debts take precedence over our war debts but from the standpoint of international law and political requirements, priority must be given to war debts. Since the coming into force of the Moscow Armistice Treaty, the Hungarian Government has had frequent proof of the generosity of the U.S.S.R. which, in view of Hungary’s extremely weak economic position, has shown herself disposed to grant facilities as regards reparation payments. While convinced that, where necessary, the U.S.S.R. will not refuse to reduce reparation payments, the Hungarian Government feels obliged to state its views on the obligations in question, so as to give a true picture of all aspects of the country’s economic and financial potentialities.

In April of this year, the Government of the U.S.S.R. agreed that reparations payable during the next 6 years could be paid over a period of 8 years. Shortly afterwards, the U.S.S.R. further agreed that reparation payments could be progressively spaced out. By this agreement, the reparations payable to the U.S.S.R. during 1946 were reduced from $27.3 to $21.8 million and those for 1947 to $23 million. At the same time Moscow cancelled penalties previously incurred by us to the amount of $6,000,000. Under another concession made at the request of the Hungarian Government, permission was given to Hungary to deduct from the reparations payable, in two equal parts, in 1946 and 1947, the value of a batch of securities representing Hungarian investments in an important foreign mining concern. The actual value of these bonds will be assessed by a joint Russo-Hungarian commission.

The principle of progressive deferment has also been adopted by Yugoslavia and, for the first year at any rate, by Czechoslovakia. Hungary’s reparation obligations thus amount to $33 million for the year 1946, but the transfer of the batch of securities will reduce this amount to a considerable extent.

These repeated concessions provide evidence of the generosity of the U.S.S.R., on which we count also in the future. We hope that the U.S.S.R. will always allow for our capacity and our economic effort and that she will not refuse her indulgence for delays for which we are not really responsible.

A second war liability is that of the cost of maintenance of the army of occupation. According to very modest estimates, it has been calculated that this will amount to 188 million pre-war pengoes for the last 9 months of 1945. When representatives of our Government visited Moscow they obtained formal promises from the proper authorities there that a considerable reduction would be made in the strength of the army of occupation. Moreover, we hope that the Soviet Government will continue to assume responsibility for a certain part of the maintenance cost of its troops in Hungary as it has done in the past and that it will increase its participation in these costs.

As for the cost of the Inter-allied Control Commission, this amounted to 11 million pre-war pengoes for a period of 9 months.

It is among obligations of this kind that must be classified the reparations provided for in Article 23 of the draft Peace Treaty. According to this Article, Hungary must restore all the legal rights and interests in Hungary of the United Nations and their nationals as they existed before the war, restore to these nations and their nationals all property belonging to them in the state in which it is at present, and compensate the owners for any damage caused to the property in question.

Hungary has not yet made any payment towards these liabilities, which are also prescribed in the Armistice Treaty; for the moment, we do not know the amount due under Article 23.

Nevertheless, the figures and the data which the Hungarian Delegation has just quoted are sufficient to prove to everyone the accuracy of the statement made above to the effect that, despite the generosity of the Soviet Union, the international liabilities of Hungary as laid down in the draft Treaty are far beyond her capacity of payment.

Conclusions.

To sum up, Hungary begs the Conference to take account of the efforts made by the Government of the Hungarian Republic to meet her liabilities up to the extreme limit of her nationals’ capacity. Hungary, therefore, hopes that the final draft of the Treaty will not include any fresh stipulations likely to make her economic position more difficult, as for example, reparations, the liquidation of Hungarian property abroad, the renunciation of her rights and claims against Germany and her ex-allies. The same applies, also, to claims which, we are informed, have been made against us outside the framework of the draft by certain Powers—the justification of which, moreover, Hungary contests.

Hungary will, therefore, ask the Conference to grant it facilities for reconstructing her economic life. One of the fundamental conditions of our economic restoration is the restitution of our property taken westwards by the Hitlerite forces and their Hungarian accomplices. The detailed list which the Government of the Hungarian Republic has transmitted to the Allied Powers is far from complete.

This property, which represents a very large part of our national patrimony, is absolutely essential for the productive capacity of the country. Without it, neither the efforts of the Hungarian workers nor the mobility of the capital still in our possession will suffice to raise the standard of living of the country to the level at which it was between the two wars. We are grateful to the Government of the United States for having handed back to us the gold carried off to the West and for their promises concerning the restitution of property removed since January 20, 1945 (date of the Armistice) or since October 15, 1945 (the date when the “Crossed Arrows” came into power). It would, however, be desirable that the initial date of the restitution should be ante-dated to the cessation of Hungarian sovereignty, that is to say, to March 19, 1944, and that the application of relevant measures should not encounter any technical difficulties. Without this property, Hungary would remain not only in a permanent state of poverty but in the direst state of distress. For these reasons, the restoration of the property removed, is as important for the whole Danube basin and for the peace of Europe as it is for Hungary itself.

The Hungarian Delegation ventures to draw attention to the great hardships which will inevitably result for Hungary from the proposed territorial changes. These would involve the loss of certain sources of power, the severance of certain communications and important relations, and the dislocation of certain economic entities. It is in the interest of the Powers concerned to establish international agreements designed to regulate these questions. In this connection, the Hungarian Delegation is making concrete proposals for the settlement of these problems.

Hungary is animated with the sincere desire to fulfil her international commitments as loyally and fully as possible. With this object in view, she hopes that the total amount of her obligations will be definitely fixed, that a certain amount of latitude will be given her to meet these obligations, and that her liabilities will be assessed on the basis of the country’s capacity of payment.

observations by the hungarian delegation on Articles 21 to 33 of the draft peace treaty (statement of reasons for the amendments proposed)¹

Article 22

Under the provisions of paragraph 1 of this Article Hungary is obliged to return all property removed from the United Nations’ territory.

As worded the draft would invalidate, without any compensation, transactions under which, without resort to direct or indirect duress, Hungary or Hungarian nationals purchased such property, from persons entitled to sell it, on the basis of the principle of freedom of contract, and against payment of its full value.

Therefore, as in paragraph 2, and as presumably intended by the authors of the text, the Hungarian Delegation requests that after the word “removed” the terms “by force or duress” be inserted.

Paragraph 2 of Article 22 obliges Hungary to return all property originating from the territory of any United Nation, regardless of whether the original Hungarian purchaser had paid in full for the property removed by force or duress from the country of origin by an Axis Power.

In the view of the Hungarian Delegation, some protection should be given to the original bona fide Hungarian purchaser—the responsibility of proving such fides resting with Hungary—so that he should not be at a loss.

Hungary would also ask to be granted a right of recourse against the Axis Power which removed the property in question from its country of origin. If there is to be no restriction provided for the obligation that property shall be returned, there should be recognition of this right of recourse in accordance with the actual principles of private international law.

Under Paragraph 6 of Article 22, Hungary accepts the obligation to return rolling stock of foreign origin located on Hungarian territory. She would, however, ask for reciprocity in the application of this principle. As a result of shortage of the necessary rolling stock, railway traffic in Hungary is already subject to very serious difficulties, and if Hungary is compelled to return rolling stock of foreign origin, without having her own rolling stock returned there is a risk of communications being completely paralysed.

Since under the rules of international law, rolling stock is not regarded as booty, both economic and legal motives militate in favour of this claim for restitution.

As a consequence of war events and military operations, rolling stock has been lost on both sides; territorial changes have likewise made big differences in the distribution of rolling stock. In the interests of economic and political justice in this sphere, we would suggest that a conference of railway experts be convened to proceed to a fair and just redistribution of rolling stock.

Article 23

Concerning the paragraphs which have been jointly agreed by the Foreign Ministers of the Four Great Powers, the Hungarian Delegation, apart from a few draft amendments of minor importance which she ventures to indicate below, has no remarks to make.

Hungary, however, feels herself seriously prejudiced by paragraph 4 of Article 23 providing that Hungary shall be responsible for all injury done “as a result of the war” to ex-enemy property (including, under Article 31, French property, as well as that of States who severed diplomatic relations with Hungary). According to clause (d) of the American proposal in regard to paragraph 4, the expression “as a result of the war” includes the consequences not only of any action taken by the Hungarian Government or its agencies, but also of any action taken by one of the belligerents and of any action or failure to act caused by the existence of a state of war.

Such an extension of responsibility seems, in the view of the Hungarian Delegation, excessive. In this respect, it would seem advisable to take into account the fact that under Article 21, Hungary is obliged to make reparation for losses caused through her participation in the war. These reparation charges completely exhaust Hungary’s financial possibilities.

The Hungarian Delegation considers that, as regards losses caused by factors other than the operations of the Hungarian forces or the action or failure to act of the Hungarian Government or their agencies, it would be unfair to exact reparation from Hungary for two reasons;

1. The losses sustained by Allied property on Hungarian territory occurred almost exclusively after March 19th, 1944, i.e. the date when the country was occupied by Hitler’s forces. Since during the period of German occupation, Hungary was unable to exercise her full sovereignty, the supreme power being in the hands of the German High Command, Germany, according to general principles of international law as well as justice, should be liable for the losses which occurred as a result of the war. Consequently, the Hungarian Delegation is of opinion that the losses inflicted on the Allied and Associated Powers by German military operations on Hungarian territory should be considered as forming part of German reparations.

2. The damage inflicted on the Allied Powers by German military operations represents a very large proportion of the losses, amounting to about 35 to 40% of the national wealth of Hungary. They resulted in a very great decrease in the productive capacities of Hungary in the field of industry and agriculture, on the one hand, and a substantial impoverishment of the population, on the other. Most of the losses sustained by the Allied Powers affected industrial and agricultural plant, but the economic life of Hungary was also impaired. She felt these losses just as much as those inflicted on the property of Hungarian nationals. The U.S.S.R. proposal takes these circumstances into account by suggesting that in view of the losses sustained by Hungary in the course of military operations against Germany on Hungarian territory, compensation should be made in part, to the extent of one-third of the losses sustained.

3. Considering that, under Article 21, the U.S.S.R., Czechoslovakia and Yugoslavia will obtain compensation in the aggregate for the losses they sustained through Hungary, to pay special compensation to these three Powers for the losses they suffered on Hungarian territory would, in the view of the Hungarian Delegation, mean paying twice for the same loss.

4. Reparation for the losses concerned would weigh so heavily on the budget of the State, that, as already explained by the head of the Hungarian Delegation at the plenary meeting, and as set out more fully in the Delegation’s memorandum, it would be impossible to find the funds necessary to cover such reparation. By making a tremendous effort and by reducing the standard of living of the Hungarian population to the lowest possible level, the Hungarian Government has been trying since 1st August, 1946, to stop the disastrous inflation by creating a stable currency. The primary condition for financial stability is, of course, to balance the State budget, or at least reduce the deficit to a level where it can be covered without the risk of fresh inflation. In the light of these considerations, the budget estimates the expenditure at 710 million pre-war pengös, and revenue at 610 millions. The revenue required for the needs of the State, and government payments to autonomous administrations absorb, in round figures, 25% of the national revenue, assessed at 3.2 milliards of pre-war pengös for the year 1946–1947. Thus, the proportion of the revenue not earmarked for public expenditure is 263 pengös, or 50 dollars per capita for 1946–47. To add to the State budget fresh liabilities which in all probability would be considerable, would mean jeopardizing the success of stabilisation. It should moreover, be noted that, in order to secure the financial equilibrium alluded to above, the stabilisation budget has earmarked only very modest sums for the chief departments of State. Quite apart from the fact that salaries and material expenditure are so low that they cannot possibly be kept on that level very long, the sums earmarked for reconstruction are so small, that they could not cover the more urgent needs of economic recovery.

In consideration of these facts, the Hungarian Delegation would ask the Conference to limit the liability of Hungary to the losses sustained by Allied property in Hungarian territory as a result of measures taken by the Hungarian Government or their agencies. Should this principle be agreed, the Hungarian Delegation would be able to accept any of the alternatives contained in the draft Treaty which the Conference liked to adopt.

If the Conference found it impossible to accept this proposal by the Hungarian Government, the Hungarian Delegation would then ask for the proposal of the U.S.S.R. Delegation to be adopted. Under this proposal compensation would be made in part to the extent of one-third of the damage sustained.

On the details of Article 23, the Hungarian Delegation ventures to suggest amendments to paragraphs 3 and 9.

1. In the case of Paragraph 3 the Hungarian Delegation thinks that a bona fide third party, should be protected where it can be proved that he acquired the property against payment of its full value.

In any case, the Hungarian Delegation feels that right of recourse should be accorded against the Axis Power whose measures of force or duress resulted in the transfer of certain property belonging to United Nations nationals to nationals of Axis Powers.

2. Regarding Paragraph 9, the Hungarian Delegation would state that there are no grounds for any special agreement about the bonds held by the Committee of Bondholders of the Danube-Sava-Adriatica Railway, since debtor-creditor relationships are regulated, in a general way, by the provisions of Article 27. The other creditors of Hungary would undoubtedly consider it prejudicial to their interests if special treatment were granted to a group of specific creditors. The Rome Agreement of 29th March, 1923, moreover, laid such heavy burdens on the debtor States, that after the world crisis of 1933, they were no longer able to fulfil their obligations. The settlement of relations between the debtor States and the Committee of Bondholders of the Danube-Sava-Adriatica Railway Company will call for direct negotiations between debtors and creditors in the same way as the settlement of other foreign debts. Should the Conference, nevertheless, agree to the French proposal, the Hungarian Delegation is of opinion that the wording of the Article should allow for a possible modification of the obligations arising under the Rome Agreement, in order to adjust them not merely to the changes consequent on the redistribution of the lines over the territories of various States, but also to the capacity of payment of the States concerned. The Hungarian Delegation has the honour to submit to the Conference in Annex A draft amendment.

3. The Hungarian Delegation considers it necessary, in any case in the clauses concerning losses sustained as a result of the war, to exclude definitely any expression which might be construed to mean that Hungary would also have to compensate nationals of Allied Powers for losses sustained as a result of the currency inflation which prevailed in Hungary before 1st August, 1946, or losses which are of the nature of loss of profit. It was natural to expect that foreigners with interests in Hungarian currency should not have escaped the ravages of war and its dire consequences, including inflation. But it would clearly be unjust to hold the general population which has paid for the inflation by an almost incredible reduction in their standard of living, responsible for any losses foreign interests may have sustained through inflation. Similarly, the Peace Conference certainly does not propose to extend the obligation to compensate to cover loss of profits. In order that there should be no misunderstanding, the Hungarian Delegation would like to suggest that this should be stated in the text of the Treaty itself and ventures to submit a draft amendment to the Conference on this point.

Article 24

This Article provides that the U.S.S.R. has a right to all German “holdings” located in Hungary. Since the term “holding” is not usual in the text of the Treaty and may be a source of confusion as regards the property to be restored, the Hungarian Delegation considers that it would be desirable, in this Article also, to employ the usual term of “property, rights and interests” which comprises all holdings.

Further to prevent misunderstandings, it should be expressly specified that such property, rights and interests pass to the U.S.S.R. with the charges attaching thereto. This results from general principles of private law (nemo plus juris ad alium transfere potest, quam ipse habet “—no one can transmit more rights to another person than he has himself”). The U.S.S.R. is the successor of Germany as the owner of this property. It is not from Hungary therefore that the U.S.S.R. will acquire certain property rights under this Article. If Hungary was therefore obliged to liberate such German property, the provisions of the present Article would not apply to the German owner or to him exclusively, but also to Hungary, which was certainly not the intention of the authors of the Article.

In this connection it must be pointed out that several States have made claims concerning the transfer of property stated to be German (e.g. France, Austria), but regarded by them as their property or the property of their nationals.

Article 25

Property, rights and interests located in territory of the Allied and Associated Powers falls into two categories:

On the one hand, property situated in territory of creditor states (U.S.A., Great Britain, etc.).

On the other, property, rights and interests situated in territory of neighbouring states (U.S.S.R., Czechoslovakia, Yugoslavia).

1. Hungarian property, rights and interests situated in the territory of creditor states are the result, in great part, of financial transactions between these states and Hungary; they consist, mainly of credits intended to finance our imports and meet payments resulting from financial liabilities.

The import of raw materials is all the more essential for the existence of the country because our stocks have been destroyed and depleted, and the country lacks raw materials. It is therefore absolutely necessary to ensure a minimum of imports. The economic development of the country also requires other imports, to meet on the one hand, the requirements of reconstruction work and on the other the need for additional supplies of food due to falling off in agricultural production.

Export possibilities only allow us to cover 20 per cent of our import requirements, which does not guarantee the indispensable minimum of raw materials.

This being the case, Hungary has a vital interest in obtaining foreign currency; and therefore cannot forego the free disposal of her foreign currency holdings in creditor states.

These credits date from a period subsequent to the conclusion of the “standstill agreements”; and were granted on the understanding that they would not be used for the payment of previous debts. Without these agreements, Hungarians could not have received credits of this kind, which would otherwise have been liable to seizure by the creditors. The Hungarian Government has no objection to making payments by mutual agreement, provided they are proportionate to the financial capacity of the State.

At present, however, while Hungary is in no position to meet claims from abroad, the Hungarian Delegation cannot admit that these sums should be used for the repayment of capital, i.e. in a way which is not consistent with the financial capacity of the State. The Hungarian Delegation also wishes to point out that it would be contrary to the principle of equal treatment of creditors, to pay such debts out of the sums in question. By confiscating these credits, certain creditors would perhaps obtain a hundred per cent refund, whereas others, particularly neutral States, would receive nothing. It is quite clear that such provisions would seriously threaten the foundations of Hungarian credit, and render it difficult to obtain the foreign loans which are indispensable to the economic rehabilitation of the country.

2. Property, rights and interests in the territory of neighbouring States originated in most cases in the relations between Hungary and the territories previously belonging to it, which were ceded to other States as a result of the last war. Though such property, rights and interests constitute a by no means negligible share of Hungary’s foreign assets, since that country is particularly lacking in capital, they are at the same time one of the mainstays of the welfare and normal development of Hungarian minorities in neighbouring countries.

The Hungarian Delegation does not exactly know which liabilities should be met from property situated in her territory. After examining the different Articles of the draft Peace Treaty, it considers:

1. That Article 21 on reparations does not provide for the seizure of Hungarian property abroad for this purpose.

2. That it cannot come under the heading of restitution of property under Article 22, since claims against them do not require that Hungarian property should be used for this purpose.

3. As far as claims for restitution specified in Article 23 are concerned, the American proposal provides for the indemnification of owners by payments in Hungarian currency, without any necessity for the use of Hungarian property abroad.

This being the case the property in question should only be used for the payment of private debts and liabilities. In this connection, the Hungarian Delegation draws attention to the fact that such a one-sided liquidation would be a most unjust and costly method of meeting private debts. Should this liquidation be carried out on a non-commercial basis, it would result in fresh losses, involving an appreciable loss in the assets available for the payment of debts. It is sufficient to recall what occurred in carrying out similar clauses of the Treaty of Trianon to show that this is the case.

The Hungarian Delegation believes that the best way of settling this problem would be by a mutual agreement between debtors and creditors, perhaps subject to the control of a “clearing office”.

The Hungarian Delegation is therefore compelled to move the adoption of the proposal of the U.S.S.R. The only amendment proposed is that Hungary, in accordance with the obvious object of this proposal, should have the right freely to dispose of all property in United Nations territory, regardless of what restrictions they may have been subject to during the war. It is of special interest for Hungary that the wording of the text should clearly stress the need for restoring property seized by the Nazis, and now situated in United Nations territory (i.e. Czechoslovakia and Poland).

Should the Conference decide, contrary to the expectations of the Hungarian Delegation, to adopt the proposal of the U.S.A., the U.K., and France, the Hungarian Delegation suggests several subsidiary amendments as follows:

1. The Hungarian Delegation proposes that the income from Hungarian property in Allied Nations territory should first of all be used to cover liabilities arising from the Peace Treaty, and that, should this income be insufficient, the liquidation of property should be carried out in an established order and according to a valuation mutually agreed upon with the Hungarian Government. In this way, the Hungarian Government could arrange that property of lesser value should be liquidated first, so that any balance should be returned to the owner after payment of liabilities. In any case, the liabilities to be paid by liquidation should not include those of a private character referred to in Art, 27 of the draft Treaty.

2. Hungarian owners should be guaranteed a right of pre-emption for the liquidation of their property.

3. It would be unjust to confiscate rights and interests arising out of industrial, literary, and artistic property without compensation.

In this respect, the Hungarian Delegation suggests that compensation should be determined by mutual agreement with the Hungarian Government, and that to obviate legal uncertainty, the Allied Power should notify, within six months, what industrial, literary and artistic property it is proposed to confiscate.

4. It is in any case necessary to specify that the right of detention and liquidation should only apply to property seized during hostilities, so that the restrictions imposed after the cessation of hostilities should not give rise to the application of such measures.

5. It would be equitable that the property of Hungarian physical persons, who, owing to persecution in Hungary, took refuge in the territory of one of the United Nations should be exempted from seizure and liquidation, even if they were living without permission in the country in question.

Article 26

According to the proposal of the U.K., U.S. and French Delegations to Article 26 of the draft Treaty, Hungary renounces all claims, including debts, against Germany and German nationals arising out of contracts and other obligations entered into before September 1, 1939. This renunciation would apply equally to all losses or damage which occurred during the war. On the other hand, neither this Article, nor any other, contains clauses restoring to Hungary the right to dispose of Hungarian property situated in Germany, Austria, or other countries formerly allies of Germany.

1. As regards claims subsequent to September 1, 1939, these arose, in most cases, from commercial transactions between Germany and Hungary. For, even before the second world war, Germany played a predominant part in Hungarian foreign trade; the deliveries of goods on which Hungarian assets are based cannot therefore be regarded as exclusively arising from war conditions.

During the years preceding the second world war, imports of German and Austrian origin formed approximately 40% of total Hungarian imports. Exports to Germany and Austria constituted 46.6% in 1934, approximately 40% in 1936 and 1937, and 45.7% in 1938 of Hungarian exports.

During the war years, imports from Germany and Austria amounted to 52.9% in 1940, 58.5% in 1941, 51.2% in 1942, and 53.3% in 1943 of Hungarian imports. Exports to Germany and Austria amounted to 49.4% in 1940, 59.9% in 1941, 54.9% in 1942 and 60.2% in 1943 of total Hungarian exports.

Hungarian credits resulting from such deliveries therefore constitute assets resulting from former trade relations with Germany, in exchange for which Germany should have supplied Hungary with goods during or after the war. The fact that the German economic system was not in a position to fulfil its obligations to Hungary and to Hungarian nationals in this respect, should not have as a consequence that Hungarian debts should not be paid when, after a certain period has elapsed, the increase in German capacity to export would render this possible. If, on the other hand, our claims against Germany were to be transferred to the Allied Powers, this would result in a serious increase of the charges Hungary is called upon to bear by way of reparation.

2. It is certain that, as a result of the delivery of war material, Hungary is owed certain amounts by Germany. Most of these credits, however, date from the period subsequent to March 19, 1944, the date on which Hungary was occupied by the Nazis. Hungary cannot renounce either such claims, or the right to demand reparation from Germany for the damage which the Hungarian economic system has suffered as a result of German military operation on Hungarian territory. The Hungarian Government has already drawn up a general schedule of the damage caused: (1) directly by the German armed forces (forced transport, destruction, etc.) (2) by events of war due to German military operations.

Since May 1945, the Hungarian Government has notified the Inter-Allied Control Commission at Budapest of its intention to formulate claims and demand reparation from Germany, and to submit a detailed schedule of damages, together with a statement of the reasons for its claims, when peace with Germany is being negotiated. Hungary, which has inflicted exemplary punishment on its war criminals, would be seriously affected, both from a moral and material point of view, if she were compelled to renounce a priori all reparation claims against Germany, the principal war culprit.

3. Since, if Article 26 is adopted in the form proposed by the U.S.A., U.K. and France, no Article of the draft Treaty would dispose of the Hungarian property, rights and interests situated on German or Austrian territory, or on that of ex-allied States of Germany, the Hungarian Delegation wishes to stress the following facts:

Hungarian property situated in Germany comes under two headings: (1) property which prior to 1944 was situated in German territory; (2) property which the Nazis or their accomplices the “Crossed-Arrows” transferred to Germany during 1944 and 1945.

The amount of the property coming under the first heading is less than that of the property removed, but is by no means a negligible quantity. The Hungarian Delegation therefore requests that the right of Hungary to dispose of Hungarian property situated in German territory should be explicitly recognised.

As to property removed by the Nazis and the “Crossed Arrows”, the Hungarian Government thinks it is legitimate to claim its restitution. It also wishes to point out that the list already submitted to the Allied Powers cannot be regarded as complete. This property, representing as it does a considerable part of the national patrimony, is essential for the restoration of the productive capacity of the country. If it is not restored, neither the efforts of the Hungarian workers nor the mobilisation of remaining Hungarian capital would suffice to raise the standard of living in Hungary to the level prevailing between the two wars. The Hungarian Government is extremely grateful to the Government of the U.S.A. for having restored the gold reserves removed to the West, and for having promised to restore the property removed since January 20, 1945, on which the Armistice was concluded, and as well as the property removed since October 15, 1944. It would, however, be desirable that the latter date should be altered to March 19, 1944, the date on which Hungarian sovereignty de facto came to an end, and that the restitution of such property should not encounter any technical obstacles.

4. With regard to property removed from Hungary, and at present situated in the territory of Austria or of States former allies of Germany (particularly Italy), Hungary requests, in accordance with the reasons set forth above, that such property should also be restored.

5. With regard to Hungarian property situated in the territory of ex-allied States of Germany, the Hungarian Delegation wishes to draw attention to the fact that in certain countries (e.g. Roumania) such property has been confiscated. The confiscation and the conditions in which such property has been dealt with, have frequently resulted in serious deterioration. Without going into details, the Hungarian Delegation feels compelled to express the wish that the Peace Treaty should guarantee Hungary the right of disposing of Hungarian property situated in the territory of ex-allies of Germany.

To sum up, the Hungarian Delegation agrees with the views expressed by the U.S.S.R., which take account of what has been set forth above, but proposes the following modifications:

(1) The restitution of property should be guaranteed, not only in the case of Germany, but also as regards Austria and ex-allies of Germany;

(2) The date January 20, 1945, should be altered to March 19, 1944;

(3) The war material necessary for the equipment of the armed forces which Hungary is authorised to retain should also be restored;

(4) Hungary should be guaranteed the right freely to dispose of all Hungarian property situated in German and Austrian territory, and in that of ex-allies of Germany.

Article 28

Under this Article, Hungary waives all claims of any description against the Allied and Associated Powers on behalf of the Hungarian Government or Hungarian nationals arising directly out of the war or of actions taken because of the existence of a state of war.

The second sentence of paragraph 2 would compel the Hungarian Government to make equitable compensation to persons who furnished supplies or services on requisition to the forces of the Allied and Associated Powers in Hungary and in satisfaction of non-combat damage claims against the forces of the Allied and Associated Powers arising in Hungarian territory. The Hungarian Government is not in a position to pay equitable compensation for the war damage of the inhabitants of Hungary. Apart from this financial consideration of decisive importance, the Hungarian Delegation proposes the deletion of this stipulation, for the additional reason that it considers it unfair to discriminate between different categories of war damage, and to have to compensate persons who suffered losses as a result of requisitions independently of actions of war, when compensation is refused for damage resulting from acts of war properly so-called.

According to the words of the second sentence of this paragraph, Hungarian prisoners of war—in contradiction of the relevant provisions of the Hague and Geneva Conventions—cannot ask the Allied and Associated Powers even for the payment of arrears due to them as remuneration for work executed by them. The Hungarian Delegation proposes to delete this phrase, as, in order to prevent possible escapes, a large number of prisoners did not receive their wages in cash, but under deferred payment schemes. It would be unjust and inequitable to invalidate Article 6 of the Hague Convention of October 18, 1907 and Article 5 of the Geneva Convention of July 27, 1929, under which prisoners of war are entitled to collect their wage arrears on being freed from captivity.

Article 30

With regard to this Article, whose provisions deal essentially with questions of procedure, Hungary agrees to the U.S.S.R. proposal, and to the U.S. supplementary clause, which provide for the shortest and swiftest procedure. The U.S. supplementary clause is all the more important since it guarantees that questions in dispute shall be actually decided.

Article 32 bis

In declaring null and void the territorial changes to Hungary’s advantage which have occurred from 1938 to 1941, the Draft Treaty restores the frontiers as they were in 1938. In this connection we should like to draw attention to the fact (without prejudice to the Hungarian proposals submitted to the Territorial Commission) that Hungary will be obliged to make certain claims of an economic or financial character on the neighbouring States, for reasons which include the problem created by the investment of capital in these territories, the taking over by Hungary of part of the Public Debt, the question of civil servants and pensioners, and the operations of banks and other economic bodies, insurance companies and national insurance schemes, etc.

In order to give a fair solution to these problems, it is essential that the States concerned should at a given moment begin direct negotiations among themselves. This is why the Hungarian Delegation has the honour to propose the insertion of an Article stipulating that negotiations for the settlement of these questions should begin within six months from the coming into force of the Peace Treaty. Should the conversations of the interested parties not result in their coming to a common agreement, the Hungarian Delegation proposes that the disputes be submitted to a Conciliation Commission in accordance with the Article 30 of the Treaty.

Article 32 ter

Based on the system of the draft Treaty, the proposed Article adopts, as a general principle that the countries of the Danube Basin should conclude suitable arrangements facilitating a solution of certain economic questions to their mutual advantage.

In proposing the adoption of this Article, the Hungarian Delegation is inspired by the following considerations:

The greater part of Hungarian territory includes the lowest regions of the Carpathian Basin where the cultivated areas are to a great extent liable to be flooded. The cost of protective works against this danger constitutes a heavy burden, and is an important factor in increasing costs of production, without any corresponding advantage from the use of the water. Reservoirs for irrigation, and hydraulic power plants could only be erected on the other side of the mountain ranges, situated across the frontier.

Defense against floods can only be successful if adequate installations are established and maintained on the other side of the frontier, if a common hydrographic and meteorological service is in operation for the territory as a whole which constitutes a hydrographical unit, and last, if the territory in question has the benefit of a rational forestry system and of measures for the control of soil erosion.

The importance of a proper water control system was realised by the authors of the Treaty of Trianon, and twenty-six of its Articles deal with hydraulic questions; but the measures adopted were not sufficiently effective.

The Hungarian Delegate welcomes the initiative of the Yugoslav Delegation and adheres, in principle, to the Yugoslav proposal, under which Hungary and Yugoslavia should settle hydraulic questions affecting both countries by an agreement. It wishes to point out, however, that the matter has a wider scope, and that a satisfactory solution can only be arrived at if the countries of the Carpathian Basin settle these questions by joint action. It feels that the Conference would reach the desired results if all the Danubian countries were to participate in this settlement.

The first questions requiring settlement are the following:

A. Existing hydraulic plant should be properly maintained so as not to endanger results already obtained.

An efficient hydrographic and meteorological service should be organised and maintained for the territory forming a hydrographic unit.

The necessary supply of water for the lower regions of the Carpathian Basin should be guaranteed by mutual agreements.

A part of the hydraulic power from the upper fluvial regions should be ensured by mutual agreements, as a set off against the heavy cost of protection against floods, which are a heavy charge on the lower regions of the Carpathian Basin.

Existing future rights to the use of water should be recognised.

Other questions connected with the water regime (e.g. fishing rights) must be settled.

There should be a common forestry policy, and used for the control of soil erosion.

B. Hungary is cut off from the sea. Her only possible maritime traffic is compelled to make use of a round-about route by the Danube. It is important for the economic development of the country that Hungarian import and export should enjoy special rates on the railways which connect with the sea; their free ports, and docks, should be assigned to her. The Treaty of Trianon provided that Hungary should have an outlet to the sea. But these provisions were not satisfactory because they could be nullified by an unfavourable rate policy.

C. The frontier cuts across the railway and road net so that railway lines and roads connected with each other and with main railway lines and roads on the other side of the frontier, make communication almost impossible between districts which are economically interdependent. It will be long before Hungary can build new connecting lines. It is therefore necessary that the use of these lines and roads should be guaranteed by adequate arrangements.

D. The third group of agreements would ensure the existence of undertakings dependent on each other, but situated in different countries. Blast furnaces located on Hungarian territory receive ore from neighbouring mines situated across the frontier. The governments concerned took these facts into account during the inter-war period. Czechoslovakia, even independent Slovakia, guaranteed plants located in their territory the delivery of supplies of ore from mines belonging to these concerns, but situated in foreign territory, as well as transport for these materials at reduced rates. Hungary assumed similar obligations by way of reciprocity in the frontier districts where the position was the converse.

The same position existed with regard to Austria. Both governments had ensured by bilateral agreements the rational exploitation of a great coal field situated on both sides of the frontier. It is of vital interest for Hungary, which lacks iron ore, to obtain this ore, which cannot bear heavy transport charges. It is therefore desirable for the Peace Treaties to compel the States concerned to conclude similar agreements.

We have only cited these facts as examples. There may be other cases where the frontier line cuts economic unities in two, and where the States concerned should conclude agreements to secure their mutual interests.

amendments proposed by the hungarian delegation to Articles 21 to 33 of the draft peace treaty

Article 22

Para. 1.

Para. 1 would be replaced by the following text:

“Hungary accepts the principles of the United Nations Declaration of January 5, 1943, and will return property removed by force or duress from United Nations’ territories”.

Para. 2.

To Para. 2 should be added a second sub-paragraph:

“The said obligation will not apply to property acquired by Hungary in good faith, that is to say, for payment of the full value of the property in question. The burden of proof will rest on Hungary”.

Para. 6.

To Para. 6 should be added a second sub-paragraph:

“The United Nations, in their turn, will restore to Hungary the rolling stock of Hungarian origin located in their respective territories”.

There should also be added a third sub-paragraph:

“Within a period of six months from the coming into force of the present Treaty, an international railway Conference will be convened by the Governments of the U.S.S.R., the United Kingdom, the United States and France, with the participation of the States concerned in the distribution of rolling-stock. This conference may, if necessary, take decisions differing from the above-mentioned provisions”.

Para. 8.

The following text should be inserted as Para. 8:

“Hungary retains the right of recourse against the Axis Power by whose action property referred to in this Article was removed from the territory of one of the United Nations”.

Article 23

Para. 3.

A second sub-paragraph should be added to paragraph 3, reading as follows:

“The said obligation shall not apply to property, rights and interests acquired by Hungary in good faith, i.e. against payment of the full value of the said property, rights and interests. The burden of proof shall rest on Hungary”.

A third sub-paragraph should be added to paragraph 3, reading as follows:

“Hungary retains the right of recourse against the Axis Power whose measures of force or duress resulted in the transfers referred to in the present Article”.

Para. 4.

Amendments proposed to Para. 4.

First alternative

Sub-paragraph d. of the U.S. proposal would be replaced by the following text:

“As used in this Article, the phrase “as a result of the war” includes the consequences of any action taken by the Hungarian Government or of any action or failure to act by its organs during the existence of a state of war”.

Second alternative

Sub-paragraph a) would be replaced by the following text:

“Where, as a result of any action taken by the Hungarian Government or any action or failure to act by its organs, during the existence of a state of war, the property cannot be returned or … damage suffered”.

Sub-paragraph c) would be replaced by the following text:

“Where a corporation or association of any nationality other than that of one of the United Nations has suffered a loss of its property as a result of any action taken by the Hungarian Government or of any action or failure to act by its organs during the existence of a state of war, compensation … United Nations national”.

Sub-paragraph a) would be deleted.

In addition

The Hungarian Delegation asks for the adoption of the U.S.S.R. proposal.

New Para. 8a.

The following should be inserted after Para. 8 as a new Para. 8 a:

“Loss or damage due to the general economic situation in Hungary or as a special consequence of the currency inflation prevailing in Hungary up to 1st August, 1946 or which amounts to loss of profits will in no case be deemed liable to be compensated for by Hungary.”

Para. 9.

The Hungarian Delegation requests that this paragraph be deleted. If this paragraph is maintained, the Hungarian Delegation suggests that it be replaced by the following text:

“A new agreement shall be negotiated between the Danube-Sava-Adriatica Railway Company, the Governments concerned, and the Committee of Bondholders of the Company, in order to determine the method of applying the provisions of the Rome Agreement of March 29, 1923, laying down the Company’s Articles of Association, and to determine the modifications required in that Agreement”.

Article 24

Article 24 should be replaced by the following text:

“Hungary recognises that the U.S.S.R. is entitled to all German property, rights and interests in Hungary transferred to the U.S.S.R. by the Control Council for Germany and undertakes to take all necessary measures to facilitate the transfer of such property, rights and interests.

“The property, rights and interests referred to in this Article shall be transferred to the U.S.S.R. together with all liabilities and mortgages encumbering them at the date of the Armistice”.

Article 25

The Hungarian Delegation accepts the proposals made by the U.S.S.R. Delegation, with the following modification:

“… on the territory of Allied and Associated Powers even if such rights were limited in consequence of the participation of Hungary in the war on the side of Germany.”

Should the U.S.S.R. proposal not be adopted by the Conference, the Hungarian Delegation would suggest the following amendments to the proposals submitted by the U.S.A., United Kingdom and France.

1st para.

Paragraph 1 to be replaced by the following text:

Each of the Allied and Associated Powers shall have the right to seize all property, rights and interests within its territory, which on the date of the coming into force of the present Treaty belong to Hungary or to Hungarian nationals and to apply the net proceeds thereof to settle its claims or the claims of its nationals against Hungary or Hungarian nationals deriving from the present Treaty, to the exclusion, however, of claims covered by Article 27 of the Treaty.

Should the net proceeds of seized property not be sufficient for settling the claims covered by the preceding sub-paragraph, the Allied and Associated Powers shall have the right to retain or liquidate all property, rights and interests, in a rotation fixed by mutual agreement with the Hungarian Government. The value of property, rights and interests retained shall also be fixed by mutual agreement with the Hungarian Government. All Hungarian property or the proceeds thereof, in excess of the amount of such claims as above determined, shall be returned.

2nd para.

Paragraph 2 should be amplified as follows:

… on the understanding that the Hungarian owner shall have a priority right to acquire the property referred to.

4th para.

Paragraph 4 to be replaced by the following text:

No obligation is created by this Article on any Allied or Associated Power to return industrial, literary or artistic property to the Hungarian Government or Hungarian nationals. The equivalent value of these claims shall be fixed by mutual agreement with the Hungarian Government and shall be included in determining the sums which may be retained under paragraph 1 of the present Article. The Government of each of the Allied and Associated Powers … in the national interest.

Each of the Allied and Associated Powers shall notify the Hungarian Government, within six months from the date of the coming into force of the present Treaty which rights with respect to industrial, literary or artistic property it intends to retain and the limitations, conditions and restrictions it intends to impose on these rights. In default of such notification, the rights in question, in respect of industrial, literary or artistic property, shall be considered as restored to the Hungarian Government or Hungarian nationals.

5th para.

Paragraph 5 should be replaced by the following text:

The property covered by paragraph 1 of this Article shall be regarded as Hungarian property which has been subject to control during the period of hostilities by reason of a state of war existing between Hungary and the Allied or Associated Powers having jurisdiction over the property, but shall not include:

(a) Property of the Hungarian Government used for consular or diplomatic purposes or for the maintenance of a cultural or social institution;

(b) Property belonging to religious bodies or private cultural or social institutions and used for religious, cultural or social purposes.

(c) Property of natural persons who are Hungarian nationals residing within Hungarian territory … since January 20, 1945.

Article 26

The Hungarian Delegation accepts the proposal of the U.S.S.R., but suggests that it be amended as follows:

Para. 2

Paragraph 2 should be replaced by the following text:

Hungary shall have the right of restitution of any identifiable property at present located in Germany, Austria or in the territory of other former allies of Germany and which was removed from Hungary after March 19, 1944, including army equipment authorised by the present Treaty, even if this equipment should be considered as war material.

The restitution of any Hungarian property now located in German or Austrian territory or in the territory of the other former allies of Germany will be carried out under the direction of the military authorities of the occupying Powers.

Article 28

Para. 2

The Hungarian Delegation requests the deletion of the second sentence.

Para. 5

Paragraph 5 should be replaced by the following text:

The waiver of claims by Hungary under this Article includes any claims arising out of actions taken by any of the Allied and Associated Powers with respect to Hungarian ships between September 1, 1939, and the date of the entry into force of the present Treaty.

New Article 32 (a)

The following to be inserted after Article 32:

“Any economic or financial problems arising out of the annulment of territorial changes which have taken place since 1938 shall be the subject of direct negotiations between the States concerned. Such negotiations shall be entered into within six months of the coming into force of the present Treaty. If no agreement is reached, the case shall be referred to a Conciliation Commission to be set up under Article 30, it being understood that the Commission shall be composed in the first place of representatives of the States concerned.”

New Article 32 (b)

The following to be inserted after Article 32 (a).

“Should the Hungarian frontiers as determined in the present Treaty cut across any economic unit or interfere with the mutual utilisation of any natural resources, or should any means of communication constitute an obstacle to flood protection, the Parties concerned shall under the aegis of the U.S.S.R., U.S. and U.K. Governments, conclude agreements for the permanent elimination of any such difficulties in the general interest.”

Annexes

The Hungarian Delegation reserves the right to submit amendments and comments at a later date.

Annex 3

[There follows Annex 3, Detailed Description of Modifications in the Frontiers between Hungary and Rumania; for text, see Department of State Publication 2868, Paris Peace Conference 1946, Selected Documents, p. 1097.]

Annex 4

Ethnical distribution in 1930 and 1941 of the population in the territory to be ceded to Hungary (22,000 sq. kms.)

	1930	%	1941	%
Hungarians	495,106	31.8	594,822	36.8
Roumanians	865,620	55.7	833,925	51.9
Others	194,062	12.5	183,251	11.3
Total	1,554,788	100.–	1,617,996	100.–

References:

1. For the year 1930: General Census of the population of Roumania. Vol. II. Mother tongues.

2. For the year 1941: General Census of Hungary for the year 1941. Facts concerning mother tongues.

(General census of Roumania in 1941. Ethnic origins).

Ethnical distribution of the population in the territory detached from Hungary in 1920 and ceded to Roumania. Area: 103,000 sq. kms.

	1910	%	1930	%	1941	%
Hungarians	1,661,805	31.6	1,480,721	26.7	1,749,907	29.6
Roumanians	2,829,454	53.8	3,234,157	58.3	3,303,983	55.8
Others	766,208	14.6	834,928	15.0	869,294	14.6
Total	5,257,467	100.–	5,549,806	100.–	5,923,184	100.–

Annex 5

[Annex 5 does not appear in the source text.]

Annex 6

The Hungarian Delegation wishes to explain the economic reasons which have influenced its decision to formulate claims for the modification of the frontier between Hungary and Roumania.

In the first place, consideration should be given to the fact that 25% of the territory claimed by Hungary is wooded country and this could solve the problem arising from the shortage of wood for fuel and reconstruction in Hungary and particularly in the Great Hungarian Plain. These forest areas are of incomparably less value to Roumania.

As regards hydraulic power, this area could provide large supplies which would make it possible to arrange for the electrification of the Great Plain.

The territory to be ceded would be large enough for all the construction works required to protect the Plain against floods and for the draining and irrigation of this area.

With regard to mineral resources, the area claimed would supply raw materials essential to Hungarian industry such as lignite, bauxite, asphalt, limestone and precious metals. All these materials are less valuable to Roumania as she has adequate deposits of them in other areas.

The area in question would complete and unify the road and rail network of the Great Plain. The new frontier would give rise to no difficulties as regards communications. As for the economic interests of the population, these are, in every case, bound up much more closely with those of Hungary than of Roumania.

1. For amendments proposed, see p. 276.