that the willingness which they and their predecessors have shown to discuss with the French Government arrangements under which the burden of the French debt to Great Britain might be mitigated must not be interpreted as a waiver on their part of their rights as creditors, which are governed solely by the contracts under which the money was advanced and the securities which they hold.

9. That a French Government treasury bill given to the British Government for value received is a less binding obligation than a similar bill given to a private investor is a doctrine inadmissible both in itself and more especially in view of the circumstances in which these particular loans were contracted.

10. The normal course would have been for the French Government to appeal directly to the British investor for the accommodation it required, and that procedure was in fact adopted for a short period at the commencement of the war. It soon became apparent, however, that the French Government would be unable to raise on its own credit amounts sufficient to meet its sterling requirements, and the British Government stepped in and gave its own securities to the lender for the amounts raised to cover French requirements as well as British. By this means the French Government were able to borrow indirectly from British lenders both on less onerous terms and to a larger amount than would have been possible if the normal procedure had been followed. The payments due on the French treasury bills thus represent amounts which the British Treasury is in fact paying to the holders of securities issued on behalf of the French Treasury of which the French Treasury received the proceeds. 11. There was no suggestion when the loans were made that the repayment should be dependent on recoveries from Germany. Indeed, during the greater part of the period covered by the advances, the prospects of any such recoveries were highly problematical. The bills were made subject to renewal for a limited period only after the end of the war, with the clear intention that as soon as French credit was sufficiently re-established they should be redeemed out of French Government loans to be raised on the London market, the redemption money being applied to the cancellation of the British securities issued on French account. 12. While His Majesty's Government have, by continuing to renew the bills beyond the period of the contract, tacitly recognized that the time has not yet arrived for giving effect to this intention, it must be clearly understood that, in the absence of a new agreement, the carrying out of it remains an obligation of the French Government which can not honorably be repudiated, and that, in the meantime, the present practice of adding interest to capital can not be indefinitely continued, and that a commencement of payment of at any rate a part of the interest should be made as soon as the sterling-franc exchange becomes reasonably stable.

6. FRENCH DETAILED REPLY1

(Annex to French note of August 20, 1923.)

1. We regret not to be able to understand the British disappointment. His Majesty's Government has been for a long time informed of our views (See inter alia, in the Yellow Book, the conversations of M. de St. Aulaire and our two notes). Unfortunately, we have not up to now realized the effort which the British Government say they have made in order to come nearer the French views, that is, the normal carrying out of the treaty of Versailles, but we are convinced that their good will and our own will shortly be in harmony.

2. There are not only the two obstacles referred to. There is also our determination stated over and over again, not to relinquish one farthing of our reparation claims, which are sacred and unlike any other claim. There is, besides, our determination not to release the guaranty we now hold before we obtain the entire payment of reparations.

3. The British draft reply to the German note took no account of what was considered as essential by France. We said that if any reply was sent to Germany, it had, in our opinion, to deal only with the cessation of passive resistance, a preliminary and predominant question.

4. The French reply, though firm, was as courteous in substance as in tone. We are sorry to see that, though very courteous also in tone, the British reply is at bottom not very conciliatory, but we shall do our utmost to remove the misunderstanding.

5. It did not depend upon us to assist the British Government in proceeding along the diplomatic lines they themselves started upon, instead of resorting to publication. We think the former method would have proved far preferable.

6. The British Government gives us to understand they have taken into consideration our point of view. Their note of July 20 seems, however, to take no account of all the statements made by the French Government at the last London and Paris meetings and of all that the French ambassador was directed to explain to His Majesty's principal secretary of state for foreign affairs.

7. If our response has disappointed the British Government, it is because the note of July 20 held our statements as null and void. We had to repeat them and to make them more precise in our note of July 30. 8. It is for our Belgian friends and allies to give a special reply on this point.

'The note itself was a lengthy argumentative review of reparation history. The whole document has been translated and published in English under the title "Reply of the French Government to the Note of the British Government of August 11, 1923, relating to Reparations."

9. We could not refer to the draft letter attached to the British note of July 20, as the wording of this draft showed that no notice had been taken of our previous indications. We had to confine ourselves to once more throwing light on the fundamental principles about which, in our opinion, no discussion can be allowed to take place.

10. We leave the Belgian Government to answer this point.

11. We confess our inability to understand the reasons brought forward in the British note on the capacity of payment of a country. The present German capacity of payment is naught, as a result of the Reich's own will. Any estimate by experts would prove useless. Do the British Cabinet wish to cancel the German debt on the plea that Germany's capacity to pay is temporarily reduced to nil? Is that the conclusion it has reached?

12. We said that the German debt had been fixed under the treaty, by the Reparation Commission. We added that we upheld the whole of our claim against Germany, but that we were prepared to give up such part of it as would correspond to those of our war debts which would be cancelled.

13. According to the resolution taken by the Reparation Commission under the treaty, the amount of the German debt is 132 milliards. The present value of this amount can not be expressed, since the payment of the most important part of it (the C Bonds) is postponed to an indefinite date.

The estimate made by M. Bokanowski is but a proof of the very serious wrong already inflicted on us by the Schedule of Payments, reducing the present value of the German debt to a figure far below the theoretical one. The calculation of the honorable member of the French Parliament likewise proves that it is possible, without reducing the amount in principal of the German debt, to lighten the payment by complying with the procedure stated in Art. 234 of the treaty. The moratoria successively granted to Germany since 1921 have still further reduced the present value of this debt. It is therefore needless to overthrow the treaty.

We leave it to Belgium to reply about the priority that was granted to her. But France can not forget that Belgian territory was the first to be invaded by Germany and that it is this criminal violation of the liberty and rights of a small and gallant country that gave the war its real signifi

cance.

DENIES AGREEING TO REDUCTION

14. France never reasoned solely in her own interest, as is implied without any justification.

She never said she would be content to receive 34 milliards. Our claim as theoretically fixed, amounts to 68 milliards; our theoretical debts, subject to the adjustments that will have to take place, vary between 25

and 27 milliards. These are the figures to be set against each other and not those of 34 and 27.

Our claims on Germany have been made the subject of a Schedule of Payments which has reduced them to x milliards,' but our debts have not been the subject of any arrangement and we can not expect less from our Allies than has been granted to Germany. Has not the English debt to the United States been made the subject of an arrangement which has reduced its actual value some 30%? The calculations in par. 14, therefore, paint the situation to public opinion in unconsciously inexact colors.

15. Here again it is for Belgium to reply. The British Cabinet quotes the destruction of naval material which is as much a material loss as the loss of merchandise. But has not the British fleet been reconstructed and its German rival destroyed, or only reconstituted by means of ships sold by England? Whereas the factories and mines of France have not yet been restored to a prewar footing, while all the time German industry is in full blast.

16. This is a question which concerns Belgium.

17. It was not France who asked that the percentages should be modified. She does not deny, moreover, that England has made an enormous effort to re-establish her finances and to pay her debts. We should no doubt have been able to do the same had we not had our devastated regions, which we have had to reconstruct ourselves at a cost and sacrifice very much more considerable than that made by England.

The English have had to surrender their foreign securities in the interests of their Allies. But did we not do the same, and were not the sums we surrendered as great, if not greater?

18. It was England who invited us to put questions to her by speaking to us in vague and almost incomprehensible terms of a commission of impartial experts. And she has not replied to these questions. She does nothing but repeat, à propos of Germany's capacity of payment, statements the illusory character of which we have already shown.

19. Once again we ask that Art. 234 should be applied. Nothing proves better than Mr. Bokanowski's estimates how much lighter the burden of the debt can be made by "echelonning" payments without having to call in question the total of the debt. It is part of the duties of the Reparation Commission to proceed from time to time to determine Germany's capacity of payment, to follow the changes therein, and to "echelon" the payments in accordance therewith.

By the Spa agreement France receives 52% of German reparation. The value of this percentage on Series A and B bonds is 26,000,000,000 gold marks. The same percentage of Series C bonds would be 42,640,000,000 gold marks. The uncertainty seems to arise from the fact that Austrian, Bulgarian and Hungarian reparation are chargeable against Series C bonds in proportions not identical with those of the Spa agreement.-Editor.

20. No observations.

21. If on the morrow of the war and relying on pre-war statistics, estimates of Germany's capacity to pay varied between 60 and 800 milliards, how is it possible to arrive at a more precise estimate in the midst of the existing economic chaos, and at a moment when Germany systematically conceals the truth and falsifies all statistics? The five years which have just elapsed, far from rendering possible a definite estimate of Germany's capacity to pay, have shown that any such inquiry would have the most unreliable results.

The estimate of 120 milliards of gold marks mentioned in our note can be found in the chapter headed "Reparations" written by Mr. Lamont and inserted in Colonel House's book "What Really Happened at Paris in 1918." (Traduction Payot, Paris, 1922.)

22. The London Cabinet admits that unanimity is necessary among the Governments before the German debt can be reduced. We have stated quite plainly that this unanimity does not exist. We can not agree to abandon any part of the claim, payment of which is vital for France; we know that Germany is and will always be rich enough to pay us; all that is required is that she should wish to do so. She is spending more to-day in resisting us than she would have to spend in meeting her obligations.

The British note alludes to the interests of Governments not represented on the Commission, interests which France might neglect. France has no need to be reminded of her duties toward other nations. She has never forgotten them. But if certain countries at the present moment are suffering in any respect, it is owing to the situation into which Germany has voluntarily plunged the world and to which we are endeavoring to put an end.

23. Either this commission of experts is the Reparation Commission itself and its agents; in which case why all this discussion? Or else it is a substitute for the Reparation Commission, and then it is contrary to the treaty.

THE EXPERT COMMISSION

24. We fear, alas! that this paragraph contains the whole secret of the program of the British Government, and that it reveals the real significance of the adjective "impartial" which the London Cabinet continue to add to the word "experts." Impartial experts are desired; the inference being that the Reparation Commission as at present composed is considered to be partial. It is forgotten that France alone has the right, by virtue of the Spa Agreement, to 52% of the German debt.

It is worth adding that in actual fact the French chairman of the Reparation Commission has only once had an occasion to make use of