GERMANY

MORATORIUM ON GERMAN PAYMENTS UNDER THE GERMAN-AMERICAN DEBT AGREEMENT OF JUNE 23, 19301

462.00R296/4468c: Telegram

The Acting Secretary of State to the Ambassador in Great Britain

(Dawes)

WASHINGTON, July 16, 1931-7 p. m. 214. For Gibson.2 The German Government is obligated to pay the United States during this year $6,000,000 on account of the Army of Occupation. It is clear that this payment falls clearly within the President's proposal for postponement. The American Debt Agreement seems to fall under a different category. Under this agreement the German Government is obligated to pay to the United States during the fiscal year 1932, on account of awards of the Mixed Claims Commission, approximately $9,700,000, one-half on September 30, 1931 and the other half on March 31, 1932. It appears certain that the War Claims Arbiter will complete his work on account of the claims of German nationals against the United States for ships, patents, and a radio station by September 1, 1931. In this case there becomes immediately available to the German claimants one-half the amount of such awards less the $50,000,000 appropriated in 1928. It has been estimated that the total amount of these awards will approximate $86,000,000, of which there remains $36,000,000 in claims which form the basis of further payments. One-half this sum, or $18,000,000, will be immediately paid to the German nations [nationals], this being almost twice the amount which Germany is called upon to pay to the United States under the German-American Debt Agreement. In addition there is a possibility that if the Mixed Claims Commission sustains its deci

1

Agreement providing for the discharge of Germany's war indebtedness to the United States; for text, see Annual Report of the Secretary of the Treasury, 1930, p. 341, or League of Nations Treaty Series, vol. CVI, p. 121. See also Foreign Relations, 1929, vol. II, pp. 1083 ff.; and ibid., 1930, vol. 1, pp. 106 ff.

'Hugh S. Gibson, Ambassador to Belgium, was in London as American observer at the London Conference of Experts, held July 17-August 11, 1931; for correspondence concerning this Conference, see vol. I, pp. 164 ff.

For correspondence concerning President Hoover's moratorium proposal, see vol. 1, pp. 1 ff.; for text of the proposal, see telegram No. 262, June 20, 8 p. m., to the Ambassador in France, ibid., p. 33,

sion in denying Germany's liability in connection with the sabotage claims, a further sum of approximately $13,000,000 will be available to German nationals. This, of course, depends entirely on the final decision of the Commission.

The Treasury feels that in principle there is no difference between the character of claims covered by the payments received from Germany under the debt agreement and the payments made by the United States to German nationals on account of the awards of the Arbiter. They are both claims of private individuals and it is felt that they do not come within the provisions of the President's moratorium proposal. In view of the foregoing and the further fact that the amount which the United States in any event will pay to German nationals is far in excess of the amount which the United States will receive on behalf of its nationals under the German debt agreement, it is felt that there should be no objection offered on the part of the creditor governments to the continuation of these two classes of payments.

At the appropriate time you should bring this matter to the attention of the Committee of Experts, with a view to obtaining their consent to the continuance of the payments during the next year on the conditions above outlined.

CASTLE

462.00R296/4769: Telegram

The Ambassador in Great Britain (Dawes) to the Acting Secretary

of State

[Paraphrase]

LONDON, July 30, 1931—11 a. m. [Received 10 p. m.]

281. From Gibson. Reference is made to the Department's telegram of 6 p. m. July 29th, No. 243. This matter was taken up by me with Leith-Ross," who said that he had no objection. I also approached the French representative on the subject; and he stated that he did not object personally, but that he would prefer that the matter not be brought up before the committee until Friday, as he wished to have time enough to talk to Flandin on the telephone. Leith-Ross and the French representative both felt that an attempt might be made to use this as a precedent or for bargaining purposes. Evidence has been given by the Germans of their desire to cooperate in reaching a solution.

6

DAWES

'Not printed; it called attention to Department's telegram No. 214, July 16. "British representative on the Committee of Experts.

French Minister of Finance.

462.00R296/4795: Telegram

The Ambassador in Great Britain (Dawes) to the Acting Secretary of State

LONDON, August 3, 1931-8 p. m. [Received 8:25 p. m.]

291. My 289, August 3, 11 a. m. Following is the text of an undated and unsigned statement sent the Committee August 1st when delegations refused to take any action on an oral statement. The Secretariat circulated it as "memorandum by the American Delegation". On first presentation of the matter it had been especially decided to treat it as strictly confidential so far as the Committee was concerned.

"London Committee of Experts 1931.

Memorandum by the American Delegation. The German-American Agreement of June 23, 1930.

1. The Agreement of June 23rd, 1930, provides for the payment by Germany of 12,650,000 marks on September 30th, 1931, and of the same amount on March 31st, 1932, on account of the costs of the United States Army of Occupation. The Government of the United States contemplates that these payments be postponed on the terms of repayment to be established by American legislation for putting into effect the President's proposal of June 20th, 1931.

2. The Agreement also provides for payment of 20,400,000 reichsmarks on September 30th, 1931, and of the same amount on March 31st, 1932, a total of 40,800,000 reichsmarks which are payable in satisfaction of the awards of the German-American Mixed Claims Commission. These payments are affected by special conditions which make it desirable in the interest of the general situation that they be not postponed and the Government of the United States proposes that they be not postponed. The payments are deposited, together with sums appropriated from the United States budget and other funds of the United States Treasury, in a special deposit account for disbursal to German and American nationals pursuant to categories of priorities established by the United States Settlement of War Claims Act. The surpluses which would become payable to the German economy from this fund in the year beginning July 1, 1931, are nearly twice the sum of 40,800,000 reichsmarks payable by Germany into the fund during the same year.

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In connection with the German exchange crisis the Government of the United States has examined into the possibility of making payments from this fund immediately available to the German economy and has assured itself that it would be technically possible to mobilize immediately in the most effective manner such a payment in the amount of about $18,000,000 while there is a contingent possibility that an additional sum of approximately $13,000,000 may within a few months become available.

The budget of the United States receives no benefits from the 40,800,000 reichsmarks payable by Germany in the year beginning July 1, 1931, which are disbursed to private individuals in payment of the awards of an international tribunal. A minor fact of practical importance incident to these awards is that they bear interest at the rate of 5 percent in favor of the individual claimants and that postponement of receipts of the deposit fund would result in the accrual of interest changes [charges] in favor of American nationals having priority over later payments to be made to German nationals under the priorities established by the pertinent legislation.

For these reasons of a practical nature substantially promoting the economic purpose of the President's proposal of June 20, the Government of the United States regards it as obviously undesirable that the movement of these payments be interrupted. However, before expediting the payment of $18,000,000 from its own resources to German nationals for the benefit of the German economy the Government of the United States desires to bring the foregoing statement of facts to the attention of the experts now meeting in London assuming that they will agree that these and the corresponding German payments should be continued."

From Livesey."

DAWES

462.00R296/4917: Telegram

The Chargé in France (Marriner) to the Acting Secretary of State

[Paraphrase]

PARIS, August 12, 1931—10 a. m. [Received August 12-8: 15 a. m.]

503. Last night I was told informally that Flandin had returned to Paris yesterday morning and that he did not agree with the viewpoint of the French experts in London or with the French Foreign Office on the question of the non-postponement of payments under the German-American Claims Agreement. The American request would have to be refused. Today the Foreign Office will probably send a formal indication of this attitude.

MARRINER

462.00R296/4917: Telegram

The Acting Secretary of State to the Chargé in France (Marriner)

[Paraphrase]

WASHINGTON, August 12, 1931-noon. 399. Reference is made to your telegram No. 503 of August 12, 10 a. m. The formal consent of all other interested Governments has

Frederick Livesey, Assistant Economic Adviser, Department of State, was in London as technical expert with Mr. Gibson at the Conference of Experts.

been given to the American suggestion, and the Treasury of the United States awaits only the French action to send out the checks.

If the information in your cable under reference proves to be accurate, please see Flandin or the Foreign Office at once and urge them strongly to reconsider this decision.

The net amount of these payments will run strongly in favor of German nationals and therefore should assist them greatly at this critical time. The payments are wholly in favor of private individuals and do not fall within the scope of the President's proposal. These points should be again emphasized to the French Government. Should the payments in question be continued, it would mean that the American Government would pay within the year at least $18,000,000 on account of the awards of the War Claims Arbiter in payment for privately owned patents, radio stations, and ships taken by this Government. Moreover, if the decision on the so-called sabotage claims is sustained by the Mixed Claims Commission, this amount will be increased by another $13,000,000. $16,000,000 of the $18,000,000 just mentioned would be distributed at once by the Treasury. Germany, on the other hand, would pay to the American Government during the moratorium year only $9,700,000, all of which would be re-distributed to American private individuals in accordance with the decisions of the Mixed Claims Commission.

The following information is for your use at your discretion. Under arrangements with the Reichsbank, the required sums are made available by it to the American Treasury in reichsmarks in return for dollars. Then the Treasury draws checks payable in reichsmarks at the Reichsbank for the individual German claimants. These payments are clearly private in nature. It would seem to be unwise on the part of the French Government to withhold its consent to these payments in view of their private character and considering the further fact that all other countries concerned have agreed. Such an action on the part of the French would be seen in an unfavorable light both here and in Germany. The President's proposal is assured of coming into full effect as a result of the agreements reached in London yesterday. If the proposal is to contribute to a revival of the belief that states can straighten out their financial disputes, it is vital that the series of agreements reached be not disturbed by this small difference which will almost surely be interpreted as evidencing an unfriendly intention.

Unless you find it absolutely necessary do not use these arguments with the French Government. We hope sincerely that the French Government will give its consent without further controversy when it has made a fuller examination of all aspects of the case.

CASTLE