800.51W89 France/749
The French Embassy to the Department of State
Note Addressed by the French Government to His Excellency, the Secretary of State, in Reply to the Latter’s Note of November 23, 1932
The careful and considered study of the problems raised by intergovernmental debts and the payments due on December 15 next, contained [Page 735] in Your Excellency’s note of November 23, has prompted the French Government to formulate certain statements of fact and considerations of principle which it has instructed me to present without delay for the careful scrutiny of the Federal Government.
My Government has noted with satisfaction, to begin with, that the President has declared his readiness to recommend to the Congress a new study of the question in its entirety, which implies that in his opinion such a study is called for.
The French Government is not unaware, moreover, of the reaction that a reduction of the debts contracted by the European Powers toward the United States might have on America’s national economy. Finally, it is far from forgetting that a first readjustment of its debts was accorded it by the American Government in 1926.
On the other hand, it cannot be denied that since that date, the seriousness of the economic and financial crisis which has prevailed throughout the world has forced the interested governments to modify their attitudes with respect to the problem of inter-governmental debts; it has led them to take a series of concerted measures, related alike to reparations and debts and destined to meet the exigencies required by circumstances.
Without prejudice to the nature and form of a new study of the problems arising from a settlement of inter-governmental debts, my Government is glad to note the agreement of the Federal Government with its justifying reasons, namely: the reductions of revenue which the nations, creditors to Germany, agreed to at Lausanne, the increase in the burden of debts resulting from the world-wide economic depression and the parallel drop in prices, the difficulty of obtaining foreign exchange, and finally the influence which the settlement of this question could have on the development of the world crisis.
The weight of these reasons is so obvious and the need of a new arrangement is so urgent that it would be difficult to believe that, once a revision is agreed to in principle, the execution of an agreement which is no longer considered as applying to the situation should nonetheless be carried through.
The French Government desires to emphasize that it has never considered controverting the juridical validity of the various obligations by which the war debts originated.
Moreover, my Government desires to emphasize that the request for delaying payment which it made implies a mere postponement, leaving the rights of the parties untouched. It does not appear to my Government to go beyond the request made by President Hoover [Page 736] himself in June, 1931. On the contrary, it seems, in its opinion, to be the normal, equitable and necessary sequel.
It was at the request of the President of the German Reich that President Hoover in June, 1931, made his proposal for postponing for the duration of one year all payments on inter-governmental debts, including reparations.
On this occasion the Federal Government specified that it would only contemplate a moratorium of debts due to it “on condition that there take place a similar postponement for one year of all payments of inter-governmental debts due to the important creditor Powers”. The American memorandum specified that the fabric of inter-governmental debts, while supportable in normal times weighed heavily in the midst of this depression. This initiative, as the French Government pointed out, affected directly all existing agreements, and in particular suspended the working of the mechanism which the Young Plan had set up for taking care of the problem of reparations. Subsequent events have shown that this suspension, once it was granted, had to be extended beyond the period originally determined.
Furthermore, at the time of his trip to Washington, the French President of the Council agreed with the President of the United States on the terms of a communiqué,79 stating that in the matter of inter-governmental debts, a new arrangement, covering the period of the depression might be necessary, provided that the initiative came from the European Powers principally concerned.
In conformity with this text, which seems to constitute a novation in equity in the régime of international debts, this initiative was taken. Within the sphere where only the European Powers were involved the arrangement provided for has been brought about.
Germany, as a debtor, in addition to a diminution of its debt to a lump sum of three billion marks, or a reduction in size of approximately ninety per cent, obtained a moratorium of three years.
As, in the opinion of the European creditor Powers, this settlement should be integrated in a general arrangement, they were unanimous in agreeing that in any event the payments due them by virtue of inter-governmental debts should be withheld pending the conclusion of a general settlement. It would create a very serious situation if a régime obtained with such difficulty at Lausanne should have to be reconsidered.
Would it not be equitable for the Federal Government, in a like spirit of international solidarity and with a view both to consolidating the results already obtained and to permitting the completion of [Page 737] the task undertaken, in its turn to agree to the withholding of the payment of December 15?
The pressing need which prompts this action has surely not been unobserved by the Federal Government.
In making his proposal for a moratorium in 1931, the President of the United States stated that the attitude of the Federal authorities indicated their intention of contributing to the speedy reestablishment of world-wide prosperity in which the American nation is so deeply interested. “The duty of statesmen” said the Washington communiqué of October 1931, “is to neglect no means of practical collaboration for the common good. This principle is of particular importance at a time when the world awaits leadership to overcome the present depression which is destructive to so many homes.”
The economic depression which motivated both the proposal of the President of the United States and his appeal for the collaboration of nations, has grown more serious since the Spring of 1931. Everywhere poverty and unemployment are increasing; this depression cannot but grow worse if the payment of inter-governmental debts must be resumed before the conclusion of a general arrangement.
The French Government is familiar with the formal reservations made at the time of the ratification of the Hoover Moratorium by the American Congress, whose prerogatives it fully recognizes. But it must recall that the approval of the French Parliament likewise was subordinated to its own interpretation of the moratorium proposed by President Hoover. It must further recall that the Committee of experts which met at Basle in December 1931, following the Washington interview, and which included in its membership an eminent American citizen, did not confine itself to recognizing the momentary impossibility of Germany to meet its reparations obligations. It unanimously and formally condemned as peculiarly damaging to the restoration of world-wide economic equilibrium, the transfers of funds without counterpart which the payment of war debts involved. The report concludes as follows:
“In the first place, transfers from one country to another on a scale so large as to upset the balance of payments can only accentuate the present chaos.
“It should also be borne in mind that the release of a debtor country from a burden of payments which it is unable to bear may merely have the effect of transferring that burden to a creditor country which, in its character as a debtor, it, in its turn, may be unable to bear.
“Again, the adjustment of all inter-governmental debts, reparations and other war debts, to the existing troubled situation of the world—and this adjustment should take place without delay if new [Page 738] disasters are to be avoided—is the only lasting step capable of reestablishing confidence which is the very condition of economic stability and real peace.”80
It was on the basis of this general consideration that the French Government, subject to the approval of the French Parliament, signed the Lausanne agreements.
Despite a budgetary deficit of nearly five hundred million dollars, and despite the very severe measures which have already been taken and will still have to be taken to balance its budget, France will have voluntarily given up in the interest of world-wide economic recovery a net annual balance, over and above the payment of its war debts, of nearly eighty-five million dollars.
France agreed to this heavy sacrifice in the belief that the payments provided for in existing agreements could not be made without producing profound financial and economic disturbances.
The situation in this respect, insofar as France is concerned, has often been misunderstood and should be clarified.
The inflow of gold to France which has taken place during the past years was caused or rendered inevitable, in the last analysis by virtue of conditions existing throughout the world.
This gold does not in any sense belong to the French Treasury. It is not a source of permanent wealth for France. It is the guarantee for all the deposits made in France whether by Frenchmen or foreigners. Its normal redistribution which is desirable can only follow a general recovery of confidence and the needs which will follow such a recovery.
The slight improvement which took place following the Lausanne agreements evidenced the hope of the nations for a world-wide settlement. The recovery that was then just perceptible could not be advanced further if the next payment of inter-governmental debts were to be insisted upon.
It is pertinent to observe that lacking a radical reversal of the trade balance between the United States and Europe—a balance which is today heavily in favor of the former—these payments in the face of progressive diminution of foreign revenues for the debtors, would become increasingly ruinous to the credit and exchange markets of the entire world.
The French Government cannot believe that in the last analysis the American people will consider their interests best served by the carrying out of an obligation, the strict application of which would result in creating further chaos and poverty throughout the world, [Page 739] inasmuch as the transfer of sums without corresponding exchange cannot but unbalance yet more profoundly international relations. It was under the influence of these very serious preoccupations, and with a consciousness of the responsibility that devolves upon the great Powers for the maintenance of social and economic order, that the French Government asked the Federal Government on November 11 last to postpone the payment due on December 15.
In urging the American Government to reexamine its request in the light of the foregoing, the French Government believes that it is fulfilling not merely a national but an international duty.
It is fully conscious of the role which circumstances have called upon France to play in Europe. It has no intention of stressing as an argument the efforts it has already made for the recovery of economic stability and the improvement of business, nor the willingness it still manifests to cooperate toward this result in the future. But it queries, with apprehension, how France can continue along this path if, contrary to its expectation, the cooperation of the United States on which it has felt it could count to second its efforts, should be lacking. Such are the considerations which today lead the French Government to renew to Your Excellency through me its urgent and reasoned appeal to reconsider its request for the postponement of payments of December 15.
The reception which will be given this appeal is confidently awaited by my Government, which weighs all the consequences which the decision of the President of the United States may entail toward either improving or aggravating the situation which is a tragic legacy of the war.
- Foreign Relations, 1931, vol. ii, p. 252.↩
- Great Britain, Cmd. 3995, Germany No. 1 (1932), p. 17.↩