462.00 R 29/2094: Telegram

The Ambassador in France (Herrick) to the Secretary of State

400. B–774. First. Latest fall mark led Bradbury submit Commission new plan for 1923–24. Begins expressing opinion [that] first consideration [is to] prevent complete demoralization Germany [Page 166] which ends all reparation or other payments. Demoralization can be prevented only by stabilizing mark which stabilization depends on balancing budget, stopping inflation and restoring confidence. Obviously impossible unless Germany wholly relieved from financial requirements [of] treaty for at least two years. Believes if this done good chance obtain three requisites mentioned above. Mark to be stabilized by announcing Reichsbank will pay gold for paper marks at figure to be determined, say one thousand to dollar, thinks under conditions mentioned demand for redemption marks slight, partly because confidence restored, partly because circulation at that rate less than adequate for commercial needs.

Second. Bradbury’s plan keeps schedule payments in force until changed by governments, which change should be made at approaching Brussels Convention [Conference]15 by adoption German capacity as basis for demands upon Germany. To avoid absolute stoppage of payments and deliveries by Germany and at the same time relieve German budget, plan substitutes for cash payments of every kind required by treaty German five year bonds at sufficiently high rate interest to permit discount by any government which receives and guarantees them. Any country receiving deliveries in kind would be required to guarantee equivalent amount German bonds which Germany would use raise funds to pay for deliveries in kind. Of course not probable any government would require large payments or deliveries under these conditions.

Third. Delacroix16 expressed general accord with Bradbury’s estimate situation and necessity immediate drastic action. Did not like bonds guaranteed Governments, preferred establish confidence by prompt announcement by Governments of acceptance principle of capacity [to pay], practical application to be on lines determined under advice of conference of business representatives of highest standing free from political control with understanding no payments of any kind [to be?] made by Germany except if and when compatible with balancing German budget. Delacroix did not like use Reichsbank gold to stabilize mark; suggested German loan for this purpose. This loan free of taxes, priority over treaty payments so that German capital already exported attracted back for subscription this [the] bonds thus furnishing funds for buying marks also strengthen general financial situation. Thought definite announcement acceptance principle of capacity would restore confidence sufficiently to make possible balancing budget and stabilization.

[Page 167]

Fourth. Summary Bradbury’s plan will be given papers today. … Barthou17 objected to guarantee of bonds but said little more except indicate some sympathy with Delacroix proposed amendments. He will present counter plan next week.

Fifth. Bradbury’s main thought unless something done immediately no possibility saving Germany. Wants Commission to do enough immediately to restore confidence so that proposed Brussels Conference may not meet under impossible conditions but may find situation better and unite on whatever necessary to accomplish results. England evidently not sure wants Brussels Conference because of mixed political situation and probability of general elections very soon also because feel Conference sure result in disagreement unless French willing to adopt remedial measures at once. Delacroix anxious eliminate governmental political character of proposed Conference by change to pure christianized [sic] conference based on principle of capacity hoping United States participate on this basis also hopes United States willing to discuss Interallied debt from this point of view, perhaps sending member Debt Commission18 to France through Paris Embassy with request postpone presentation French plan because presentation this plan practically sure make situation more difficult. All indications are French Government cannot change policy without such suggestion from outside.

Sixth. My judgment if United States does nothing France will not make sufficient concessions to meet situation. This opinion subject to possibility that England’s determination to withdraw leaving whole responsibility to France may induce France accept principle of capacity but this unless hastened by some action United States likely take so long that useless if made and possibility seems remote. Our judgment is that England will withdraw unless satisfactory concession made. This policy natural and already intimated. While such situation deplorable, we regard such withdrawal as better than further compromise because German disaster certain unless bold and comprehensive action taken immediately and better come quickly than drag along. I have no faith in pledges of securities, sanctions or financial control. There is no remedy except restoration of confidence within and outside Germany. Even with most comprehensive action possibility of success doubtful at best and depends on Germany more than on outside nations who can do nothing effective except create conditions which make possible success of German effort for reform.

[Page 168]

Seventh. Rehabilitation of Germany necessitates as a matter of course terribly severe business crisis. This means not only usual industrial crisis which always follows cessation of inflation but will be greatly aggravated because for months all Germans have bought everything they could rather than hold constantly depreciating paper marks. They are stocked with far beyond actual needs so renewal of purchasing after crisis will be long postponed. Anyone who desires to be in control and responsible for Germany’s finances during such crisis is a damn fool.

Eighth. We believe United States could turn scale by appeal to common sense on lines indicated memorandum which I prepared for Secretary Hughes during first visit to Washington.20 Every country except France sure welcome this. Inclined to think even French Government would welcome for they cannot really believe their policy would bring practical results, but even if French Government not glad to be relieved of terrible responsibility for carrying out their policy alone they would in our judgment be forced to yield by world opinion and judgment of sane Frenchmen.

Ninth. If you think possible to act on lines indicated or any other lines, recommend immediate intimation for this purpose. France likely to insist any concession to Germany must be balanced by pledges of definite security and stringent financial control. Even on this basis probably would not make concrete concessions sufficient to meet situation although barely possible may permit discussion based on general principle of capacity. Should think great probability of France accepting this principle if could be applied to general settlement including Interallied debt. Boyden.

Herrick
  1. Telegram in three sections.
  2. The proposed conference at Brussels on reparations and Interallied debts was not held; Interallied conferences on these subjects were held at London in Dec. 1922 and at Paris in Jan. 1923. See British Blue Book (Cmd. 1812), pp. 61 ff.
  3. Belgian representative on the Reparation Commission.
  4. French representative on the Reparation Commission, succeeding Louis Dubois who resigned Oct. 6.
  5. World War Foreign Debt Commission, created under act passed by Congress Feb. 9, 1922 (42 Stat., pt. I, 363).
  6. Not printed.