View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.


Translation Bureau No. 6828


Annex 1731 G.
January 3 1923.





Present Austria is a country of 6i million inhabitalits in which

industrial activity and commercial and financial transactions make it

necessary to employ a working capital which must be in proportion to
the rates of exchange and the national standard of civilisation.
The henvy taxes levied for a year on current accounts in lo:-aks have

reduced the size of transfer accounts end of paymtnts by cheque.


instruments of payment in circulation in the country uust therefore have
a value in gold or in coods sufficient to meet business requirements.
If the present value of the available national currency is inadequate,

the result is a serious shortage of money involving the restriotion of
credit, en extraordinary rise in the rata of interest short dated loanii

at exorbitant interest (up to 3%) and the circulation of foreign currency
used directly for the settlement of transactions even within the country.
This state of affairs has been prevalent in Austria for about two

years, and the danger has been realised, although, owing to a number or

circumstances, the insufficient natimul currency has beun in such reyil
circulation that the difficulties of the market have been slirhtly reduced

The boycott of the crown, which was too uncertain a currency and

constantly depreciated to value, asumed such proportions in 1922 that,
with a working capital in Austrian currency ten times less in value than
in 1919, the country could stAl carry on its exchange.

Each note

circulated faster since nobody wished to sec it depreciate while in
his possession.

A glance at the following table will nevertheless show the decrease
in the actual value of currency in spite of the alarming increase in
the amount epparently in circulation :



Annex 1731 C.

Since the stabilisation of the crown, paper currency has thus been
almost tripled, although this inflation has had no effect on the exchange,
has slightly improved.


The value of the currency available

in August (64 cold enillions) had become alarmingly inadequate owing to the
rapid fall of t}


Speculation hnd panic at the collapse of the

currency had hastened the fall and these pyechological reasons much exceeded
the economic reasons based en the inadequacy of the amount available.


result was an under-estimate which could be made good only if confidence
.4.11.were restored, that is, if the pyschological ORIMCIS of depreciation

The crcwn should then rise until the value of the notes

issued, eithout any alteration in number, reached the sum in gold required
for business purposes.

On the other hand, if the crown were


new means of exchange would most certainly have to be created so that the
total value corresponded to the transactions effected:

the market would

then have at its disposal a margin for issue the IL -its of which would only

be the value of the available currency,

Owing, however, to the return of confidence, the rapidity of circulation decreased, crowns were twain saved, the total neueber of deposits in

credit institutions increased from 11 milliards at the end of September to
36 in October, 60 at the end of November.

This accumu

added to the far larger amount finally saved by individuals themselves
decreased the currency in circulation by a corresponding aecunt and its
value necessarily increased.
The State supplied the crowns which the market was capable of absorbipi:

and continued this inflation until November 18, that is, it paid its
expenses by means of new notes received from the Bank of Issue in return
for the deposit of Treasury Bonds.

These bonds, however, had no value as

security for the notes in circulation and there tray thus a risk that

confidence in them would be reduced.

Annex 1731 C.

On November 18 1922, the Austrian Government ceased to offer new
Treasury Bonds to the Bank. Of Issues at the time of this cessation of

State inflation 3,161 Milliards were in circulation, representing 221
mil;iona in gold at the rate of 14,5004

For money to be as plentiful as it was in 1919, this gold value
should have amounted to a milliard, either by increasing the unit value,
that is, the exchange, or by increasing the number of notes.

3,161 milliards at 3,161 represent 1000 millions in gold

(b) 14,500

" 14;500






Owing, however, to the difficult economic position of the 'country an

improvement even as smell as that indicated under (a) would have the

most terrible remits, such as the stoppage of exports, bankruptcies,
unemployment, etc.

horeover, in vie7 of the s

it would obviously be exageruted to reconstitute a stock of currency
to the va.lue of one milliard in Fold;

half of this sum would no doubt

be sufficient to meet the requirements of the country, although such a
circulation (less than 80 gold crowns per capita) is considerably less
than that of most countries which can be compared with Austria.

The financial position of the Austrian market now offers in itself
possibilities of such stabilisation.
In 1919 when the Fold value of national currency in circulation was

approximately one milliard, the available liquid working capital of the
country ineauded) in add'itian tb these crowns, a certain number of foreign
instruments Of-pa.ii;tent)iised for certain special transactions.

From tb t;


time onwardiOertaleCiOods even within Austria were paid for with foreigrr
assets fooal, raw materials, etc 's)

In order to make this clear, let us

suppose that the liquid stock of instruments of payment at the disposal
of the Austrians then included crowns to the p.old value of one milliard

and foreign currency or Credits in banks outside Austria to the value of
500 millions in gold.



Annex 1731 Oe

The 'depreciation ef the exohare in 1920 and 1921 induced the
Austrians more and 'more to safeguard the value of their capital by
converting it into stable currencies., in spite of the loss involved.

This demand for foreign securities increased the deficit of the baiance
of accounts and accelerated the fall of the crown.

2art.of the liquid

working capital in crams eis thus exchanged for liquid working cepital
in foreign currencies;

instead of retaining in their coffers crowns

which were daily depreciating., business men kept their reserves in

foreign currencies and did not convert them into crowns until they were
actually .required for the payment of salaries or the purchase of products

in Austrda

On the other hand, manyeAustrians endeavoured to cede theta

real property or their .hares in *the country to foreigners.
Invested capital vas thus converted into liquid capital., realised in
foreign money and deposited outside the country in banking accounts.,

especially in Switzerland.

It is probable that 'in 1920 when the crowns

in circulation were worth only 400 millions, the foreign reserve
exceeded 1 milliard.

In 1921, ellen the .old value of the currency fell be

300 millions, that of the foreign currency in circulation was probably
equal in value and the foreign deposits had further increased in spite
pf the deficit .ef the balance) of .accounts..

In August -1922 the foreirn reserve was probably more than

It is this reserve which, as confidence is restored, is gradually
being reconverted into national currency.

The repartition of capital is

being effected all the more rapidly as the rate of interest for crowns

The supply of foreign instruments of payment on the market

is 2/3 greater than the demand, especially since, owing to the rise in
priees and the restriction Of credit, there is a deortage of crowns;
indus,trial world is endeavouring to find available capital again by

selling its reserves.





Annex 1731 C.

In such a state of affairs the crown would rise rapidly if tae
Devisenzentrale left buyers and sellers to dial with one another.


accepts all offers, however, and collects the surplus for deposit in
the Bank of Issue in return for mare crowns issued on the security of
such foreign currencies.
The increase in paper currency has thus continued but with definite

security for eaet Issue instead of the undefined guarantee of State stock
or private fina.ioial bills.

It is therefore more a case of the conversion

of foreign curency in circulatiOn into national currency than of inflation.
The crowns issued on real security are not distinguished from the others;,
today each

is guaranteed by a. gold value much hinter than that by which

was covered when the circulation was 3000 milliards instead of 4000.

If; therefore, we wish to sumarise the position of Austrian turrency,
we may say :Since November 18, State inflation has stopped;
been issued on the security of Treasury Bonds.

not one crown has

koreever, the total

amount of this doubtful security in the assets of the Bank has been reduced from 2,562 milliards to 2:559.
'Irflation in the form of pri7ate credit has ceased;

the total arount

of commercial bills has fallen from 865 to 672 milliards.

The total increase L liabilities due to the rise in circulation from
3000 to 4000 milliards is ccruner-balanced on the assets side by '.;1.1e receIpt

of foreign currency which provides real security for the circulation.
The,, ahole of this foreign currency

credit has_ yet been granted.

comes from Austria since 40 foreign

It represents a partial~ realisation of the

foreign rer;erres accunulated by the Austrians and :hich they are aFain
converti:-.1g Into national currency as their confidence, increases.

The crowns In circuiatin are thus regaining a quantitative value
which corl-esponds to market rewlirements:

they have not yet reached this

Value, altDowt the rate of interest is definitely beginning to fall.
On the other hand, the foreign reserves in the hands of the public
are being placed at the disposal of the Bank;

they thus replenish its


1731 C.

funds, give security for notes in circulation and allow of stabilisation.
TLIese reserves, accurulated. during three years of the flight of

capital are still considrable.

They have nevertheless fallen in one month

by more than 3 million pounds sterling Which have served as security for the
issue of 1000 milliards;

the intrinsic value of each crown has thus improve4

since today there are 4 rillIon pormds as cover for 4000 milliards instead of
1 as cover for 30000
Such procedure can but be favourable and -i11 'continue provided
corfftdcnce still ex:!.sts,

The issue took palace partly at the demand of the public which voluntarily

exchanged the value of about 2,250,000 pou%ds for crowns, and pertly at the
demand of the 0o-vernmnt which transferred to the Bank 1,250,000 pounds
received by it from its foreign currency loan to the Banks.
It could not sell this foreign currency on the market, since the


vas already too great.

A secured "issue was the only means of obtailiing

c:-.ownz by this means.

The same will prol:ably apply to the first foreign

credits received,.

On the other hand, as the normal balance of accounte of new Austria
showed a deficit of about 500 million geld crovas per annum, it is to be
e.y.pected that the country will require fereism currency during the period of

economic reconstitution, after the presrint exteLsive repatriation of capital.

The-Bark of Issue will then have to supply such currency from its reserves
and will thus receive crowns in return;

balance will be ensured by the

indispensable foreiEn leans.

It is probable that by a careful policy the Batik will Succeed in accumulating a stock of foreign currency while leaving a sufficient amount on
the market to obtain the pro6ressive rise in the value of the gold oro-n to

If 6;000 milliard crowns were then in circulation monetary reform

could be excA/m41-Fetit-Vor,
could be effected at that rate and the 6 000 milliai-ds

600 million new crowns representing approxirately the
by the market.

(Signed) :


Pierre Q,UrSNAY


This article is protected by copyright and has been removed.
The citation for the original is:
“Germany ‘Mistress of Europe’.” The Times (London), January 4, 1923.

Jan. 4. l92.

The English project is insoired by the most honorsble intentions, but it has not succeeded in solving in en equitsble manner

the grave problem of repertions.

In that pert of it which I shall

name "institutional" it creates two new institutions which seem to

be nate foreiTn to the matter of rennretions.

The Impartial Tribunal

constitutel on the one hnnd of representstivea of the interested
parties and a third arbitrator named by the President of the United
States if the two representstives above named oan not agree, iu an
orgenisation which suporimposes itself upon the Treety and alstrisutes

to itself functions which the Treaty has confided to the Reparation

To judge the lerman capacity for payment is the eseentinl task
of the Reparation :3ommiseion, a task which is strictly sot forth by

Arts. 234 of the Treaty of Versailles.
of the dispositions constitutin

This Article contains one

the basis for the urestion of the

Peperetion Commission,

It does not consist of a modif

Annex IT, such as wee done when the Committee of Ousrnntecs was

This Comlittee is but an orgenisetion of the Reparation
It is named b

its actions to it.

that Commission end is reessnsiele for

It has been possible to modify Annex II becsuse

the ,Committee of Gusrentees entered into the Renerel idea of the

The Tmnartial Tribunal on the contrary is outside of and over
and above the Repsretion Commission.
delicate end important functions;

It replaces it in its most

conseo,uently it radicelly

modifies the Treaty.

The ssme consideretions are to be m de regsrding the ?inancial
Council of Control to be created at Berlin with the participation of
neutrals and under the presidency of the Germen Finance Linister,
According to the English project this Council is absolutely indepen

ent of the Reparation Commission.

It is then another institution

imposing itself upon the Treaty and modifying Part VIII of the Treaty.
It seems to me that according to the English project these new
organisations would co-exist with the Reparation Commission and the
Committee of Guarantees.
economies in expenses.

Certainly by thie &yet= one does not attain
On the contrary cne would surely bring about

a confusion in the attrieutions of the different organisJtions en3 a
situation capable of producing conflicts at each instance.
But U. le Premier, Poincare, has already made very Treat detailed criticisms of these new institutions which would be created by
the English project.

Tt does not teem to me than that I should linger

any longer on this argument.

Mr. Poincare has denounced a whole series of modifications which
the English project would brine to the Treaty, but he hes omitted one
which has a very great importance for Italy.

Articles 232 and 233 of

the Treaty of Versailles establish fundamental principles of the
reparation system;

that is to say, the principle of the German

solidarity for reparations dee also by the other Ex-enemy Governments.
The Schedule of Payments of London wee founded on thie principle.


132,000,000,000 cold marks constitute a reparation for demeees produced by all the Ex-enemy Governments.

It is the duty of lermany to pay for all except such deductions
from the total cum of reparations as would bo paid b^ the other Exenemy Governmeats.

But the Enc15sh project annuls the totel debt end fixes the amount
for reparations representing only the ' German debt.
ecutes the payment only for her own account.

lermany thus ex-

If Austria, Hungary and

Bulgaria, would refuse to satisfy their obligetions, or if they were
not accomplished by Lhemselves, Germany would not be held to substitute herself for her Ex-Allies in their respective obligations;


least, that would seem to he the deduction to be made from the English

One would destroy in this way the most imoortent legal

edifice of Pert VIII of the Treaty of Peace, that is -to say, the
essential principle of justice according to which all those w'eo have

produced damages in common are to be obliged to repair jointly.

It goes without saying that this modification to the Treaty pre-

udices especially the interests of Italy, which according to the Spa

greement should receive 25;.) of the payments due by the Ex-enemy

overnments other than Germany, if Italy could not

address herself 1


only for two or three years the English pro Sect accords it for four

years and on conditions muctt more generous than those which Germany

In effect, the German Government would recognise the obliga-

tions of deliveries in kind for the devPstated territories, while the
English project limits these deliveries to very limited quantities
of coke for France and coal for Italy.

After the declarations of Mr.

Boner Law it is to be hoped that the English Delen-f:tion will recognise

the ri!7ht of Italy to receive the coLl which is indispenseble for her

needs. It would not be just in fact that while the Conference made
all the efforts for the systemiestion of the vermin Budget wne would
end up by aggravating in a very grave manner the Italian Budget which
is in a delicate situation.

This injury to the Italian Budget would

surely come about if Italy should oe oblized to buy Pounds Sterling
and Dollars necessary for the pnrch2se in foreipT countries of coal

which is indispensble to her.

Fart II.

For that which refers to the partil annulation of the interallied debts, I should first think the 7nglish Government for having
accepted the proposition lade by M. Mussolini to settle with the
Gevlan reparations this very important problem which weighs so heavily
upon the general credit of Europe.

But what are the means by which the English project ostEblishes
this settlement?

At London, the intentions of Nr. Bonar Law would seem very much

Today, the English project sets as the first condition the

transfer to England of the Italian gold deposited in the Bank of

I must, in this respect, mare a reserve.

In the Enplish

project it is affirmed that this gold was deposited to guarantee the

This is perhaps but the effect of a misunderstandimr be-

cause this gold was deposited in the Bank of England uniquely for the
purpose of covering surplus circulation c.f.used by this loan.

A great

part of the gold thus deposited did not belon,7 to the Italian Treasury
but to private individuals.

If the ownership of this gold were trans-

ferred to England by that Lot, Italy would sustain a Tory serious
dama,To because the Itrlian government would find itself oblirr.ed to

immediat&ly buy one-half billion of gold to return to private individual lenders.

The English project asks, moreover, that Italy cede to England
1-1/2 billion of Series 1 Bonds that Italy would receive from Germany
accordin7 to the new sche:ule of payments.

This would siTnify almost

entire cancellation of the reparations moich Italy might receive from
Germany according to the English project.

In effect, if the Series

1 "onds should be reduced to an average of 25 billions by advance pay-

ments such as the English project provides, and if only BO of this
sum is destined to reparations (the other 20:L being destined to the

expenses of the Armies of Occupation and of Control, etc) the share of

be 105 which Italy would receive upon the net amount of

erman repara-

tions thus reduced, would be about equal to the amount that England
Lsks Italy to cede to her.


The Italinn public opinion, which now follows with attention

these problems, might in this resnect make a very bitter feflectton.
Italy wonid receive on. the 132 billions which Germany owes for

reparations, 10

for one pert and 25

for the other part.

!tor share

would thus figure between 16 and 17 billion gold marks, but the English
project proposes to reduce this Itrlian credit to a little more than
2 billions, that is to say, it deTlknds that Italy cancel her debt to-

w5rds lermany contenting herself with 115.

II the other hand, England

which has towards Italy a credit of about 13 billionhaxicaltincFlftxxxmmxt

lire, would be dienosed to cancel it against payment of 2 billion 350
thousand gold lire, which is equal to 205 of her credit.

Thus Italy

would be more generous vis-a-vis her ex-enemy than England would be
vis-a-vis her Ally.

Another reflection equally bitter grows out of the fact that while
lermany would find herself thus entirely liberyted from her debt vis-avis rtrly, the latter would not find herself liber'ted from her debt
vis-a-vis the Allied and Associated Powers beceuse she would not be
relieved of her debt to the United States of America.
that there are the Series 2 Bonds.
There is the question.

It is true

But will these bonds be issued?

To the extent that they are issued, those

2eries 2 Bonds would be destined for the United Stites, but the question
comes up whether America would accent such a means of payment.


the contraray, according to the declarations of the 7ashineton Government, the United States does not accept payments made by means of

repartion credits.

Would it then be reasonable to establish between

us a system of payment for America which she would not accept?
But the English project further demende another condition for the
ncrti:1 ccncellation of debts, i.e.,' the Allies aca.oe4 to accept the

English propositions wherein they referred to the settlenent of renarations due by Austria, Hungary and Bulgaria.
tion contrary to the Treaty.

There is another proposi-

When it shell become necessary to fix

indemnities due by Austria d.nd Hunary and to concede special facilities to Bulgaria, the Reparation Commission will act as Tribunal.


The capacity to pay of each of these st'.tes will be eut,ibli7;hed

by each delegate upon the Reparation Commission as a judge of this
Tribunal, but it is impossible that these Judges should bind themselves in advance to support a proposition which one of them will
make and which is unknown to them.

would the Governments permit

it to be imposed and their Judges oblied to accept a point of view
of one of them which the Governments themselves did not know?


answer is doubtful.

For the reasons sot forth rbove, the Italian Delegation cannot
accost in principle the lnglish project; even in recognising that
in its rigorous technical structure it cent'.ins very interesting

det=:ils as regards the settlement of the ronletion problem.


before 7ou, you find another project, perhaps more modest and certainly less detailed, that is to say, the one which has been presented already at the London Conference by M. Liusiolini and which I

you to trace into consideration, not only for its nationality

but boonueo it seems to me to offer the greatest probabilities for
re-uniting ell the opinions.

This project first proposes the

redu:Aion of the German debt to EO billion gold marks, except for
other refluctions in crse of edvence payments, and this resulting
11 ;lire to be hereafter accepted either by the English project or by

the French project, it being understood thLt the methods of acc)ptation are a little different.

It proposes to you moreover, the compensation of Inter-Allied
debts with r part of the repev'tions due from Germany.

This ilea

has elreedy made great progress end the Enejish project as well as
the French project have welcomed it.

The conditions of this

settlement, which would make a great step towards the economic
peace of Europe, are not yet a-rreed to, but I can not permit myself

to come to such a point of pessimism as would keep me from thinking


that a profound and patient examination 4a.f.--4 he greater spirit of

conciliation on the part of England might not bring the interested
parties together.

The Italian project consents to a moratorium but it demands


that the German Government contract an interior loan to which the
German Government itself would declare itself disposed.

It seems

to me that that would be the way to conciliate the different points
on the question of guarantees which presents itself as the most
difficult to obtain general consent.

The Honourable Boner Law observed that the idea of a moratorium
does not accord with the other idea of productive guarantees which
have for effect the reJuction of the economic resources of Germany.
He added that the guarantees hinder the operation of a loan, but the
Italian Delegation are of the opinion on the contrary that, if the
loan shall take place, and there is reason to believe that success
will be easy being: given the bac:cing up of the German industrials

already disposed to share its success, the guarantees mitht not be
put into operation because Germany would be in a condition to execute the tayments established for the Period of the moratorium.
In this cLee the guarantees might perhaps serve to render the loan
itself more easy.
I be

you then, after Yving finished this ample discussion,

which will hEve served to develope the general ideas and principal
conceptions on which each Delegation bases the solution of the
reparations proolem, to take into considert.tion a project which
present!: itself as the best average of the ideas expressed and which

perhaps will have the virtue of conciliating the different tendencies

which manifest/themselves during the course of this conference.

tract from "Le Temps", Friday, January 5, 1923.
A note from the 71inister of Foreign Affairs.

The Prime rinister communicates the following note: Following t'r-..e declarations made by Mr. Sonar Law on the subject

of the gold remitted by the Bank of France during the war in execution
of the Agreement of August 25, 1916, and reproduced by the Press, the

French Government believes that it should bring out the following points:I
The Agreement sined at Calais, Alienist 25, 1916, between LL. Briand,
Ribol, Asquith, and MacKenna, would put at the disposition of France,

credits in sterling for the amount of 150 million pounds.
Article II 'las drawn up as follows: -

"The French Government, in exchange for the advance of 150
million pounds stipulated in Article I, agrees to ask the Bank of
France to put at the disposition of the British Treasury, a sum
of 50 million pounds in available gold, constituting an ndvance
loan to be returned by the British Government three years after the
termination of the war.

The reimbursement of the advance provided

for in Article I will place at the same time."

The placing at the disposition of the British Government of this
sum would not exclude that Government from the obligation cf returning
the gold according to the above conditions.
Upon several occasions the English Government manifested its
desire to be freed from this obligation.
Iii 1917, the 13th March, it demanded from I. Ribot to accept in
a draft of a new Agreement, the following article: -

"It is understood that the reimbursement of the gold loaned
by the French Government to the British Government according to
the terms of Article II above and in virtue of Article II of the
LITeement of Calais, in the

month of August 1916, can be used

as a balance towards the debt due by the French Government concerning the treasury bonds of the French Government discounted
in virtue of these Agreements."
M. Ribe'refused.

In 1919 a new article was inserted in a draft agreement at the
time of the voyage of M. Loucheur to London.

The French Government was to engage itself "to not deAand the
reimbursement of the gold held in execution of the Agreement of
Calais until the time upon which the total of the French debt vis-a-vis
the English Government would be liquidated."
M. Loucheur reserved his adherence and upon his return to Paris
the Governmeni, refused to accept the article.

The Agreement of 1916 therefore remained the only one which fixed
the legal situation of the gold deposits

in the British Treasury and

conforming to the stipulations, the amount o2 this gold continued to
figure in the balances of the Bank of Prance.

To the aoove note we add the following information: -

The deposits of French ~old which have been made at London

result from the two Conventions, the one of Feb. 1916, the other of
The Convention of Feb. 1916 constituted an operation of

Aumst 1916.

a strictly commercial character between the Bank of France and the
The Bank of England having discounted the French

Bank of England.

treasury bonds of which the total amount was, first 60 million nounds,

and raised later to 72 million pounds, to return finally to 66 million
pounds, the Bank of France deposited at the Bank of England a quantity
of gold equivalent to 1/3 of the sum thus advanced.
odelt.ite two due

Upon the first


.6ww stipulated for reimbursement, the Bank of France


made in 1922 two payments which permitted it to bring beak a quantity
of gold equivalent to 3-1/3 million pounds sterling.

It does not seem

that the Bank of England was desirous in the future of having the reimburserients succeed each other as quickly as had been provided for.

As to the Convention of August 1916, it provided for an advance of
150 million pounds that the British Government would make to the French

This was not a commercial operation but en operation be-

tween Governments.


The Bank of Trance was to furnish in virtue of Article II of
the Convention, a quantity of gold oquivalent to 50 million pounds
sterling, and this gold was &minx to ho deposited at London.


MI of the Convention stipulatod that the gold would be returned three
years after the end of the war.
sumo time.

The loan would be reimbursed at the

Those are the 50 million gold pounds thct tho Bank of

England would like to appropriato now.

1;ritish 1,ote on the .erench ..ote

of 3rd January.


ae first criticism advnced by the 12renoh Government is

that the

3i.itish Iroposa) is a direct infringe:::ent of the .reaty

of l'eace, onF


of thoc:e documents "known te International law

erpetual treaties une which cannot be modified."
It may be said at once and %ithout hesitation tt,.t on

the voints on which it is thus attacked nothing is proposed
in the .ritish plan which is riot

,ithin the contemplation

of the .reaty ane for which indeed
rrovided in the treaty itself.

equate m,_!chinery is

The britieh plan does not

nro.ose to make any new contract with iermany but to avail
ourselves of the provisions of the existing documents lollewing
the precedents

rich h ve already been set in the administration

and application of the Treaty clauses.

The 'meaty, indeed,

though it no doubt may ,roperly be called "perpetual", has
with wisdom and foresight been expressly drafted in such a
way as to allow for the modifloations wiloh changing circumstances and conditions may show to be necessary.
The British pro osals vw;ich ::re alleged to contravene
the Treaty, -fall under t o hoa,s.

reduction of the
60hedule of ..aymente

zfirst they :,rovide for

debt as already fixed under the

next they intrmuce certain modifi-







constitution o f the eel). ration Commiseion Wes a matter for

the Allied and Associated Governments (see erticle ,40 of the
Treaty), and was embodied in annex 1I to

art 1;1II.

annex contained a special Clouse (LL) to the effect that it
might "be amended by the unanimous decision of the Governments

rpresented from time to time on the Commission".
Consider:ble use has ,lroady been made of this Bower
of amending the

reaty which vas thus made exressly subject

to modification.

Thus a Committee of Guarantees was con-

stituted in lay 19e1 by the ...;chedule of kayments, to ehich


assigner specifically the poeer to examine the German fiscal
system under paragraph 1L of Annex II and to secure the application of -rticle a48.

This Committee was

from the outset ampoeered to co-opt members of neutral

Thus one of the eowers, the removal of which

from the .eeperation Comedeeion is made one ground of complaint

against the 3ritish proposal, has already been taken away from
that body.

further the Zronch Government has agreed eith the
eritieh to introduce an amendment to ;41nex II by which in

certain events the power of interproting kart VIII of the Treaty
without appeal and with binding effect on all parties including
Germany - perhaps the most important of all

he powers of the

Commission - may be devolved upon an arbitrator nominated by
the Council of the League of Eatione.

egain, the power of modifying annex II has been used
by the Allied Governments to introduce a provision (paragraph
19 bis) compelling the German Government to r: eke Bert in deliveries in kind the value of whit:al is to be fixed in case of

diseute not by the Commission itself, as is the case with all
other deliveries in kind contempleted by the 'reaty but by a



.,nd yet these amendments to the 2reaty, made as they
:ere in pursuance of

ewers which the Treaty itself contained,

Oo not seam in the past to have oeen held to require a
reference to the iroLch


-4One other point when an infringement of the :rent;
alleged should perhaps be noticed.


-onsieur 2oincarels

statement complains that the .:4ritish plan contravenes com-

pletely the provislohs of the peace treaty as to reparation
in kind because it negleots the figures given in 11).nexes Ili
IV and V to kart

ation to give

VIII of the Ireaty, and aluo .;eraany's oblig-

riority to deliveries of coal intended to

replace coal from destroyed mines.
to be some misapprehension.

There would u1.pear here

,,nnex III of the '..reaty

(relating to ships) has now been exhausted .ith the possible

exception of certain small details as to river chipping and

GOG orders for ship building.

4nnex IV (sueplies for resto-

ration of devastated areas) has already been extended beyond
its normal life.

2,nnex V relates to coal.

Under both these

two latter Lnnexes the deliveries are not of any precise
quantities fixed in the Treaty but are subject to the decision
of the Eeparations Uommiesion, which has to take into account
Germany's domestic and iildustrial reeuirements.

There can,

therefore, be no ciueetion of violating any 1.rovision of the
Treaty seeing that the amount:; are to be fixed from ti -e to

time in such a manner as to be coweatible with tic capacity


Lastly before passing away from these juridical questione
it r:ay be remerke(', that the scheme proposed by the .French

:overnment itself contemplates diving powers to the vommittee

of Guarantees including, as already remarked, neutral members
which :n far beyend anything included

in the

Treaty and comi,rise


the right to disallow expenditure f.roposed in the per :an
budget and to prescribe the increase of Germi,n taxus.

power co olde is not at first sight reconcilable with the


express eta ement in the reply of the Allied and -asociated
lowers already referred to, that the .;ommission does not
-cossess pow:ors "to prescribe or enforce taxes

chracter of the Berman budget."


to uictate

its introduetion may

no doubt be defended as a mo&sure of compulsion to be
used in the last resort, but it involves going beyond the
provisions of the Treaty.




Fixing of German i'ebt.


be obtained from Germane coeeistently with the restoration
of her finance and credit the
total burden on Germany for all

xlmum must include the

uroses and remove any

element of doubt es to her total maximum liability.
It may be added that the annual chttrgo fixed by
the 3chodule of Payments iteelf covered riot only the

reparation debt proper but also the reimbursement of the
Belgian debt, uhich is the main other cherEe;

ehile the

modified schedule of payments for 1922 fixed by the
Reparetion Commienlon covered also the cherges for the exudes
of ocovration.

The couree proposed by the British plhn is

not only essential to a satisfactory scheme but has alrea4
been accepted as failing under the Treaty and acted upon.

Reparations in and.

If it is admitted that a moratorium in necessary

ith the object of balancing the Gerrun bud' jet end reetoring
(lerman credit, it follows that deliveries in kind which

require payment from the German budget to :erman nationals
must be included in

the maximum German burden.

7o demand

excessive deliveries in kind must destroy the object of the

The French proposal world appear to involve deliveries

in kind which together Ilith the other treaty charges would
mean an effective payment by '''ermeny in excess of the eetuel

payments which she han been able to melee in 192e.


infinitely worse finenciel circumstanees Germany ' ;cnld have

to pay more in 1923 than the sums which have already mede the
grant of a moratorium necessary.
The British plan does not suiegest that treaty

obligations to maee deliveries in coal, eyestuffe,


timber etc. should cease.

it does ,,ropose that, for the

reasons ,given above, such deliveries should be paid for
in cash by tt.o receiving powers in so far au they may exceed
Thee° maxima would be

the new annual maximum to be agreed.

fixed by agreement among the allied ane not by ne:;otiation
with Germany.

if the allies are unable to reach agreement

on the possible amount of 4-ree deliveries, the aritish
Government would. be quite reaey to tofer to the .committee

of banks the uuestion of what amount of eAch deliveries
could be made without diminiphing the possibility of aUCCOSSful loans by feraany.

The criticism that these deliveries will be pale for
at double their value is unfounded.

,iermany will is credited

with the value of ,,,ny free deliveries in accordance with the

prices fixed under the treaty or by the

eparatien OemmicAden.

but the value so fixed is the equivalent el: and must be

treated as cash for the purpose of redeeming bonds.


bones themselves are subsequently treated by the lirenct Government in their criticism as only being worth 50/43 of face value,

but here they are apparently taken as eorth their full nominal

The argument is clearly fallacious.
laingth of the Loratorium.


.Lilo the aritish pmposal contemplates a probable

oratorium of four years, it specifically j.rovidas that if the

finance council decides that the condition of German


is such that cash payments for reparation can be comLeneed,
.iemany should pay the

-9sums Lill& tis authority ley prescribe in each of the
years 19Lb and 1926 up to an wlsount net exceeding Iwo

milliards 301d narks in each year.

Tlio meraLorium,Lauy there-

fore if circumstances permit be reduced to two years.

iledges and .-danetiens ("Gages)

It is said that the moratorium is to be granted without
any gases or sanctions.

The British .7overnmnt is prepared

to enforce sanctions of the most drastic kind (inouding
forcible seimre of Lerman revenues end assets and even military occupation of Jerman territory outside the existing zone
of occu-%ation) in the event of the foreign finance council

reporting at my time that .lermany is not taking proper
steps to stabilise the mark or reform her bu(get;

and also

(apart from the financial programme) in ease of any default
by Ilermemy on the payment due in res eat of the new bonds.
The sanctions which the i:ritish Government contemplate in the
event of ...lemon default are therefore of the most drastic

The British Government are in entire agreement .ith the
rench proposal subscribers of loans raised by Germany

should be entitled to ask for such s,ecific secilrity for their

loans that they may think necessary.
The ol4ection el' the British government to the demand

for pledges by the allied Governments in the meantime rests on
the conviction that gaol/ a denand is inconsistent ,vdth the

restoration of German credit.

if this 2roposition is not

agreed to they tould be prepared to refer to the 'Jommittee of

Bankers, as representing the 2robable opinion of potential

the i,uestion of what pledges, if any, could now be

taken consistently with the germ ral object of restoring
Ger an fin..nee.


Tho E;tatement that GermA.ny

the 1.oriod

of the moratorium have entire liberty vnder the proosale
of the British Government in Inaccurate.

the continuance

:aid indeed the strengthening of the enpervision over German

finEnces le an intesral pert of the British plan.

Total Liability for .eeparations.


is alleged that the total credit for

reparations (excluding other leace Treaty charges) would
be reduced to 20 milliards of gold marks.

This makes two

ieeossible and inconsistent assum.tione, first that in the
year 1923,

hiring ehich the French Government agree that

a moratorium is neoessary, Germany will be able to raise
in the merket the colossal sum of 1,250 millions eterling;
and secondly that in this event, the and series would not
be issued.

But it is clearly impossible for Germany

to raise a loan of this magnitude and the Geman burden
will therefore be larger.
lt,oreover, in considerlag the burden upon

Ger an finance regard must be had not only to that portion
of the bonds which can be identified with reparations payments proper, but to the totel of ill. charges under the

On this basis what are tle real figures?
On the B.,e table the present valee of BO milliards of gold

marks let series bonds, after alloeing for deferment of
interest, is 39A- milliards, and of the l7.?; second series

bonds commencing in 1933 about l0
50 milliaree.

milliards, a total of

On any probable hypothesis as to th


of redemetion the eresent value may be taken as about 34
millierd gold marks for the first series bonds, end about
8 milliards for the second series bonds, total 4L milliards.
These figures will be found to coincide closely with the

astir ates...


esti.ates of the real vaue of Gorman obligations under
the ;:chedule of iayments given b.4, the zW_pporteur of the

Budget Committee of the .:humper of J.,e1;tics in July last.

It will be found that they represent a middle figure
between the highest a:1 lowest figures which he dives


the value of ',;erman obligations.

To treat the existing 0 Bonds ao having real
value is notoriously contrary to feats.

the ilapporteur

of tLe Budget Cormiiittee of the Chamber of Adt*uties, worting

on hypotheses which he himself describi.c as very optimistic,

estimated the present value of 70 milliardsof C ::eras at

between 7.3 milliards and l& miliiaras, and decided in
order to be on the safe side to take an intemediate figure
of 10 milliards.


The U .eonds



can only be regarded as a bad dent

ambit 06 eritten

he writing off of k; bonds is is,pbsed by the realities

of the situation.

Until this is done, 4erlean oredit cannot

be established and the value of A and B Bonds suffere
,.Pain what are bhe facts?

The proposal of the

British Government is to exact from .lermany the maximum

Which it is thought she on pay.

It is useless to

complain if larger UMW OZ4/1110t be obtained.

the figure of 6 milliards of gold marks for
the 2rench and British share in the Belgian war debt cannot
be identified.

The best estimate at the disposal of the

British ;-overnment gives the figure of 4.8 milliard golO

The stateent that the charge against the first

series of Bonds in respect of the Belgian ear .seet is a

nev reduction in the money available for reparations is
inaccurate as in fact the Belgian ear debt was represented
by a certain proportion of the former A and B Bones under
the schedule of iayments.

The loss arising from the deferment of interest
on eeries I bonds is made good oy the issue of series ll

There is a possibility that Germany will satisfy

the proposed arbitral tribunal that she cannot in 1933
bear the additional burden of these bonds, but elsewhere
in their criticisms the xrench :eovernment assume thet

C'rermeny may b able to raise t1,50 million sterling




- 13 -


- 14: -

of tho first series in eeemoer 194 if at that time
she could oxoect to rAiso in the market the Valossisle

already vinted

fi rALI0 of 21,250 aillions storlin_;, uut

out if this assumption 'ere correct the series 2 bonds would
have u value f- r exoeedin,; 2 milliards.

On any .)robable

assusotion the amount to be ki id by ;Ieribialy -salad be oonsIder-

ably lar.-er, see ,ara,,,raph VIII .above.

these explained

the )resent value of the first series bonds on a 5-4 table
is 391- milliards, or on the most san6uine assura,)tion which

can reasonably be rude of the lossibiAities of redaaption,
34 milliards.


of this latter fi tire v;ould Lo 27

milliards, ace ooraared with 20 milliards

tad in the

drench statement.

.L'he followins table ;ives the division of this fi;ure
oo-n9ared with the Preach fi ,ures:

:rendi fi .urea
80A of 25 milliards.

13rItish fi =urea
( b) 60,; of


1302 of 34






ri tain

r its




Dail Tara .,old























- 15 he statersont therefore that the 20 milliards
distri Suted as above represent the tou 1 14'Inent s avai 1-

.1ble for rege-ations for ell ti allies out of the first
series bonds, and that the share of Franco would oe

limited to about 11 sitliiarde cen of ue :taco 'tad.

In dealin, with the 1.) milliards carried to
reserve fund, the .t,`rench ,overielent a An ado



optimistic hypothesis that the ,erman overnsent could ue
able to redeem these bonds by the 31st eocemeer next, and

put their imient value therefore at 5 milliards. On the oezer
hand they take the value of the iel,lan war deet
o alreedy stated this
the.i_ure of C) aiiiiards.
ii,ure does not correspond with those in the )osoession

of the iritish overnssnt, ano the full noninal value of
this dent would wear to :00 4.0 milliards, ..pit the


holdire, these 'trends must of course under the aim iloceet
their redemetion in accordzesce


the scheLeilo.


therefore the Jorman overwrent is in a losIt ion to redeem
the reserve fund ponds by the 31st Llecemuer next, the char o
in roe* ;eat of ;e:feJian dent -4111 ue ti.4 ailliards snd not

,nilliards. ,3o that even on this as-um-et:ion ther.. would
remain a considerable wrount in the reserve fund to eeet
the other chares such as armies of occupation :eel oleurin,




- 18 not be raised immediately.


ffeot on the .;erlan budget; by de-

erivine her for the time ovine of the revenues intoroe )tode would

ther fore ee to increase the earden from the above nears of from

70 to 80 millions eterlin to somethin, in the excess of 1. 100

!ail lions :;torline.

It !ety 'se recalled that the exeerts sun ono to Berlin in the
eatu:m erreed in declexine Unit; no suostantial eayments in oash or in
kind could be

exeeoted from Gereettkv in 19:3 consistently with their

plans for restorin.,

.'rerean credit.

Juseestions, therefore, that irererany could aurin. the moratorium
melt. e deliveries in kind of 1 millis."d sold marks ter arming in ad-

dition to the tether charges roposed are ontireky inconsistent ,pith the
unenleous o inion of the exeerts and would from the

lase any attemet to uLabilize the ea

out-set render hole-

or to palancse the ..erman euti.;et.

-his oen olearly oe soon from the eieeent eosition of the eernen oudeet.

leurint; the first six

months of 192;...:

the aoturel

revenue of Cternany was

sufficient to :neat the total domestic expenditure end leave a mnal1 surelus over towards zie .tine sale of the reparation oilarc,es. 'ale do ,reciation of the nark durin.., the eatumn has erAdo it almost imposeiole to ,ire
any definite

fires but the °etiolates of tho deficit on the internal

exemditure alone without eny ,roeision for reeer-tion durin; the car .ont
fin...noiel year (15/2 -23) is now not less then 400 4i1iiards nd will more

erobely .)0 ouble


,,t the present value of the A., er e_trk

deliveries to the value of one milliard ,old marks would. ont e 1 disaar et=cents Oy the .ierraun .uvernaent to the extent of

»roAi:I.Lely 1,800 milli-

ards of )a er narks. the eernan revenae ees not Ito to the :resent exceeded

160 milliards in
ly inoreaaed

,Aonth and Lae revenue will ther fore have to

tee ,neat-

times to cover the :roposed deliveries in kind. These fieures

are aufilcient india. ,ion of the leteosaibility of realisine such a pre;reerle
if, at the saele tine, the ,eemin Jevernment is to

its bud et arid to stabilise the emrk.

required to balance


:he Prenah overnaent

e that. the ,ritish plan includes
e annulation of tne wur debts of the Ties to ,.rest Britain, but
it is under an al tiro .1 sai) lrehen sion in thinxin .; that the cancellation
of the "a" bonds is su..; osted as a condition of t is ..nnulat ion.

osnoell tion, as has oeen °A:pi-aped, is simay

the g,ritin of( of a sad doot which ham ors and indeed mattes

in)oesiole the recovery of the offeotive lout of


In the st,to

iv= It is noticeaule that the :ritishdest
to the United ,tt:tes is wAtten do4z1 to 13.5 milliards. It is not
ale r on Anat basis this ft,,ure is arrived sat, out it appears that
this resuit is ost,:ined by
tho 01-. ^.:n Bonds, *fish
firitf4in offers to acoeA, as a small set off for the cancellation of
the Into'-allied deuts owin; to her at their full v e
homes, as shoe already' been renamed, the same ponds are Lamm as

mrth only 50 :; of that value for the 9ur-)oses of calcul.tinG the
recei )tO of

he not losition of ire.:t 3ritain and

the iritish roposals,
in a DOait ion to est17.--te

nee r opectively under

f r as the iritiah lovonaent is at esent
be that ..felt s: itlain cult

ObtAlt 3ellass bonds to %1 total ,re ant value on the 5,C; table, not

allowin,, for rederaotion, of 18.4 milliards of pld marks as ool.lared

..ith the jrit sh (lest to rierioa, of 20 mlillo.rds, whereas ;fratICIA
4/ li receive ,eraan bonds to a total ty.lue on the same So-sib of 41.

milliards free of her (loot to .great 3ritain .Ls coislared with the
,wench clout to

Aerie:. of 14 milliards. :Ile result is that

the .;221tod Kin,dors will still reiaain indebted to the United -t,.LLes

even when it has received the Dail :22unt of the ',ovule* relarAttion
lirlents doe to it under the .,resent -fropos:ils aereaa FranOe

alone -iouid still have a subst _ntial surllus of receipts fres
.',,evraavy even after --ayin her debt to .ierioa in full.

- 20 *he eropos .1 to set off the old deposited in n,land
under the

reorient of 19 16 a :ainst the _rose :ranch

debt is in accordance with the ar,an;elonts tiien .nade, under

rich each _old ?as olaced at the disposal of the .iritioh
Treasury as a loan to Je re ).1.d 7/nen the french debt to the
'United Kin.,-dom had oeen reoaid.

It was ,uoseuently a ;reed

between the two ,overn ants that it would bo equitz.ible that

interest on the .:old which on in.,11y had seen a non-interest
bearin, loan da.all be aid (as soon as the United,;dom

he interests was credited to
the :'ranch overnnent hnd this has )een done It is ther fore

actually eklenced the _.old)

oleal-ly proper to uffset the v ilue of the _old from the

iuterallied deft at a time when the iritish tpvernlent is
,osin,..; to oancel the -,-hole of this dent.

posal is insoried by the desire to secure
.myrient from Jornany by Jvin, her

er to restore her finances.

In the

iew such a otr )ose involves an effective

ction of the ta...1 dent t.o a reasonable

onditions are in their view essenti!t1 to

nd final settle znt in the ;Amaral interests

pose would. ue ..rustrqted oy a policy

ut ..inin; a reL..tively snail istriediate

result of a ooelete collapse of eraan
overnent hold that their voposals eroody

use the total which they oropose, while leav,ormany, is likely to oonviend itself to the


:rid a ,en. roue offer oceans.,



in scate of her ova sre at needs and of aer ova li/oliities to
.zserioa. %re.3t 3ritain has of :erect not :*rely to shzire with

her life s in the reumtion of the re lir-tion total, but In
audit ton to cancel her

de:A.3 to R total of nearly 110.)

pillion sterlin.. a sun ?roiided i.)y the creation of .5ritish
de:A. the Burden of which the Aritish tax,- )ayer .4111 for at
least a .encration h:70 to Jeer.

astuary 4th. 122,

I hove the nonour to ooseat agein to the merlon of Adofs
of ,overnmenU: the dro:iuct of .a settlewlit of the reparetion due by Germany that tho Italian .'rips Idolater 1,6 kossolini eubmitted to t1

Oonferenoe which tout plaoe at London aurinL Aloamber lasts


Paris oOnference being but a contirmation of th:.:t of Lonaon the itaidn

project was then the objoot of a ffirst study and left in =sponse
and should be locio,aly with too roopening of Lho conference is-oxamineci.
;ertain mcuifie.Aions :And A/coif:Ilona have oeun mode in


projeot with the ob.ect of oomini. closer to the different points of
view whiuh wero m,,n1festvd

London and after the London confer as

in order that it would be easier to attain the oonsent of all the ;Alias.

Bafere my departure for


vast paraitted to 'anew tu, plum for tie

dieoussion of the problems which would form the eurpoao of teat reunion.


desired to know if one had enviesaed the particular and transitory asaacts of
the reparation aroblom which miaht be occasioned by the renewal more VY less
lona of the moratorium to Germany ata::h ended Vac, end of December or one had

envisaged the roparation problem as a wtole to that a arealate and definitive
solution could to ulVan it.

Irnt from the moment that ue reunited at London I

think that we should have mode a rociarocal and formal egreetAnt not to ceps -

rate before havin

falfillea oat task which was that cf salving the Repuration

problem in its grand lines, leavina tc the aeloeates which are to meet at
7aaiseels Cr elsewhere the teak of fixinc the praotioal teems.

'11 the people of aurope are awaiting with an anxiety which one might

term anguishing for the roaults of this meeting and this aaxiety roes from
day to day on 4,40courit of the economic crisis which becomes more graiy every

After four aeure tame the amittice the amoral situ/Um of Zureps


has not malioreted.

It presents to us two aspecte, the miasmic which is

always grtve and the political which werks e. progress towara thu return to
normalcy of social relat ions.

in the years Ian and hags one has been able

to feel for the moment, on account of the communistio attam)ts at Ba&q.leet
eci aunioba

the oocup_ition of factories in Italy;

.;gait aelend;

the 3olsheviat offensive

and the utroarous riots in Germany. that the communistic wave

would bete eeriousla me:weed that group of legal. political and. eoonomio insti-

tutions which form the ease of eaturn civilisation.

Today" the danger roore-

sentea by this sort of moral epidemic is strongly diminiehou.
But if we wish to avoid a reeOmmeneement we must get rid of the present
economic life in aarope

aid of that stAe of incertitude into which we have

been plamged for the past foar years.

.n incertitude the effects of which

make thessAws felt equally among the industrial classes as well as thu working

The efforts made by the Powers to avoid the

uotrian catastrophe arc before

us to arove that it would bo scramming dangerous for every one (including the

tetea on both sides of the Atlantic) to await still longer the state of

almost economic chaos in which a great part of Central mrope finds itself.


- 2 at


of okoas is the result of the after-war aalloy whica is dmainated by the

reparation problem.
It.ay on aciactznt of her particularly difficult omaitioas and on saa mat

of the vary heavy saorifioee of mon and of wealth that she has made is ostroriely
intorastad in this problem.

The Italian government affirsm to i*4n ..ith that

it wmald be infinitely unjust

to reconstitute Germany by motins of the misery and

ruin of a'rance, Italy, Belgium and the other .1lies.

an :amount of this one cannot in the examination of reparations ignor
the protaem of intor-allied debts.

be opinion of the Italian , overnmeat

which I have the honor to preset again might be rasateed in the following



solution which would be only partial or dilatory.

The absolute impossibility for the Italian god to renounce
im any amount whatsoever the total of its raparations unless mai
as equitable arramgement on the part of analani mod her oradite
towards the llies permi ta her to ranaunoe in favor of Germany
u oroportionate part of reparations.

The hope of such a settlement is legitimatized by the tradional functioh
of equilibrium and modification exercised by angland on the life of tie auropoan
Jontinant, by the state of the spirit of certain shades of anglith public opinion
and also by the BalfOur Note, a note that the Italian government and the Italian

people have ocnsidered cal welcomed as a way toward a radical solution of the

The Italian overnmant asks frankly and loyally this arrangement on the
art of England tieing into oonsideration the following ideas:

2he It lian government considers that the Interalliod debts as
it has lroady been rumarked are of a nature quite partioular and
that one cannot a ma ider them as a on on de bt a;
The British ;government and the most eminent Lnglish man of ainanoe
and :Ammerca realise aerfeotly that analand °m:at demand the paymeat of its cradita without precipitating the allies into the abyss
of a awlitioal crisis and an oconomio failure; events which would
have an immediate and formidable repercussion throughout aurope,
inolaaint a'aiglinda

The Italian hover anent considers that with its arrangement, Ingland would

alleviate immediately the economic situation of the Allies and of Germany aad at

the sane time arrosting on the politics-military


this Ausso-Garman alliance

which outlines itaelf on the horizon and which can oe presented as an enormous
danger not

too far away for tact rest of aurope.
aettlement St. the
Federal Reserve Bank ofof Louis

remainder of the German payments by the conoes-

of three billion old manes.

Certain revenues of the German Jtate on which the privilege of
reparations is today established will to Lken as a guageatee of
this loan.
The separation Commleaton will allow that those vac Brent the loan
shall have as a guar:Antee a priority on these revenues (Article
2es Treaty of Versailles)


The Povere hying right to reparations may oblige earmeny to continua
the deliveries in kind (coal, dye-stuffs, etc.) eenfonsing to tin
annexes to Part VIII of the Versailles Treaty wed miler the oendatione
and the price indicted in those AROMMI.
Tbs said deliveries in icing will be payed to Germany fret the share
of the loan duo auaually to each one of time receiving Powers.


During the period of tae no atorium the Aeparation tam:mice:ion and the
Committee of Guarantees, in the exorcise of their pomere, ruinforoed

if necessary, will see that the German GoVernment takes all waseery measures in order to stabilise the value of the waft to execute
the financial reforms required by the Coneattee of Guersitteent to
re-establish budgetary equilibrium, suppressing not indispensable
expenses (A:peel:ally those havinc the character of publics works),
assuring the greateat possible yield from the tares and stop ling
monetary inflation.

The period of the moratorium having terminated, and the credit of
German re-established, she will take up again the payment of the
r:aerations by means of more important loans that she has agreed
at umenit to contract.


If Germany shall aoquite herself in advanse of the amount of her
obligations, the advanoe payment which she shall effect will be
applied to the reductions of her capital debt discounted at the
rate of:



hf the enemata are made within a period not expeoaing 10 years
4 (10

4510110T1 Val('x aAANTa4 uoimuurariaG1e.:,n

Maintenance: of the present control exercised by the Allies on the avorte-

tion and import6tion licensee.

it is known that this control should be **dressed

:a:wording to inter-alliod agreements and replaced by tie aurvoillanoe of a mixed
Qs,:...1111,31on, composed of german and _flied representatives.

Aroct administration by the ALLILL; on the outside frontier of the REINhe



Tell; administration of this customs line has alresuy been exorcised by the

llies in the past.

Its yield can be estimated at 140

to 180 million gold marks.

The income in paper marks could as e;.:chaniod into goad marks by the Awe

Bureau which would aocori the exportation licenses on oonaition of the remittaneee
of a pert of the foreign bills realised by the exporter which would be reimbursed
by the said SUPOIal in Gaper mares,

ontrol of the

UndertaXin;::s which administer the do/masa

orestgl of 3 Orrnanye

exercised by the dole:ates of the hied .;overnments or by
fL ion

enc consv".

amid also

exit a more extensive fellin6 of trees

the re ;alar and even more Important deliveries of wood to the

"1 ::114-411032 repeat ions ace oun t.

Uontrol of the vcduction of the


The Oontrol of th

for t1

mines of the

-Jcodl.otion of the ,4ate mines would, servo as a ,uarmt,ee

deliveries of coal for t Le re Air ,tion aaco eat and assure the necessary



the Aaineland a;aihst any Ltempt of the ,soich

the .)ztvoce.tion of an economic crisis in the occupied territories.


erenoh 4ksi.
The French aroam of, first, the search of a solution of the reparation
Problem and of the Interallied debts; second, the edoption of a precise policy
concerning tile stabilisation of the mark and the re-orgenisatien of apeman

finances; third an immediate deoisian ooncerning the moratorium demanded by
eermany and the guarantees of which the French government esteem's the


indlepeneible, us much to assure that payments be maintained during the course
of the nuratorium as to prevent a later default of the Aoiehe


Li:mi:L61M La Zi

Germany has demanded (1) a reduction of her reparation debt (2) the fixation of this debt in proportion to her possible budgetary excess.
This last demand is evidently inadmissible.

The budgetary exoesees of Germany

are, in effect, the r suit of her policy and of her good will.

The experience

of the past would not give the least confidence in the future.

The French

government recalls to her :Anew in a special note the incalculable defaults
comeitted by Germany during the last months.
leave us any illusions.

ehey are sienificant end cermet

The French eovernment declares that it is not disposed

to acoept eny reduction of its part of the peements which Germany owest it in
virtue of the schedule of eayments.

This part, in effect, is

from this


insufficiert to erenme the charges of pensions and tire resteration of the dev,stetea regions.

The reduction of the German debt could not then be envisaged by the
French Government unless eertain of the

flies would admit the possibility

of a reduction or other rearrengement of their erudite on Germany by the modi-

fication of the peroentage8 and the attribution of a priority of roperation
payments to the devastated regions, it is not for France to give an opinion
regardine the intention of the other creeitors of Germany on this point.
However, an official document of the


h2ving Given

to understend that that government would be disposed to abanaon or reduce its

demands via-e-viz Germany, under oertein conditions toe:bine the problem of
interallted debts, the French government believes it should at to, what is, in
this respeot, its point of view.

It does return to the question of the ori-

gin and the sienification of tie debts.

It moans that they have

been cm-

trasted in the inter st of the woven victory, that they constitute the execnses

2of the war and oonforming to the orizmiples laid darn by rtioles 231 and 232 of

the Treaty of Versailles, they should be first charges on the reparation credits.
The French wove meant cannot, in equity or in fact, pay eitier tbs ozinit al of

these debts or the interest as long as tiny sh.:11 not have oecn at least covered
by German .aymmts of past and future costs for the reconstitution of the devastatad region, thee() expenses Gorr sponoing sensibly to the French share in the



B oblit;at ions.

If oert.lin of the oreo.itors were disposed to ..moept this le.)thoci of settle Lint, tin French slovernment mulct bo ready to reeu.t to then from this macont on

its share of the C obligations, a nominal capital equal to the nominal amount of

its debt.
It declares th.:t it is ready to annul the 0 obligations witch it would
eventually receive in payment of its min ort/dits if this method of settlement were
adopted 'cry the whole of the .au'Opean Potters and if those of trop who find tiem

selves creditors would decade equally to annul the v obligations which would be

remitted to then. Conowning the methods of pap nt of the German reparation
debt such as they have bek=n fixed by the Schedule of Payments or a aoh as thr,

nicht oe reduced in nab ord.:nee with the hypothesis above set forth, the ?rim&

Government is of the opinion that it is in the corm on interests of the llies
and of Germany to assure themselves of the payment in a shorter spacie of time
that that which has been laid down for the amortissoment of the A and B
In consequence, the French a-overansit awaits that the 1)aynents

pated which would affect WM-11y should be, until a date to be fixed, au, °anted

for them at an equitable rate. ..,uch Payments could not be actually effected by
Germany in appreciable amounts exempt from the product of foroign loans oantracted
by her; the French Luvenimont thinks that the Allied governments should by all
ITO .ns in their power favor th omission of these losses

It believes, moreover,

that in th) very near future such loans would be pose ible. The real soar/titles
could be found now in Germany for the service of limited loans and the affectation

of these sureties to tirise loans could be efficaoiously controlled by tin Committee
of Guarantees to which would be ;added at:wording to the dispositions of .rtiole

6 of Oa iohedule of Payaents, representatives of the subscribers,

An sa[pem ive

mobilisation of the German debt amid note however, be obtained as low as order

n not been re-established in German finnoes, tinier the oonnitions and under tin

oontrol indioated in the following chapter.

jip-MGANIZATION ilLI;d14.4

The French Goverture


considers that the prOgram of re-organisation of

the Gernka finances should comprise the following essential articles,

1110 - The elaborAion by the German overt of a plan for tie et bilis tion
of the German money, to be submitted for the approval of the Ateparation Ooranissioiy

o rrying no other intervention on the money market that that which Nit) uld oe rieees.

sary to maintain the exterior vulue of the mark _t the rate Cricen at the ueLinning

of the o9erat ions until tire interior value of to money should fall to a value
in the neighborhood of the exterior value which remains oonetant

- Immediate treasures to be t icon to brint, the German budget into equill-

brim laid to maint -=in this equilibrium while introducing progessiTekv in the

expainss the necessary credits to permit Germany to acquit herself of her repara-

tion debt.

- Cessation of the disoounting of Treasury bonds by the Itelebabank as sows

as the plan of stabilisation is put into execution. It would ,movide a means
for the emission of interior gold loans fa* the newts of the Beioh whioh you'd
find themselves not covered p;COV is ion_: 117 by normal receipts.

- Reinforcement of the proper dispositions to stop tie nicht of capital

and the hoarding of foreign monies in the intorior.


Org,hisat ion of the control f Cr the applioJt ion of the (4 iA po It ions, as

stated :Above, by the -ommittee of uarantees under the following conditions:(a)

A complete plan of legislative and administrative meosurtJa will be

est .11 !shed by the German goVernment in aereemead with t be tiop Fes t ion ommi es ion.

he 'German (Averment will Wee to present this plan immediately to the Delon-

stag and so far as is neoessary, to the Assemblies of the States who should agree
to u -hold it .end not tootheriiise modify it except in agreement vdth the Cormiittee
of Guarantees.

The Committee of Guarantees will follow the execution of this program and

notably be in constant touch with all the uetails of the state of the fineness
of the Reich and of the .Mates. It may use, to effect this, all the weans of

- 4 Aistit:LItion which it may judge useful.

It may forbid all ex )ones which it may

judge inopportune and prescribe all sucmontation of roceip s
and destined to permit Gormany to pay reparation charges.

4udged by it possible

It would exercise on

the Hoichebanx and E/11 othr,r organisations ()barged with carrying out the modifioa-

tions of the German monetary regime, the necessary control to assure the execution
of the plan of reform which shall have been approved by the aeparation Commission.

If the program set forth above has not been voted within the delay


fixed by the Med governments, if the engagements set forth havo not been taken
or h:ve not been held to, and if the German Govornnent does not conform immediately
charged with the control, this default uould

to the A: Lunation's of the or

constitute in Itself a voluntary default in the sense of paragraphs 17 and 18
of ,.nhox II to Part VIII of the Treaty of Versailles and all of t,o sanctions

laid dawn in Chapter II hereafter would enter imoediately and automatioally in

The ,llied iJowors would agree beforehond to give instructions in this

souse to their delegates to the Aeparotion Commission.
The final disposition of .hrticle 7 of the s.Asheduie of eajments acoord-


ing to which the jommittee of Caorantees is not authorised to intorfere in the

G rmen Aministration will not be consider,1 as au obstacle to the aoplicotion
of the dispositions which precede.

It will be well understood that the stipula-

tion cited above 6101/flea only that the Committee of guarantees would not substitute for tne (Armen

Uministrative services and assume the direction of their



Tronsfor of the headquarters of the ,Onsonittee of Guarantees to 3orlin

and the addition to this committee, as soon as a foreign loan sholl !I've been

emitted, of reorosentotives of the subscribing countries.

'he French government considers that Germany would be able to maim in 1923

in agreement with the large industrials. a augfioient effort to =bout° the
_:aheoule of ..,-4mehts and that in any core the moratoria cif:manned by Gorm,!nw is

not acceptable except on coodition that it doee not effect


totality of the

Paymenta due by Germany: and that it is 'moored by Cue 'leisure of guarantees


?xtont and duration of the moratorium.

The French 0:vvornment is not disposed to consider Ea moratorium longer



two years.

It even considers this delay skeild not be acoorded or maintained

unless Germany a000mplistes the indispensable effort in accord with the Be2aration 0,minission or ro-organising her finances, and anlosa she takes the nsoesear$
steps for the emission of 1,)ans destined (1) for one pert to facilitate the

equilibrium of her budget and the stsblistion of the mark, (2) for a balance to
being the amortization of her c pital debt. as soon as the meratorims
goes into

,oncerninL the extent of the iser.loriu, the French uovernment considers

it necessary to maintAn the payment of, the exp uses of the

mien of °caseation

such as they have been fixed by the ar-angement of 11 march 19a. the expenses
of the Inter-Allied High Comsission of the Ithenish Territories and of the

illitary and Naval Commissions of Control;

Paper* in cash under the co:editions hereafter indicated;


Yayment in kind under the conditions laid down by the Treat,' and

by the -greements now in effect, and the other obligations (oloaring houses,
restitution, eta) th t the treaties :auk conventions impose on Germany will be

moreover maintained under tno conditions which are

ow in forms.


Anoe the three ye acs w}doh have just passed stowed that it is im-

possible to have oonfidonoe in the execution by Germaly of the orgaGamonts under-

takes by her, the French goverment regards the seisure of guar intees as incite)onsable, and it considers thA the realisation of the guer.mtees hereafter set
forth will not exceed the eapacity of payment of Gemeasy and are not of a nature
that will hinder the recovery of her finances.
These guarantees will be taken:

In order to assure the execution of the conditions of t -v more-

tJrium not only in rogaru to the re-organisation of German finances, but also
in regard to the restricted payments provided during this period.

In order to iourentee to the Allied Powers the ocntinuation and

the extension of these payments upon the expiration of the M erAorium. if Germany

at that time has not t ken tre necessary steps to dequiot herself
of her debt


If loans suflAciently important are contrasted by Germany airing the

moratorium and Int at the disposition of the aepar tion Coemdssion to &mortise the

c.ipital of the German debt, the oash prodwed by the (hiar.atees, amd either a part
of the Leymonts in kind, or the is equivalent, midht be left at the disposi tion

of the aerman government to apply on the amount of tine loam.
But the

French :ovornment thinks that all

useful steps should be taken to

assure immediately the productivity Of the guar Jatees of which it has considered

the seizure, and to see

that the organisation to be

created runotions to the ex-

tent tilit the circus:mt.:aloes shall r:nder necessary.
The program elaborated consists of the.:
the French government has,

far as possible any new

seizure of definite czar aiteos,

however, ameliorated this progr:m so as to avoid as

military ooctvation, except in oaso

not conform strictly to oll

where Germany does

two obligations that the program imposes upon

in which cL,se the sanctions set forth in Ghapter lv hereaftor utll

into force.


lliod ,Pverhinunte agree either



enter auto-

apply the sanctions

in °cartoon or to ma o no objection to ezrime of the govuxumente applying them

of its own acoord.

2he french Lovern.entn

is _persuaded

it to impose

program and collaborate with


that if the .Lllies acoe)t


upon the Jelrench evvermiont it could

be applied without any serious difficulty, anu

that any movomont of troops on

non-occupied territory would be rendered unnooessary.

Detailed explanation

will be

furnished on

the follow

ng articles of

the progress of which the resume only is hereafter tj.Ven:
Unardutee destined


to assure the delivery of payments in kind.


inter- llied maga LOA of ontrol formed of enbineors, of which the
president will be ?reason and in which tilt

votes will be deivided in proportion

to the deliveries of coal due to the powers interasted, will be

sent to seen

and accredited by the German. ,_overmaant erith the .powers necessary to inspect
the action of the Kohlensyndloat and
the prosident,
the strict

either to tide syndicate or to

the German Transport Arvioes,

apdliaat1011 of the drogr Ja fixed by the ;leper-Um JOinaila

The inter-


zihineland High Oommiss

orders in the hakor territory

to assure by means of modem Liven by


ion shall

have polar 63ve

the execution of he dispoel tiona taken by

- g

their swab licenses dm She orriultation above demerlted madam tram similar eMses in nonsecupted territories.
Framis Will ONG rise to Tocsalar, or noroonal p4mb1tica to be !we
neenesi by th4 milltxy tribunals, utdokisny delegate their Pdveks is liSSO of
neesseity to Gorman triboaals.
This method of control. if it mere set,Ibilahed

is sitima

4111es would Mistime witboat further allithry ocowatieS gad


WAIN* the

establishment of a oastomm barrier iet the °amt.

The total sollast from the oolleetiens oiat as valued at spores'.
mately 443 million geld marks par year.

itidaELALAVIgaild..7141603 tt the


%MIA& ALIPAILALIAL_ffinstaLutusLiZi.e.L' 93 tit 2alai
la spite of the objeetteas onprIssed4 the 'roma toverament op:lists

is thinking that It would be daiirable to ramostab)isiiihe eSeemio regtme in

etauted by


IMAM Gontbremse of narehe 111

opposttlea menifostaa r

afar. is /ism of the

llies. the free* gnwoumento in the ease of

pledges taken in oonnIon, rdould be disposed. to allOoA tie W.I.:4/14c pROWOROs

The ImSerPkilled



*Al sissolvo the posers

to assure under its orders, tbs optimal= of UUAtOSO VONealos at the welt
frostier of tne cmoupled territories,

territories and



within th OlAMOO beumiarlee of the

of the Air.

It will hove th poor to detwraise the gift of the

whIeh will be "Table in

swot, tames

appreciated. otimlealso, the halms. to be Aid


perm maries

Gramatssisu stems the lime et the sesdit ions buil ot,ted


ressellug pareirepit




sestrol will be eratudeed imder the order,* of the


SO WPM that the duties dap from the experts-

the Wortottens asessieg is the territories above summorAst have

Set Won paid in s.4/1 em MOW SO to subvert the messurws t.,bun within the
emstons boundaries of the nonmoompla° territories or dot eab,jeot to aurealliamee




This method of oontrol Ocoee not acquire the

terrier, Avian:

eetehlletmeml et

stAullaga to ties east of tat *mingled


territories ad

espaolally in the Ruhr Basin.
the value of the oollectiona can be setimated at about 200 million ;plci perms
per Year, of which 150 will towns free the ooeueied territories; if, far example,

20% of the export taxes were oollooted in appriciated currencies, the mount
realized would be 20 million cold marks, plus, st the ourront rate of esehun6e,
324 milliard paper marks.

hire of


taxes lathe eoeuoied territories and in tle Auks Desin

The German govern meet shall be notifieU that the llied Powere give to
the Inter-Allied Rhineland High eare-dasion, the power to colleot, for the


of the Aeparatio Commission, the opal tux in the owes:led territories, and in the
-Ruhr Begin,

The e:roprietors of the mines will be requireinto pay in foreign currencies

).art of the taxation (3A,; for example).

The prop.rietors of the mines will

be notifed that in the event of this re,:eirement not Wing relfillad, tha


pollen) reserve the right to t,ice possession of s oorrosponding value in call.
un the basis of the results attained durint; 1 22, the anumul -uroduotiau

of the Ruhr and the ocolvAed territories amounts to about 100 million tons.

On the basis of the actual value of Ruhr welt the cee1 tax amouetihz
to aboute 4 gold marks per tale it :Omelet procure the equiv4lent of 4a) million

gold marke, of which 120 mil ions should be ?ayable in Appaeciated currenoies
and the balance in ,arer marks, or 3t the actual price, 600 milliards.

Utilleetien_atAge °ever mcrke reEllaftklEatheme end. Aal Tax

The securities seized would give the

ilied .Owere the eluivalent of 460

millions no 3,d masks in paper marks (of whieh 180 would be realized from customs

and 2ao from uoul tax).
In all, it oan be hoped that a not productivity, from cueranties taken,

valued in gold marks, on the bases above indicated, wculd attain the relieving

-.airs execution of the Jeehedule of Deliveries of coal of
the Reparation Commission


Deliveries of 'VeCld







Deduct ion of foreim ourreneies on exporters


seizure of exportation taxes (amauat collooteu in ourruaous 20,000,000

fort: gn







66 30/1;ure of cool tame (amount collected in


fOrbiLn =lire:miss)

T 0



The exeoution of tin '..ichedule of larents restricted to the period of

the moratorium would then be guaranteed;

the right would be given to to) .1lied

Powers to inoreaae, in case of prolonged defsliatin6 of the, the annunt of

their povments, notably by an increase of the coal tax and of the deductions
in foreign currencies, either on the coal producers or on the export taxes.
The guarantees set forth mitt be adopted by the Allies in con non,

may using only methods of control of the economic order without int.erve tion
by military forces.
:'finally, the guarantees chosen would have the advantage, thanks to

the method conceived for organizing the exploitation, to permit an energetic
pressure on large industry, w/doh has, up to the ?resent time, raised the

principal difficulties to the exeoution of the Traaty of Versailles, which
has favored the exportation of currencies and gold and ulaokihas drawn considerable benefits from the actual situation in Germany.

Ln ease tile German overnment does not oehnit to try execution
of the present program, and particularly if it does not t.:ace such legislative

and administrative weasurea ns may be deemed proper either by this AeparAion

Commission or the Inter'- flied Abineland Bighommission, or by the Inter-Allied
Commission of aagineers, to permit a strict exeoution of the program, this def_ult will mamma

osuse immediately :_nd autometioelly the putting into effect

of the following sanctions:1.

Military occupation of the districts of seen and Bochum
and all that part of the Ruhr Basin determined by Marshal


The establishment of a oust= barrier to tin east of cell
the occupied territories,

And that wit neat orejudioe to the statement m,de sever ,1 ti

s by the French

Llovermment, that 41 inexeout ion of the Treaty of Versailles has already had

and will continue to have the effect of advenoing the dates of the evacuation
of the oocupiee territories.

-621 To accept such financial supervision as may be deemed by the ;ailed 20wers to be necessary to see to the
punctual carrying out of these reforms (cee ;schedule "B").
(3) To submit, in the event of her failing to satiefy the
supervising authority that condition (1) is being observed, or failing to discharge her oblidations as nap revised, to any measures which Allied Powers, upon a report of
such failure from the supervising authority, may unaniSuch measures may inmously decide to ue necessary.
clude the forcible seizure of German revenues and assets
and the taking over of German fiscal machinery and the
military occupation of Gennan territories outside the
treaty occupation area.

L11 loans raised by Germany in the national market of
any Power which is a holder of any of the bonds to be applied to the
redomtion of bonds held by that rower, unless and except to such extent as the Government of that ower may otherwise agree.
In order to facilitate the provision of funds for the restoration of the devastated regions of .France, Great eritain to agree that
50 per cent. of any German loans raised on the Britieh market before
the let January, 1927, which would otherwise be applied to the redemption of bonds held by Great Britain, shall be applied to the redemption
of bonds held by Vrance.

(See bottom next page for explanation)
The deposits of gold which re held by Great 'Britain as
security for loans made to xrance and Italy for the purpose of carrying on the war, to be applied forthwith towards the repayment of these

The french share of the German fonds applicable to the repayment of Belgian ear Lebt to be transferred to Great eritain and aooepted by her as satisfaction of an equal amount of the 2rench debt to
Great Britain.
One and a half milliar.:a let Series German Bonds to be transferred by Italy to Great Britain and accepted by tereat Britain in discharge of an amount of the Italian debt to Great Britain equal to the
face value of the bonds.

the balance of the Erench and Italian ear Debts to Great Britain to be written off; all counter-claims by xrance ane Italy at the
same time being abandoned.
he Italian debt to r ranee to be ;ritten off.

Great Britain and Irunce to transfer to the A.eparation Commission as trustees the net war debts owing to them by Serbia, Roumania,
Greece and Portugal to be dealt with as provided below.
On the let April, 1933, the bonds of the Seciond aeries to be
distributed as follows:
Great Britain
...) The aggregate Spa :zreement
4ny other -Lowers which may ac- percentages of these ;:owera
cent the arrangements refer-)
red to below
.9.) Their respective Spa AgreeJapan
) meat percentages.
Any other Lowers which may
not accept those arrange






Piewing examples show the annual sevieg in the interest
charge for future years, resulting from redemptions effected at particular dates:ennual interest saving on bonds
cancelled by each 100 gold marks
cash applied to redemption.
Redemption at 50 on -110.31,1923
Redemption at 56 on eec.31,1924
Redemption at 62 on Dec.31,1925
Redemption at 68 on Dec.31,1926
Redemption at 76 on Dec. 31,1930
Redemption at 80 on Dec.31,1934
The schedule is arranged so as to enable Germany, if her credit
is re-established, to provide interest and sinking funa on loans raieed
for redemption out of the saving effected on the interest of the cancelled bonds, and to give special inducements for redemption in the earlier

bale:Lee-Le "B"

Supervision of German Finance.

It will be necessary to establish machinery for effective supervision of German financial legislation and administration on behalf
of the Allies at any rate until the time when the new arrangements have
come into full operation and Germany is regularly discharging her reparation obligations.
It is proposed that a Foreign Finance Council should be set
up with its seat in Berlin.
The Council will coexist of persons appointed by ereat Britain,
Prance, Belgium and Italy with two other members of eeericein and neutral
european nationality refeectively. The German iieance ainister will be
ex officio chairman (without a vote except in the case of equality of
votes), and will be required by law to act on the Council's advice in
regard to all matters affecting:1.

Currency legislation.
The budget, fiscal legislation and oublic expenditure.
Genera:, Treasury administration.

prohibitions, control of foreign remittances, etc.

This, of course, means a considerable measure of interference
with German democratic independence in matters of finance, but such interference is the inevitable concomitant of any method of effective supervision or control.
The association of the Finance minister with the Council seems
to be the only method by wlich foreign interference can be seleared with
the democratic machinery.
-e regards the powers of the Council the main object to be
aimed at is to leave German administration as far as possible in German hands, and avoid direct responsibility for initiative in regard to
details in the nutter of legislation.

The aggregate share assigned to the first-mentioned group of
Yowers to be divided in irofortion to the respective debts of these
lowers to the United states in respect of war advances as on 1st April

rowers other than Great Britain, :irence and Italy which are
indebted to America to have the option of oominis into the above arrange;lent and having their debts to european Allies critter: off or of discharging their auropean inter-Allied debts and retaining their ;;pa Agreement percentages m ;f the Lnd :series bonds.


Zortugal, who is indebted only to Great Britain, to have the
option of ceding her interest in the 2nd series isends to be dealt with
as part of the joint share and having her debt cancelled, or of die
Charging her debt and retaining her 6pa ,q,.reament percentages of the
2nd 2eries Done e.

eny payments made in respect of unoanoelled european inter-11ied indebtedness to be invested by the neparation Commission in German bonds, such bonds to be retained by the aeperation Commission until
the 1st April, 1933, brat then to be distributed amoneet the group of
-lowers first mentioned above in the suns proportions as the 2nu series
German bond e.

Powers to which a remission of debts is grunted by treat
Britain under paragraph 13 to agree to support any proeosals made by
Great Britain for mitigating the liabilities of ex-enemy iowers other
than Germany under the treaties of Saint-Germain, Trianon and Beuilly.



rites of lst eeriee Bonds.

Interest Late December 31, 1923
June 30, 7.924

December 31, 1924
June 30, 192 5
1.43oember 31, 1925

June 30, 1926
December 31, 1926
June 30, 1927, to i:eeember 31, 1930





aising by 1 point per
half-year co 76
June 30, 1931, to maturity (iec.31, 1954)
Rising by
per halfyear to par at maturity.
Lote - The scale allows redemption an an 8 per cent. basis at the start,
gradually felling to a 5 per cent. basis at the end of the thirtytwo- year period.
* (This explanation appli s to * on preceding page) These eropoeals for
dealing with inter-;alied Debts are put forward upon the understanding
that the above reparation plan is accepted and all proposals for the taking of pledges ("gages") and application of sanctions (otherwise than as
provided for in the above plan) are abandoned.
4- In the event of eerbia opting not to come into the group, her debts to
be written down
trance and Great Britain should, on tra nsfer to the
by the amounts necessary to give her the oomeensation provided for in the
eierbo-Frae;co-British percentage agreement of the 20th June, 1921- say the
equivalent in 2rench francs of 70 per cent. and the equivalent in sterling

of 30 per cent. of 250 million gold marks.

-9It is desirable to give the Council very wide powers, but
also miWitesecretifn as to both the manner in which, and the extent
to which, they are to be used.
It is not pr tioable to lay down beforehand any rigid rules
as the further degree of expansion of the
in regard to such
emitted or the further increase which may
note issee which o
in the floating debt -- still less to insist
be allowed to take
on the raising of loans -- the possibility of which depeLds on finding lenders.

ehatever form of local control ea;, be decided upon, it should
be responsible and indieendent, 1. e., not subject to a eeparation Commission sitting in :Paris.

It will be necessary to provide that the German eoreign Yinance Council should sit without the German iinance Minister whenever
occasion reeuires to exercise the executive powers at present -.LA/MOSSed by the Reparation Commission and by the existing Committee of Guar ant ees.

If the loparation Commission is retained at all it should be
as a purely judicial body with such changes of constitution as [ney appear desirable.
;le special powers of the _Foreign iilnance Council should expire on the Zliet Locamber, 1946, but the Allied Governmento should
have power by unanimous decision to re;tew them for a further period
or periods, if thee deem such renewal necessary.

efter the expiry of the special powers, the Council will
cease to sit under the Chairmanship of the German Finance :.sinister,
but will continue to exerciee the powero which have been transferred
to it from the Reparation Commission and the Committee of Guarantees.

PLAN AoR cry

:.":..31M1 CW litillARAZNII AID

liebilir41.1M1 D2323.


p- / -2- ) I7


The follorrin plan has boon rropared as a complete and final settlement of
asparatione azd ,uroean Inter-J.11°d
210 Cancan obligati xis under tin -ooze Treaty aro fixed by the plan at:

Llil fbr four years (apart from oertsin deliveries in

for which

°rod it is to be E4VOLI against future payments)
2 milliard gold matte (4100 millions) per annum for to next four years*
milliard Gold rnarics (4125 millions) per annum for tin followine two years,
milliards (4166 millions) or sash smaller (nun (not loss
!Ste? ten years
than 2, milliards) as may be fixed by on impartial tribunal.

If tin supervising authority provided far below decides unanimously tint the
state of German finances before tia end of the initial period of four years is
such that cash paiments for ra.,?aration can be male, it will bEive paver to antedate the denioncietsent of ti'n annual pqmset of 2 milliards by such period not
exceeding two years as it may see fit ani to male such ii.justirents in res:bot of
future payments as it may deoin to be wuritable so as to °acute that the total.
liability shall not be increased.
one obligations take tin form of 5 per ()ont bonds redeamoble at call by tee
Ciorman Governmsnt --at the outset on easy terms, f;rnatza.114, rising to par, at the
end of tblIty-tvao years.
are bonds are divided into two series, Series I representing tie fixed
payment (rising to 2!:- milliards per annum), Jeri° s II representing tie additi
Payments over an' above 21:-

er anntre, from tin eleventh your °Mara Se

There is no oinking fund, but redemption, more especially in tin earlier
years, is permitted upon such liberei terms that tin saving in annual interest on
the bonds redeennd will, if '.`,-erman credit is re- ostabli hod, be sufficient to
cover both interst and sinking fund on ("Armen loons raised in the ra ortmt for
redemption purpo see.

its arrargement gives (=armory a strong indiscoment to rAse such loans as

soon as possible, sines she will thereby convert a jar.otual into a tortnirrible
obliigitien without increase of tie manual oilers° aift also ettstitute a normal
foreifst debt to private bondholders for per ira:lent obligation° to fbreign


ike baids provided for in the swam are not intended either to be issued.
to U glittlio or pk.Oed on the maricGT They are to serve merely as accounting
maehtrerr, The "Liobilisation't of the Germon reparation debt is to be effected
by loans raised by oterma3a front the public, ti's p roceeds of which would be

applied to the redemption of the on Leal bond
In older to give Cermary a ret.t1 ahem* of restoring budget equilibrium and
atebilicin. the mark, it is absolutely essential teat she should be given ocrplate freedom from papas:its in foreign currencies during tin initial period,
ani that deliveries in trial (except in so far as the neeiving countries Ray be
willing to ray cash for them) should be redttood to a minimise
It will. however, be necossaw tiv:t tae deliveries on reparation account of
coke to kranee, coat to Italy, and possibly dye -staffs should be continued',
thou:J.1 npOn a reduced scale, even during this initial Jeri -de The precise

quantitLa can only be settled by ingotiation.
In the event of the plan proving sisscossful, it is

probable, 110cl

lirr, that Germany ranild herself seek to incrotve her deliveries in kind in t: early
yoars to a raxinnen, in view of the liberal toms on which tie value is aloliod to tie
°emanation of her debt,
Are plan muld be offoral to .1-ormany on conOition that she uaiertakes--


>o stabilise tie murk in acoordarne with tie re 001233 Itiat ns contained in
tee irsjoriV report of t e foreign experts consulted by tre German
Government in jovertber last, and to restore bulget equilibrium with
limits of tine to be proscribed (say six months for the stabilisation and
two years for the bulgot refonn).
2. To accept such financial suporvis ion as nny be deoned by the ailed carers
to bo MOOS sary to soo to the punctual carrying out of tease reforms (see



To submit, in tie event of her failino to satisfy the stapervisrinr I.xtzthority
that ooralition 1 is being observed or failing to discharge her obli .ations
as now revised, to ary mlasurlia which the Allied Powors, upon a re: ort of

sueb, failure from the supervising authority, may unanimously decide to be
ilieeesoary imludinis forcible seizure of carman nvenuss and assets and
military occuoation of rlernan territorios outside tiro exiatinc zone of
oocupati on,

The following prop.)sals at put forward for dealing with interaollied debts
upon the understardinrt that toe above reparation plen is acoo!.ttl, aid all proposals
for tin ttic in o of pledges ("roves?) ani application of saw ti ons ( o tho rod so than
as yirovided for in the above plm) are abantioneds-

t3old deposits rev held by Groat 13ritikin as security for Inter--filed debts
are to be applied towards the reduction of tile5o debts.
2. The let .;cries ,:ernian Bonds to be received by ,ronne in res-.ect of the
OolJon Oar Debt and 1* milliards of tOs 1st .ieries :fonds to be
received by Italy in respect of her shark') of reparation are to be
transferred to .-roat Britain.
io reooect
3. 'Toe balance of the net debts 07 the as botoeon ..urcotean
to be ontirel,y
of advoncos* for the pumose of oarryino on tars war is
writton off, 311 countor-claims being abandoned, on oonOition brat the
debtors tronsfor ti it intorests in the a:11. Jones (0ontinoont) 3onds
to a pool for distribution to toose ocwars which are indebted to the

"chatted Otatoo of oinorica in prop:-.)rocion to toeir respective aroarican

"2he covorning



)rinciplos of the plan are --

To fix a minimum ertaan liability which is t.,rithin reoert estimates watch
have been Trade by financial exports of Oormar. capacity, and a supolopentory
Nobility which is prima facie not unduly onorous, but wnioh can be

reamed or oraoelled by an impartial tribonal if it snould prove in the
event to be oxcessive.
To oubstittte for the present fixed obliontiora of tile oxopean ollios to

Great 311 thin arrangements under which all exceo:A a arre3.1 percentage
(which mulct be accepted in tiM) fonn of a trio sfor of .14.3nratti oblioations)
would be remitted, but cantor uhich the continr::cut !Annan pcynents in

excose of tin fixed minimum would bo available for discharging ,urooeen
debts to ,i213011.09.


To give attractive tome to ,orraany for tie early rodor_:ption of ti*
annual payments by m ticioation.

Toe 'rimry oblioation of Gerroory is ,cat into the for 1. of 50 minimal cld

statue quo would not be interfered with as ro;!ards inter-oolied post-war

-6rk thirty-tavo-year bonds hearing no interest for four years, 4 3)er cent, for the
next four anti 5 p et cent. thereafter. :4 provision. is proposed for a sinkinG fund,
but tin bonds ear be redeemed on terms Wilt :fit if '.:ernan credit recovers, will
enable the intemst ant sin1cin3 tee on t; loans ro,luired for redemption to be ra)t
out of the men:I:tent saving on the into /yet on tip n,-,naa,
:',orraarzr is t.:118 ;Avon a double inducement to borrow fro

the oriLinal bonds.*

the public to reclean

She frogs herself free her :7 ireot liability to the
She stbstitutes without additi..mal cost a terminable for a :.orpetual

The merits olairsid for tee plan am that its adoption will m the restoration
of 'Jennan credit possible aril lad to the recovery of Very substantial sums for
reparation, \71111e persistence in the policy of attemptinf: to oat' ore° impossible

claims will end in the destruction of the cream* alto;

The present value of the rimary obli tiou under the plan cannot bo 1.,recisoly
es timatod owing to the radoilption options.
If the ncloption of the plan led to a rapid revival of 7.ennan oredit and
',oniony Ivem able, by raisin; loans, to pay off the wnolo of tin fixed annuity in
tin first few years, tin present value ni,-ht not be nacre, and mi.-ht rossibly be

even less, tinn 30 r:illiardS.

:gut if this happenod tin .411i) s .rould nave actually reoeived this 30 milliards
and ;aiirmany -a3uld undoubtedly be in a position to pair for the servi,e of the
2a3 Aries of bowls ieen they fall to be created ten years hence, axe redeem that
series also very rapidly. In that event this 2n1 aeries would be worth at least
cent, table--7,4 milliards-so that on this supits f._-cusent talus on the
position ten whole melee city would have been collected in twelve or fifteen yoors
(mainly in the first ten ) and a p xu sent value of over 37 milli ards
on tin worst assumption that no sermon loans become possible either now or in
ttn future trfit t.m 2nd :Jerks of bon,:ks bras to be cm celled altoOlither ant Germany
merely ?lays the interest on the let :Aries as a perpetual annuity becinning !oar

jrir:ra itenoo at 2 milliards ana rising oar year later at a:- milliards, the present
value on tin 5 per cent, table is 39:1?

Zee burden on c.:ennony (which will be reduced. If she raises rtalwaltion loans

on favourable terse) covers all financial liabilities under tin treaty,


These are not intended for IS Ste to the public, but moreka tie security for

the an-qual reymonts aril. as eounters for ,;?um4sos of ace° :ntinc,



.,,,La I..::

.1J -.0



ri'.7:',-..:-.EALJ.,I.',1) 1)4W:3.

lit_..11,.:0,4;,.....;.:4Erull 3...TTlirZliZril

1. The existint,: Gernt911 bonds of 301°103
3 and C to be cancelled and the
Johedule of azirtents annuities to be reduced to the amounts re'juired year by year

to provide the interest towable on the row bonds to be issued. under paragraph 2.
2. Germany to le sue to the ]Zoparation 0orinission a*w bonds, to be divided into
two series:(a)

1st -3eries Bores to the amount of 50 milliard t; old mares to be issued
forthwith repayable at par on the 31st 7'ecembert 1954, sal bearing
interest at toe rate of 5 eer cent. per annum poyable half- yearly; the

interest to be suspended in its entirety for the first four years (until
tee 1st
1927), and to the extent of 1 per oe:nte per annum f or
the no.-rt four 7:roars (until the let -Ta mary

(b )


2nd _Series 3oals to tile anoultt of 17,31 milliard (T;o14. mar.ts (bein;,; the

amount of the deferred i .terest on the bogie of t'fa 1st aeries compounded
at 5 per cent. to the let April, 1.93e), or such lessor amount (if any)
as the iirhitral '..e.ibunal provided for in para344,11 3 rrsv determine, to
be issued on the let April, 1933, replvable at par on the 31st arch,

1965, and boari...).13 interest at 5 per cont. per annum payable half-y(382'1y.

If at any time before the let January, 1927, tine steervising authority provided
for in paracraph 11 decides unanimously that the coalition of Berman finances is
such that oash p elements for reparation can be ooreenced, eermany to pay in cash
such sum as the authority may proscribe in each of the oalenlar years 1925 and
1926, not exceedine 2 millieed eold 'amts in either year.
Arty such poyments to be applied to the cementation of 1st eoriee :ones at
redemption price or otherwise in xeduo lean of the a re gate liability under tile
preceding paragraph as the wapervisine authority may direct,
3. If before the 1st April, 1933, Germany proves to the satisfaction of an
iirbitral :ribunal that the payments roeuirod to meet the interest upon the 2nd
3eries of bonds exceed her cepaoiev, her oblif.:ation to issue ouch bonds to be
cancelled in reole r in part as taco tribunal may decide,
erbitral eribunal to be appoin oil upon applioatiee V tie 'omen Oostern-

rent, to be male not later than the let '.1atobert 1932, and to cetsist of one ,arson
nrdnated by the -dei,,aration Ooreession, one Berson nominated by the eerman oevern-

oent and a third by aereemait between the other two, or, in default of agroement,
by the 'resident of the Jnited Jtates of America.
4. *A bends issued and to be issued under paragraph 2 to be seoeyeed. by tee

allied 43011111111111t8 in cossautatien of all finmolal liabilities of the German Govern-

cent read nib indisehaeged at the 31st ilecettber, 1922, under the 'Llreaty of Vs r`

wills to Powm *Sok have ratif led trot treatyie including all liabilities under
excluding the ereasury bills issued. to eeleium in rospoot of the last five instalments of the cash yetymim is Ile in 1922.
met, y to pay at maturity the bills issued to eelgium in respect of the first
agreements with particular Powers in commutation of treaty oblientions, but

two of telse five instairanital, those issued in respect of the remainile; t roe in,s talmant to be c:.:tnoollod and ti amounts tearoof reoredited to 3810.04
ereaeo obliestiore to rata deliveries of coal, dyestuffs, timber,
to continue, subject to the various eerlitions in regard to etreetities and prices
in :.ho trcatr. Juch. deliveries (in so far as they may exceed nor/ an.ival nvocimst to be
acreed) to be poid for by the reseci.ive receiving o -re in cash, unless otherwise
agreed between (Y,ertzly and the ewer ooncerucel. ell deliveries within tee now
annual maximal, or which veer be :ado the subject of steel special aere.3mout, to be
le id for by the reeeivine 'iterer by sot -off against the interest receivable ueen the
bonds, held by it, or (until ouch interest ;..n,ymauts have be.eun or in so far as they
may be inaufeloient) by surroixler at redeeption price of bonds for cancellation,
5, Creretny to have the right to redeem bezels of tee t eorioa as on erg
interest date after the 30th junto, 1923, at the price sheen in eched.ule 'vete,
es so et as, but not before, the 1st eerees of bonds as been redeemed, eerroany
to have the right to redeem boreis of tee 2ne eerios as on my interest date at a
discount of 3/8 per cent. for eace unexpired half-year.

- 5-

Redemption of both series at more favourable rates to be permissible by agreement between ;eraany and the respective aowere interested subject to the approval of the Reparation Commission.
The bonds to be negotiable as between the Governments of the
Powers to which they are issued and as between these Governments and the
hep:.ration Commission, but not otherwise, except with the specific sanction of the aeparation Commission.* Redemption to be effected by direct
agreement between the German Government and the roe ective bondholders.
In default of agreement, redemption money may be paid to the separation
Commission, who will call up bonds for redemption in ape Agreement percentages.

Nighty per cent. of the bonds of the lst aeries to be dis6.
tributed forthwith to the Powers entitled to reparation in the Spa agreement percentages.
Me remaining LO per cent. to be retained by the aeparat ion
Commission as a reserve for adjustment of accounts between Powers and
for the payment of miscellaneous treaty charges as provided below.
Belgium to discharge her existing debit in respect of her
priority adjusted in accordance with paragraph 4 by surrender to the aeparation Commission reserve of bonds of the 1st series to a face value
equal to the amount of the debit plus 26-i per cent. 4
Belgium to waive her clalas to priority of payment over other
Powers in so far as they have not already been met.

rele United ::testes (subject to the consent of that Power).

Great Britain and France to receive out of bonds of the let aeries retained as a reserve by the Reparation Commission amounts to e face
value equal to their respective credits arising out of the last paragraph of article 232 of the treaty (Belgian aar aebt).
All other outstanding debits and credits as between aowors entitled to reparation and the separation Commission to be cleared
as on the 1st January, 1923, by transfer of bonds of the 1st aeries
at redemption price.
Debits to be adjusted by transfer from the debtor ''over to the iieparation Commission reserve and credits by transfer
from the reserve to the creditor aower.

as from the lst Januara, l92a, costs of armies of occupation and clearing office and other miscellaneous charges up to such
amount per annum as the separation Commission may approve, except in so
far as they can be met from cash accruing to the Reparation Commission
Reserve in respect of interest on bonds in that reserve, to be discharged by transfer of bones at redemption price from the Reparation Commission Leserve to the Powers entitled to the payments.
any bones remaining in the reserve when its liabilities have been liquidated to be distributed to the various Movers entitled to reparation in the Spa Agreement percentages.

Germany to agree (1) To stabilise the mark in accordance with the recom
mendations contained in the majority reaort of the Forelm axperta consulted by the aerman Government in Bovsaber last, and to restore budget equilibrium with limits of time to be prescribed (say, six months for the
stabilisation and two years for the budget reform).

The iptentioR is that thew bonds should in no case be placed on the
market, the mobilisation of the German eatbeing effected exclusively
by the flotation of German loans to effeot the redemption of the original bonds. The exception is introduced to provide for the contingency
of the United states Government aareeina to accept the bonds in payment
of debts owing to the. United ,states.
of see beads Q
b per cunt to ale beina 49 per


II1LAllAtion Bureau Lo, 68001

,,mnex 111:: e,



Beidele, January 112, 194,
To the :ambassador of the French .mpublic,


to reply as flies.
I have the honour on behalf of the Germn Government
ily !el in writinc on
to the commemication which Your eAcellency sods to me or
the (hymen kmbeas7..dor
January 10 and which ve,e Nt the w.cfc %Imo transmitted to

in 'earls by the French 4overn-ont.

the French a d B 'elan Goverrelente hems decided to take ection with
of o comeniesion
regard to the ,luhr basin which they describe as the despatch

This (wiission, accompanied by troops,

of control of engineer:, z-..nd officials.

thc .,,xect execution
will supervise the uctivities of the i,:ohlensyrdikat, ensure

take all steps necessary for the fay-

of the aele,r,tion tiOMMilliii011 schedule

moot of reparation,

For tnis purpose it will twee dictntortl porers,

inflict punishment on
It will receive full posers to issue orders to and to
trade ard
employees of the Gomm administration and the representatives of

camerae in the occupied territory.

It will further be entitled to demand aey

information from adminietretive departments, Chambers of Commerce,

and to search officesb nines,
of employers and employees (And from business men
factories, stAlonas :.rmt other premises.

eccordirg to infercestion which htis reeched the Geran Government
the red: -ntise commenced,
the local authorities the execution of this plan has in

entered the
Considerable numbers of French and Biagi r troops have

Auhr basin in

full war equipment,
of ti
ihe French Government bases its Lotion on the deoluretions


:131d cool deliveries and
Coo Fission regarding tie situation of the Ger.4,tn timber

refers to par graphs lir and 14 Of Nnnex II to art VIII of
t the ea


treaty of Versailles,

euilitar opetime it states that for the mome!It it is uot considering

retlina or occupation of u


It :dos t,t it relies on the good -sill

interest t, f:-cilitte the
of the German Government, to whom it is of the ereateet


Ore German saevement

work of the :.fission :lid the billeting of the troops.

%-ust tour way te,, veil s.hich the French Goverhnset thus enocavouru to draw ow-r
the true nurture of ite ziatior.

The Germge Government declares that the decision of the 1?sper,Alor, Commis-

Slop and the above-rentioned previsions of the Treaty give no leg el justification
for the action taken in the Aahr basin, that this k,otien constitutes rather

violation of international law and of tie Treaty of Versailles.
the express et-temente of the

,5cording to

4ilparetion uomnission in its i.ot© of -arch Ll,

Meg defhult in the ease of timber emu coal deliveries could only he punished

dessud for camh payments, so theA further measures under le,rfigraphe 17 and
seen the regullIr application of paregrephe 17 ;:4141

18 gre is thia ceew exoludeu.


should *stall on .y economic tAtu tint:natal measures or measurte similar in bind and
import-,noe against Germeny,

'mesa could only be measures carried out by te Allies

in territory whore they are supreme, Ityld not meUSUIVS ti.hioh like: tilt) present avtry

of troops bold officials into the latir basin, constitute the mast serious violation

posslble of ern sovereignty.

finally, ender the Treety any measures Fat rmissible

against Germany can only be taken by all the

towers concerned in repurRtion

together and not by individual eceers eating Alen*.

It is in vele that the French

Government enueuvuurs to conceal the gravity of tell breach of the Treaty by desertbine its tictlen


itte fact thit an army at war strength and with war

equipment is crossing the frontier of unoccupied Germhn territory shows clearly that
The situ_ -tion is in no way altered by the statement
the French action is
ONO iniginn has no m:lit..ry operations or occupation of a politicul nature in vie*,

moreover, this aticasnt is not ini, but is only Week for the time beteg;
Geren olevernment notes that that only real reason for tail breoeh of

As Treaty alleged by Prance is the that thl,A Germany has Puttee short toe relatively
small extent in the deliveries if timber end float recjared for 19eiv

Ater the

immense deliveries wklie by Germany for four years in fulfilment of the :rmlstioe fled

of the Treaty of Versailles, with the greatest effort

to ouch z41 extent that

r powers

of ,,rottuotion

4:re exhausted, these paltry arrears suffice to eneble the

trench Govern lent to el:ter Germ:.,n territory in greo.t military strength t-rd to


hands on the most important of Lierry,,nyis economic possessions,

The Oeran Govtrnment formally !retests before the whole world agbinst
the violence here done to t, defencel es nation.
this violence.

Nevertheless, it vilt

It cannot defend itself against

ot submit to the breach of the 2rezaty ncr

assist in the 0, zotaution of tn. Frenc,. 4= as it is


to do,

It repudiates


this 5.130,Nstion.

the resPoLsibili4 for t11 constNuences falls on those Goverunents

'ho have carrie

out this march into Germ,ny,

be seen in a further depreciz,tion of tne mirk and

'these consequences OUr ,lrerAdy

sudden rise of all prices in

the future economic and political consei,uenoesAS
ctinsot be

Gore my;

long as this breach of the Treaty due to the violent seizure of the co7Are of *WOK t
economic life continues and its practical consequences

not averted, tierm-ny is

not in a position to taii:e deliveries to the rowers responsible for this atate of
I should be 0.;:.d if you would oommunicatt the

hove to :iota! Government

i%nd I have the honour to be, etc


v, A06.1.111,

free elution Inreett ; o. 63 A.

A.IFIST'47 of

Brussels, Januaro. 10, 194.

u tO/OB

Tot ois Oxcelleney Oerr Landsbero.

In view of Airnanyvs default, os announced by the
oeperation Corsmission, in the exocution of the scheoules laid omon

the latter for deliveries of timber ord cool

clod in aocordonse

pith the orovisions of paragruphs 17 and 19 of Annex II to Part VIII
of the Treoty of Versailles, the Bakion Government hug decideo to
send to the ouhr o

isslon composed of engine re and vested wito

tho necessary powere to suiervise the work of tit Kehlensordikut,
and to eosure, by meons of instructions isaued by its Chairman,
either to this Oyndloote or to Common traneport servioes, the strict

apollootion of the schedules laid doom by V* Osparation commission,
ono also to toke ellimeasures to ensure the ooyment of Germany** reparation oblieotions.

The It lieo oovernmert hiu decideu to attoch Itolier
poolneert to this 'lesion.
`fie 4,owers of this

oppended documents, of

issioo are defined by the two

ilics the Geroao Governmeet Is asoed to

inform the outhoritiee eonoerned, furnishing them with the necessary
instructions so that they oay act in strict encordence with the
provisions laid down.
Zho Belgian Ooverameot ',lakes to declare that it has

no intootion of erooging et present in an operation of n politicol

It is oerely serding to the Ruhr a oission composed of

engineers and officiols, the object of which is clearly defined,

ft is to see that Gerwomy resoeets the obligotions &sawed by her
under the Treaty of Versoillee.

No. 6808 -

it is sending

Annex 173:: 0.

to tiie :fir

only such troops as ;-,re

/10.006ftry to protect the ,ission eed to i.nioruntec Uiv excution

of its m.ndato,

here Wi1.t therefore be nu


of cr oh' nit

in the normal life uf the population, which mul continue to work
in peace end
It is to the greatest inter, at of the german GovernmeLt
to facilitate the

of the ;lesion un4 the installation of the

troops sent to erotect it.

Beicion Government counts on the good vill of
thte Germn Uovornment =nd on th,t of 1-11 x.;thorities whatsoever,

If, through uty manoeuvre, the °per:Alone of the
offici: is of the AIIIIi0M and the InsUAlation of the rommpanyine
troops, are hr apered ur endamgeng4, allt if, 4 %r 1. act or failure

et, the longl authoritios prejudice in am erg tie material .-nd

economic life of t o distriut, all mosesary measures uf coercion will


nd penalties ii9posui r,:t


the diseretion

uf the Belgian

AIWA 1734 b

- V, 4807




.t....Cal.eY Herr



I have the honour to address herewith



roy u notifim,.tion to the German Government, in whit*

vernment of the -.public, informs

ced to



the assavirfis It

take as u result of Germ ny's !allure to carry

schedules laid down by the Aeparation :,ormilission for

es of timber and oml to France.

Th 1 <


:tlestion are taken by virtue of

of .,:annex II to tart VIII of the Treaty of Versailles;

mply no intention on the part of France to engage in oper.,tions

litary nature or in an occupation with any political object.
I venture to hope that the German doverrnent will tilace

acles in the way- of these

per them and so render


mea =IDS

which would be maculated

task of the ton Governments more

I have the honour to be, eta.

January 1 e




111 Tier of Uermanyls deVlalt os :tnruroed by the
iloprtr,tion Oommission, in the execution of the soheuules 1::,sid down

13 the lttter for deliveries of timber and 430 1 to France,ard in
aocordAnce with the provisions of psrfraphs 17

d 13 of Annex Ii

to -art V/11 of the Treaty of Versa lies, the French Government has
decides:. to send to the :iuhr

:Amnon oomposed of engineers Lnd

veJtei. with the rocessr powers to supervise the ork of the
4oh1ensyndiket, and to ensure, b means of instructions issued to its

ChatIVINI, either to this syndicote or to ilorflan trt.nsport services,

the strict apvlication of the schedules laid oc n by the ,:ep.,-r:tiou
Com-,1i4sion, :toil tile° to tt,ice as11 neoessc,ry mewoures to ensure the pfiyment

of kkrtasny's doparutiom oblicatiors.
ate Italian OeVernment has ciecided to LIttainh

ra to Loin tailors

owers of this -111181021 are tiefin6d by



kocusents, of which the German Government is -.eked to intone

uthorittes concerned, furnishing them with the Beesontry instruc-

tions so th't they nay act in Strict accordarane with theprovisions
laid warn.

The French ilovenrrent wishes to declare it has no

intention of engesgins at present in operations of a military nature
or in en OCOUplItid#11 rith ate politic :4 object,

It is merely seT ding

to the liuhr a iiission composed of engineers na officials, the t,bject
of %%Isiah is clearly defined.

t is to see th:,t Oerm =ny respects the

obli.z.tions assumed by her under the .peaty eif Versailles,

400- vAp

Lc). 68,9 -

ilE-sex 17:k: a

It is sending to the ..tuhr only ,Alch troops us ere
noessfiar/ to prdsct the

lesion ,n ).ti

:u-rantee the cxsoution of


Its mand:Ae,

Zhery will therefore bt no distureLnoe of or cavvge
in the normal life of the population, which ma:: oontinue to vork in

pow !mg quiet.
It is to the greatest interest Of ibis GOrmftli Gostivwent

to facilitate the 'roe* Of the JAsslon and the installation of tNe troops
soot to protect it.
1110 .erenoh Covrnment gavots on the goodamill of the
aermen 4everament and on th t of stil authorities r. ha
If, throw- h an7 rfartoenvre, the operations of the off i-

cials of the ASSiWA and the instellation of the aeeompsuyig troops
are hampered or enikincered, and if, by any got or failure to t.ct, the

local authorities prejudice in any way the materiel and econostic life
of the

.istrict, all SIDOOSicilry ,71esures of coercion will be takes ant

penalties imposed at the discretion of toe Prench ,JiovornAmst.

In view of 6crAy'a detAalt, as announced 1,5. the Alperation CortAssion, in tix

xooution of

due under too acheulest 1! do-l: b



co_ 1 deliveries

this t.omnission, ara in order to

enoure in future the strict c,xec,ition of the reph=rntion col: uses of tie

Zreaty of Versailles,

isslon ortrusteu Nith the supervIsior of the

mines and t etorios in the occupied territories told composed of ereineers
and officials is created os from this ds.;:..

The erginecru and officiE1s of this A.ssion &hull have
full powers to require of :,4,inistrative orgy-nisc,tions, Chambers of

Commerce, employers° 4Ai emplorease assooiations, industrial ;,nit cam-

erciA groups, etc., all statistical and other information that they
sly see fit to sell for.
throughout .he occupied

They shall have the rifeht to oiroulLte


No. 6e09


Annex 'Yee d,

territories, to enter °filmes, mines, fectories, stations, etc., and to
oorsuli in these pleats all eccounts end statistic:el documents.

The staff of the Gerehn dminietretion end the represettativec of industrial and commercial groups must, under eevere penalties,
pleas theemelves ht the entire disposal of the eerkers of the



iseior in

perfermenoe of their duties end least comely with ere orders .hich they

way receive from the Head of the elusion.

The latter shall have the right

to .sloe ere. chnges be eel desire in the uohedulee of the distribution of

fuel or in the routes taken by trucks end barges cerrying fuel,
The engineere srd effioiels of the

lesion shell bear a spe-

*lel service order delivered by the militery euthorities, which shall serve
as an idettificetion °ere.
from Jaeuery 11, leee

t)e scheenles of distritution of ceel

aed cote drawn up ekgcerried out by the eohlersyrdikat shall be submitted to
the aperovel of tile indestriel mission of the euhr, which shall have the
ewer to revise teem if it ases fit,
These sorer .ales shell in particular it clude the total del ivere

of tee quantities stlpulateee
ear tbi eleiex eountrieer
for ehe eccleeeed territortee oe the left bare of the Rhine,
4And se 11 meet tile reeulremeeett of the territariee

evly ooeupied,

ith these aneeptiors, there in re chenge, in principle,
in tee generel dieteibutiou of fuel now in foroe.
In O4so o'r feller* on the part of the hoblensyrelket or the

menet, to comply with the above stipuletiens, or in arse t e qualities deliveree should prove unsatisfectory, severe penalties would be impOsea, ircte-

yeAk tly of the chleges in the routes of the trains or barges which might
be ordered by the industrial mission.
Frequent tents will be made by the engineers of the misdate
to .Ski sure that the orders of the eohlensyediket have been correctly issued
and strictly observe-.


Paris, 27 Decemuer 1922.
18 rue de Tilsitt,

Honoreble A. 3. iioughtora,

American Ambessador, Amerieen Smbessy,
'Perlin, Germany.

Dear Mr. Ambassedor:-

There is transmited herewith for your
information a copy of a letter received today from the
General Secretary of the Reparation Commission.
The Reparation Commission in a leeting
yesterday, after having decided by a elajority vote that the
failure of Gereleny to execute in their entirety her timber
deliveries to France during 1912 constituted a default by
Germany within the meaning of ?er. 17 of Annex II, Part
VIII, of the Treaty of Versailles, further decided that this
default should be formelly noti'71ed to the Governments of
Great 3ritt in, France, Italy End Belgium, and that a copy
of the letter of notification sent to these Governments
should be for'enrded to Tashineton, through this Deleation,
for the information of the United Stetes Government.
The Commission in the slime mooting,
subsequently to the three decisions which are quoted in the
attached letter, and exercising its powers of interpretation
which are derived from Per. 12 of Annex II, Part VITI, of
the Treaty of Versailles, unanimeusly decided that the word
17 of Annex II, Part VIrI, of the
"default as used in
Treaty of Versailles, signified "voluntary defeult" as used
in Per. 18 of the eane eAnnex.

If the enclosures mentioned in the
Commission's letter to the four interested Governments there
are transmitted for your inforeition copies of Reparation
Commission's Annexes 1665 a,b,c, and 1666 a - h, incl., being
memoranda by the Commission's Service of Restitution and
Reparation in Kind concerning deliveries of timber by Germany
during 19!.;:2.
The extracts from the minutes mentioned are not
aveilable and will be forwarded re soon as received.

I heve the honour to be,

Your obedient Servant,

Assistant General Secretary.


1%ted January 5th, 1923
scd. 10.43 ran.

;ecrptry of "tote,
-!.Ashir-:tor, D. C.

6. Jolu:Ty 5th, root.
8 -822.

Uscelinneouti repnrntion receipts lecember 10th,

to 30th Luxemburg coal coke 61,848 pounds credit Bel7ium.



Paris, 18 rae de Tilsitt.
5 January 1922.

1:,y dear Ben,

Enclosed henwith please find draft copy of Linutes No. 343,
(Exhibit A) of the meeting of the Reparation Commission of .Jecember 26, 1922
which contains the debate within the Commission preceding the report to the
Allied Powers by the Commission of Germany's "default" under Paragraph 17,
Annex II, Part VIII of the Treaty, regarding, shortage of deliveries of timber
to France during the year 1922 (letter reporting default, 'Exhibit B).
The debate between Bradbury and Barthou Preceding the report of "default",as will
be observed from the ;:dnutes, was fairly spirited. As a matter of fact the
actual debate was more acrimonious than the record indicates, as many of the
more controversial phases were expurgated by the mutual consent before the
i.iinutes were finally drafted.

The French in forcing a report of "default" considered its "technical"
more than its practical aspect in strengthening L. Poinoareis position during
the meeting of the Prime -inisters in Paris.
As a matter of fact the actual
value of the shortage in delivery of timber on which this report of "default"
was based was aperoximtltely P150,000.00---a relatively insignificant figure.
The actual French position concerning deliveries in kind under the
Partial Loratorium of Larch 21, 1922, is open to some criticism.
It will be
remembered that under the terms of this Partial 1,:oratorium, Germany was required
to advance on reparation account during the calendak year 1922: (a) cash to the
amount of 720,000,000 gold marts and, (b) deliveries in kind up to the value of
1,450,000,000 gold marks.
The cash actually advanced, including the six months
German treasury bills accepteu by Belgium in lieu of cash, for such instalments
falling due August 15, September 15, October 15, November 15 and December 15,
amounted to 721,494,000 gold marks.
In other words an over-payment of 1,494,000
gold marks. As to deliveries in kind the Partial Leratorium fixing the value
of deliveries in kind at 1,450,000,000 gold marks, provided that of this latter
sum "950,000,000 gold marks should be delivered to France and 500,000,000
gold marks to the other Allies, insofar as France or other Allied Powers, or
their respective nationals, may call for such deliveries". As concerns the
500,000,000 gold marks deliveries to "other Allied Powers", such Powers duly
"called for" deliveries 1111) to the full value of their allotment and deliveries
up to substantially such total were duly effected b Germany. As regards
France, her total "calls" for coal, timber, etc. amounted to only 240,000,000
gold marks, in addition France was debited on this account with 12,000,000 gold
marks in respect of deliveries of river-craft, and with 1,000,000 gold marks in
respect to Armistice deliveries.
In other words, French "calls" for deliveries i
kind amounted to only 25:1,000,000 :old marks, thus leaving a balance of
697,000,000 gold marks of deliveries in kind primarily intended for the resteration of the devastate l areas "uncalled" for.
This results that the failure of





A. L. Jr.


Governor Strong - Zerscaial ani Confidential



the friendship of the var ious r) eopl es and Crlo verzrx nt s for each other".

The French are particularly bitter against the British for the reference
made in that part of the British propos...1s ccncerning interallied debts, which
provides "Gold deposits now held by Great Britain as security for interallied debts
are to be applied towards reduction of these debts." The British informed us confidentially within the last few days that approximately 53,500,000 pounds sterling
in gold, included by the Bank of France as part of its metalic reserve and held
to the Bank of France's credit with the Bank of England, was non-existant as a
French aetal reserve . According to the British statement the metal in iuestion Vlas
transferred during the var to the Bank of i..].gland as a guarantee for British loans
to trance and subject to repayment to Frame on payment oy France of its debts to
Great Britain. According to the Briti sh, the .Fre-leh desiring interest on this deposit agreed to the British using sane for American purchases during the wa,r, and the
gold in .itzstion \las actually shipped and disbursed in America. The British then
referred to that they termed the "deliberate inaccuracy" of the Bank of irance's
report, stating that when the actual position of this gold was realized it Aiuld
have a 'serious repercussion on :"reach excharge.
rho .Annual Repo rt of the Bank of France for the year lS2l, on page 19,
shows under the heading "iietalic Reserve" the following:
"On December 2..., 19`...,1, our gold reserve was the following:

Gold on hand

Gold deposits in foreign
c ountries

ran cs


3,575 ,818,000
I ,948 ,367 ,000
5 ,524 ,185 ,000

"In the figure for the Gold deposits in foreign countries
Frs. 1,896,000,000 represents the loans of gold agreed to
during the course of the war, not on]y to the Bank of

.England but also to the Briti4sh Gove.onment in consideration

of ere its opened to the Fre reh Treasury. Remember that
these gild loans which at one time attained a total of

1,955,000,000 are to be reimbursed simultaneously with the

liquidation of the correspondin; credits."

L.r. examination of the p ertinent portion of the text of precedinp. Annual Reports
of the Bank of -.rance since the original transfer of this gold was effected gives
counsub startially the sone rezarks in explanation of !Gold deposits in for

tries". Therefore, whLie the presentation of the )osition of this particular

portion of the metal reserve by the Bank of France nay be somewhat misleading,
sts the basis for the allegation that the Bank of i'rance's report
there scarcely
in it self' is Adelieerately inaccurate". B,ovever the f act resins that the metal
reserve behind the French paper currency has heretofore been generally accepted
as being the "total" figure indicated above and not the total alone of "Gold (..n
hand", which from the British statement appears to be the actual extent of the
real metal reserve held by the Bank of France. Even the "official coraluni.ue"
issued by the French Foreioi Office (Exhibit H) while presenting some controversial

features as to the position of the gold in England, is far from convincing as




January 8, 1925.

dear Logie:
:Since say last. letter dated Deceit;:ier 1, I have ;;ours of December IS,
14, 22 and 23, all of which e have read with great interest, as well as the
enuloeures which eccoceanied their.
Lf c;ouf3a, one cannot help out feel a
good deal of sympathy for the predicament in which Bradbury found himself when
the Italiene and Belgiaee decided to vote with the :'rench can the finel eecieiou
as to timber defaults.
I was a good deal impressed with the significance of
the statement coeteined in the Gereee reerxeeedum ycu sent ee ao to whet eight
be gathered in from the operation of the forests and mines owned by the
the whole t.11e; is really eitiful, arid especially
Governeent in the Rhineland.
from our standpoint over here, when one realizes what the decisicn to occupy
the Ruhr hue dose to public opinion.

iet, no ties eiece the end of the wer had public opinion been eettie6
so strongly in the directionlrtakieg some part in aiding economic recovery in
Europe so
as it did not involve
This Opinion
was gettin, stroaaer in almost all pe,Aione lnd strange to say, seemed to have
had a real outburst in eoee parts of tile eitdle Nese.
it is eseplained ey the
fact that the farmer° have come to realize ttat they need foreign rarkete for
IC) or
per cent. of all that they proeuce, and if tnlat;s; go to
Europe they may lose those markets and he obliged te curtail production.
3eside.e that, they have been educated to realize the eetent to wiect their
domestic prices are fixed by world oricee fbr practically all of that sort
C.? thing thet re do ezport.
es you know, the situation got sufficiently
impreseive to lead Borah


introduce a resolution in the senate askine. the

President to call an economic onferenco. Secretary Hughes de:initely indicated
that he would be willing to do so if we were asked by foreign governments.
Senator F:obinece introduced e. revolutioe c.1,inG for the appointment of
representatives on the Repare.tions Commission, and it really looked as though
the country ware waking up to our interest. in econo.eic ef:elirs in 6:trope when

this decision by the French to move further into Germany, I believe, shocked
public opinion here e. good deal.
One result wee the passage of ft resolution
by the Renate, with onLy a few dissenting votes, suggesting to the President
that our troops oe withdrawn from the Rhine.
You and 3oyden doubtless have in ,rind that while ycu get a picture of
the situation built up of all of the intimate details of what is transpiring,
ell that the greet American public sees is a depreciating mark, disagreement
between the Allies, disorder and disagreement in the Near East, and finally
what is interpreted as a military eove evilest lermany.
It all strikes thee
13.8 the height of folly and sadness.

This is the atmosphere i which the l'eritish Coreraleeion arrived to
negotiate the debt.
Fortunately, where the French have sufrered, the 3ritieh
have gained; and still," am not sanguine that they are ready to propose an

January 8, 1923.

adjustment of the debt that will come within the limitations of the


bill, I nevertheless have hopes that they will make a proposal which will

contemplate that the debt will ultimately be fully repaid in some businesslike
fashion and that the program of payment will be so reasonable that the
Administration can submit it to Congress with reasonable hope of having it
approved by special act.
This is the best surmise I can make of what is
going to happen.
Business is beginnir., to get up suite a wholesome boom, and we are
only hoping that it will not develop into an unwholesome inflation.
astonishing thing that we now observe is the continued maintenance of our
export trade notwithstanding conditions abroad; but we are also importing a
good deal and of course it mace very large loans in various parts og* the
I hope you fellows all keep well in Paris, and that you had a good
holiday up in Switzerland.
Bill Williams cot home safely and told us
something of what you had been doing.
new and Stabler have both gotten over
the grippe, although I think Nemo has felt a little shaky, for
was quite ill.
Winslow is living in the house with him, and both ycu and 3asil would be
deli 'hied to see how fine the house looks.

I have teen troubled with a severe cold myself.
It has settled in
my vocal cords, so I will let this pp as it is to-day.
Please dron 7e a line
if there is anything particular in the way of news that ycu would like to
hear from home.
My best to you and Basil.

Colonel James A. Logan, Jr.,
18 rue de Tilsitt,
Paris, France.


Annex 1731 b.
Jarraar7 8, 1923'


At the expiration of the second period prescribed by the Geneva
Protocols, when most of the external parliamentary guarantees have
been devoted to the Austrian loan, it is possible to make a survey
of the situation.

The Swiss franc, which on August 25 was worth 16,000 crowns, is
nor equal to 13,400.

The creTal is stabilised below 15,000 paper

ccrins per gold Grown (14,33f4) at the pres,Int moment).

This etabilit.

and the re

of exchange makes it possible to estimate tho cost

The cost of li/ing has decreased

duGtion of the margin of profit.

(3,C10 and Zip

silkhtly during each of the t:A,,e,';

Sire November 18 there has been no State infi!:tion..

No new

Tieacu7:-y Bonds have been received by the Bank of IS3112 (2550 milliard,

as sgaLnst 2C62).

6f cl,edit to private individuEi

Inflation :y

Lai, moreover, been reducer:, cemixi.cial bills dropping from 900

milliards on November 7 t. 672 millta:de

Dese:Iler 2

ber of croons in cirGuldti,:n :":eta in(!re4:74od oniy

T:le num-

alot of the

retum to the Bank of part of t;ae foreign currencies hoarded by the


as a result (1- rerzewod cenfidense part of the working funds

ez:e1x3ssed in bills: have been converted into crowns.

The sold value

of the crown reserve (280 millions instetA of 1 milliard in 1919)

having been inauffisient for the requirements of the market, this
spirit of confidence would have led to a rapid rise ih the crown invol7ing a serious economic crisis, if the policy of the department
for foreign currencies had not boon to profit by the situation to
constitute a reserve of foreign securities purchased on the open
market against crowns put into circulation.
therefore by real securities.

These are all emerod

The value 'of the reserves in curren-

cies has increased from £70,000 to 4 millions, and the 4;000 milliard
crowns now in circulation are better secured than the 3,000 milliard
crovrns in circulation in November.

Annex 1731 b.

All these fomign currencies are obtaind from the Austrian
public which still Possesses large reserves.

A portion was changed

directly, another portion was handed over to the State when the internal loan was floated and converted by it into crowns in this way.
The Treasury of the Austrian Government has therefore been normal!..

The second period prescribed by the Geneva Frotocols was covered
solely by the resources of the home market:

in add

million j.!old crowns recoived from the Banks, 230 milliards, that is,

more than 16 million:: in gold have been collected from the public.

It is hoped that the issue of Treasury Bonds expressed in gold 4hich
may be suibscribed up to January 16 will produce a total of about
20 millions.

For taw future, operations are being considered for the utilisation of the balances of French, Italian and Czecho-Slovak credits;
the French and already announced that
have Czecho- Slovak Governments

repayment of their advances only out of the pro-

ternal loan, although the vote of 80;. of parl:l.a-

obtained at once, and that under the lsst para-

o Protocol II, immediate repayment May be de-

tion constitutes the first real support from

ble to float an external loan on the basis of
the Austrian gold obtained from the liquidation

l Bank, the assets will be utilised septrately;

ce is no-J preparing a scheme in this connection.

ounts to from 46 to 48 million francs, that is,
crowns; the Czech balance amounts to 81 million

milliards and the Italian balance to 68 million

s, that is, a total amount of about 630 milliards..

nt intends finally to give to the National Bank

old obtained from the liquidation, for the re-

e Treasury Bonds, a temporary operation might

is, :rhich would furnish more than 200 milliards.

been entered to the account of private banks

-3;annex 1731 b.

-;hich advanced 100 milliards to the Government, but this operation
mu: t involve a corresponding increase in paper currency.


this increase is limited by the amount of the security and is not an
unrestricted inflation, such an operation might be criticised and
would therefore be frustrated as soon as the previous operations were

the gold might then be sold to the Bank of Issue and rept'


to it at the same time as the balances, out of the proceeds of the
future loan.

In any case, only 100 milliard. remain available, that

is, a total amount of 730.

The Austrian Government still has available gold amounting to
about 5 millions, collected from the public and deposited at the Lint
(value: 70 milliards); it also has the net profits of the former department for currencies, that is, 300 milliards, half of which is in

The total value of available assets amounts therefore to

1100 milliards which should be entered to account B.
This sum will have to be used to cover the deficit of the next
few months; delays in realisation may however occur in regard to eer..

tain of these assets and in any case the redemption or funding in
gold of the internal bonds on June 1 calls, in the meantime, for the
preparation of the external loan.

It is impossible to redeem in

five months out of the returns from customs and tobacco the capital
and interest of these bonds;

the three months' interest on the in-

stalment of 30 milliards in gold not paid to the banks for the second
quarter is henceforth kept in a special account.

In October and

Vovember, the returns from the above securities amounted respectively
to 163 and 179 milliards.

For December, the sums already entered in

the account amounted to 122 milliards in less than a month; as a result

of the economic crisis, the gross returns are moreover less than these
for previous months,

All the sums placed at the disposal of the Austrian Goverment
to cover its weekly deficit have been gradually released from special
accounts as a result of a request addressed to the General Commissions?:

was for the liquidation of expenditure incurred;

might be

deferred but not avoided.

the payments


Annex 1731. b.

On the other hand, in the establishment of the preliminary budget
for January, every effort Jas made to restrict the estimates of the
various Departments in order to ielduce them to out do ;n expenditure.

The sum originally indicated in no

-ay corresponded to the figures

estimated for the period Januarp.July 1923.

It is obvious that from

the first month of such a period it is impossible to put into practice
all the. economies and increases in returns !hich are distributed aver
Six months:

the extra oeficit on the beginning of the period should

ho:ever, be small enough to be covered at the end of the period in
order that the total expenditure durine the six months may not exceed
the estimates.

The iluetrian Government has therefore proceeded to

suppress expenditure anti on the basis of the schema of revision (annual
expenditure 600 it.illions (gold) it has asked Parliament to authorise

an expenditure of only 200 millions (gold) during the first four

The estimated deficit for January is 404 milliards, that is, 13
milliards per day; on the averade adopted for the first six months,
this figure represents a surplus expenditure of 21 ellliards and a
decrease in receipts amounting to 44 milliards, which is explained by
the fact that the returns from inoome tax are collected quarterly,
the next collection being in ::arch.

On the other hand, in relation

to the October deficit (572 milliards) it represents a possible reduction of 168 milliards;

be at least 150 milliards.

it is hoped that the actual reduction Will
For the first eifrht days in January only

80 milliards wore released.
The scheme of revision has in fact already come into force.


to the presensi more than 27,000 officials have been dismissed,
December 31 being, the date fixed for the dismissal of a large number

of employees.

It is anticipated that the law on the reductidn of

up,ff 'Jill be revised in order to make the provisions more effective;

the law on pensions :ill also be revised with a view to reducing the
rate of the indemnities granted to persons rib° find employment

Annex 1731 b.


The Chancellor has promised that the b11.1

outside the edm:aistration.

on the redaction of the number of lanietries

will be submitted to the

the Departments of the Amy and

Counail before the end of the month;

the Interior would, in particular, be combined as well as the postal,
telegraph and telephone Services


Economies in respect of expendi-

ture on motor oars will be effected by adminietrative means.
All these measures should, however, be still energetic:Ally applies

The new fiscal customs tariffs are already in force;

increased taxes

The indetrial crisis is serious;

come into force in January.

number of unempleered at Vienna alone exceeds 100,000.


In certain

cirolee, this situation gives rise to a discontent which is increased
by the announcement of external loans.

For political as well as for

financial reasons, the Chancellor vary strongly insists on the urgency
of credit operations abroad.

Austria hus eueceadod by means of her oun resources in reaching
the end of the second period without being obliged to place on the foreign market Treasury Bonds guaranteed by the balances, as had been
The oonfidenoe of the Austrian public kns exceeded all


reasonable expectations.

Not only have fifty millions (gold) been

collected, but the gold capital of the new Bank of Issue was subscribed
without difficulty;

its reserve

of foreign currencies, and conse«

quently its status, have been strengthened on account of the change in
public feeling.

After several years of disaster the Austrian public

has naturally little confidence;

doubtless many subscribers in the

country will participate in the foreign credit operations.

They are

awaiting these operations in order to assure themselves that their
hopes were not without foundation.

Further sacrifices may, moreover,

be required of the public when the schemes for foreign credits hove beer.

Owing to the balances and to various available Assets, it appears
that the situation of the Treasury is assured at least until the middle
of Larch.

It is abseluiely necessary to provide, as soon as


.t-nnex 1731 b .

possible, for a transitory credit operation., which will strengthen
internal confidence and tide over the interval which must elapse
before the floating of the final loan of reorganisation. If the
rates of interest of short-dated Treasury Bonds were fixed in
Jan-,al.y, these bonds might be secured by Parliamentary guarantees,
custovE, and tobacco; their issue wou1:7 facilitate that of the
largo loan, by means of which they would bo consolidated or

It appears that various forms of assistance hays been
propeced to tho i_ustrian Government in t1.13 connection it will
be necessary to issue betide. When moreover the issue has been

placed on the foreign market, other resources will become
available : further internal subscriptions could be expected
and a S,.7iss loan, which has boon adopted in principlei could be
floated. This loan, amounting to 20 millions (gold) would furnish
tho Treasury with very considerable now resources.
The reorganisation of Lustria has only just begun, but it
promises certain favourable prospects which cannot 'to ignored.
These hopes cannot and must not be destroyed by delay or
neglic,,ence of any 1:-.ind whatsoevor.



ILLALineik Ammo Tti aUliitUTIAJI211444.1-A


;..lliiit05 Loa 346a,



Zaff141 j0V11311.qat.


?be 'lore")) 1,e1°,frtion Walt introduod


The GiOAltilAii retal the letter II afir tidied to the .:ot.411ission by

Herr Weyer, rwieestin sa bsarinis on :he .uestios of the deficits in the
deliveries of 0°41 to Fr. se duritt; 192.9 reform the .;orsliession took
4100i8lur, 011 the roll:unit frog the .'reouh

IA. deal are Ier.zany

in default. 714 ;Win IOU ;Air° re the i-am Arial un was Na'
htkfi :Armory
Mao in det.ult within aliti


of 'arro,m4oh 17 of Amex II of Part

'11 LI of the 7..raty ui VersailAse.

Lin '4,saemoor .-!.Rh 19V, the erenoh

had entreVitekl to the QOM -Lasion a t. Ale of the elivorioe

of coal nude It i4er.ziay in 1922 and bad °rued it to deal ire the dePa-a .4131'1,11a :11y speultin6. ander the :re ty the
s . ion vas

A ,ed to .,ive the 'Jerson '111:;atton a beaswini; on that 4160%1011
i4c1A-4,; a decision, Out Oa tale ot.her :and in %riot:4 of the Foo-

aolouLs -4hd the ',Wit of jnatioo 4.4ful equity with which it h:::d always
.aou zsair.wItede the .ors dedion

cieolded not .o rofuso this hearini.

it w s in -,huts° uirouobtAnooz, th st the er,oen

tiou turd eon

in 01111d.



th;..3 ;he .er.:inn oversaw; had done iLe

'oast to ur:-..r k;st for z:he3 ro..1-xes in

with aslittle delay zez 308 4:!le Of the re vedontat.ivez ro.uired to 4r
SCAlig& tion from the

It raid in onor..:1 su000ed-

;carman :Vint, of view on the coal .uoation.

ad out ht ff4d )roved !ri..veotole to :1r n,'a the ree nor at that ;390tin:r;

of herr '.uosen, ,xho had to his - Earl.

Jefore %ILA. Owia, to dlf.loultied in


tr41 day

his iseeport he Aould

not A) able to c.,ttes4 before the folio )1n_ day. :ha ;arson Overnsent
sone iflored thx.t herr :,pawn's gyres nom
indle-onsable. as be :alone

eonit Isolain the situ-Lion from the ) of .lew of the Kohlonaysdikat. Hen, alisiohoath would ire
explan tion of the amoral Goal
situation in 'emu ye and the *.f4.orts of the

4er_ban 4-overuses% LO our-

-acute the ....enmissions dosands. : ;err Luesen would eaolain the -Areeedure adapt-

ed ay the Itheinische- estirhalischa Koblensindi tat.


mesentLof representa-

tiren of the other .andioates kg.:. (1 not awearad neesseery an it see well mown

that the sulk of tale re )rfition


this .yradiatte.


the ettu:tiOn had oeen esplainesi ,.Toth from the Dint of vie,/ of the ..-or regm
overn4mt and rroti Lt. t of tr.o Oyndialtes the



nit t recluse of the *010 11111Silation.
o into the ,Anert.1 oiraurarw--nces

Mont TALwazailla Toposed to


of tho sltuntion at owe without rfavertin,.: to the dethils which 1.-.4 alr4'siy
fre,...lently been ezolained.

:semen repreornIt Alves vire acquainted with the

7rerioll -10-aorndtri from its ',WA ict,:tion in the

craom:::_Tslarn st,Ateii

that the deliveries by i.;ernany had oontinasily shown a deficit axocrt in

resent of the month or ctober 1.'120; it further stited that the ,.;o1 talAnn,

in ftzin its ::re ,rhalea of de liveries, h,.,d :.lw .ys ti.aers ageteent of t to
ooul ::.itu.tion in ...ora-cy ;said of the fluctuations in



outimt Of the

rain re.)resent%.tivas could not, however, adult

ettuAtior in ;erlany,

fiiotett scootutt had ifil taken of the


the no.,etiatione on the p:.o "mimes. the zerrlens had al4sys deelared that
the amounts dem .,nded far e;.cesdedi altissores ea uoity; Urn 4A.1.1.211011F.r.7.11

was in `10aseasinn of MA* information on this point «nd uould further draw

ottr't Ion to the explanations 1.ven ay the

,sicheitohlenkommicsar wet


:Agetin; of the ,Jemlis ion held recently in ierlin. he wao further ot.tli..ed
to contest the st-atetnent that auftiOlent :.t000unt had Wien tilicen in the
rro oaresee fixed by the ,:;orstii solos f the fluot um %ions in to. e oat iut o f
0021 in 4evaamy.

In Jantury


-as drawn LI

for the delivery of 1,960,000

tons :J,:se..1 on The outlut of the 1:4st few months or 1921. The avera At monthly

out!nat from the .uhr d-arin; tlis months .,tr Ault


amounted to

7,914,00 tons. it h.d, however, considerably doareheed clurin the folic's,in iaonths;

in .euruary it amOunte..i to 7,6a2,000 tons;

to 7,450,

000 tons, in jun. to 7,2229000 tons, .md in July to 7,793,000 tons. Herr
T, did not Ire the :It lut tbr
Oent'xioed -41

e!:0e!tionai UW2Jvr

r icin

months of =rob and .1.4 as these





The total output of Germany in

wee not the only sourco of so, J.y.

amounted to 11,089,000 tone, z u in 1:al-olt to 14120,000 tons.

>r it

in :Juno.

walk; to the lose of the teeter sart of U),er ilea'', the output tell
to 9,00,00U tens;

in July


amounted to 996d9,000 tons;

is must to

to 10,4o6obee
l':),206000 tens; La Septeawer to 10,753.0.,:)0 tons; in 00t04er
reinired some
tons :Ala in NOvOliMP to 10,753,000 tons. ktfeee fLurea
wdiflo Lion

is Upper Aletwia had

all those fi.uree

mere ,;been

Areviously exported oerti:in

t the -metin, of ;Aovem.,or 7th.

these difficulties the Amman vvernient

bad dons


;tsntit lea;
sate of

its best to do Liver the

of j'per
amounta demanded for the illies And of re the eits.,lon
disposnl Burin: the
delivered rwout 144 of the total quantities et its

vriedJAM41111S14 to the on.

orhotio ily tt:e



of Xayl922.

It hAd rorecver

peroonta.,o after


the (*salon of 1,!71Aer

mash less

althou:h the amount ut its dis?Osol was


and tLe


gist tier that the >erln lovers.
found in the
mast had done its Jest to met the 4110 islands Mil to
proof of Farr

.t severalty of coal in .3eraLsy and the oont basally inoreeeini quaniti.
ties importet. %bleb eves esseoded "re -war ialorts ant Invosed boa* tisuaoial sacrifices es Uormasiy. in ardor to maintain the to'.al of the quanti
ties delivered to the steal'. ;to misty had this 001111 °all ed to sake 'washes**

but the selorienee of the lmit few months )-oved the truth of the

statement mwdo

at the :leetin

of November 7th, iind showed thA these

of the
mould. not bs coaintskined in vigor of the continued dsgreoistion

LmoumAt tllorted had in f,et roOontly been
fags, mAusily had a


on the

reclined n.


icahlat half.

par !haws


to the allies tend oepiilimed

the fact to Ailich AtestieS vas drays Is the 'Frenelt lionorardtsa, ,hat the deliveries to the .ntente h4d decreased in the litet Is menthe, zai thou ; the
4essan output had inoronsed.

The folio An.: atm.. wou.d show that there had not :sea any consider..


able deficit in re,;aru to the



the Allies.

The 7:epar..Ltion

ro,r211.ea of deliveries for the -spied Jraulry let to I:seesaw
3lot, 192. , con.vised b total of 194;3.4000 tons. xclodin, the months of




retrlieki that the retor ,ert of the ,lebref.)-



40 1.inutes :A). 346 a.

ahoy would .4 Accounted for by the eso losion of the month of ?owner,.

'miler of the eileerepunoy tie 'could re in LI better position ti ex.

)la !a if be bad n 0.%portouity of oomparin. t,he erten f Wiring with ;.hosts

Jiould merely repeat the deficit

_Ivan by the !renah

of 8fr, Jven in the ierban statscient die not ,4;:ain the mcr in ..litany
r nwustions.

allowed in ord. lust/ cora ae rat

WALLMIORWE had net antlered

The ;;i1..41111411 Observed th,=t

.id the

John 3radbure 111 .Ittat ti On.

iv an tv the *.roolit Dolot;..tion,

faint 14114:.Lion eceept the fl ;woe

ich hod .a

on asked by the :Am .isbion?

if this lore the ease, how did the :erne* 1:410:Ation ex )L = in tine ci Var-

ese esteem the tail peroonta;as of (lariats? at* was the quash on eked by
Sir John dradoury.


Herr WAL..,1ECHR.411 tH tt,,1.t ae 2i u3.



:iradtvaxsr's Itiestion which ho ad not anderet....o.d to refer only to the

cieilveries to ?rano.*

Ile was* iiewovero pro 'area to 'Ave the tijt100

of to deliverleS Se iranesit ado 'tin_ the 'eathod enolo'ved in the Frensh
emo,vedtta field dealing separately with the deliveries of oval and oak*,
tine* the l'raneh .4Vernaont

the ,erlan 2,overisseat hltd always 121 ttasboti

Impo rt:cnoe to the Litter doliveries. Tbe sob evaded had
treat delivered to t..,e extant of 90,4 leaving a deficit of 104 and the
ea-.1 to the extant of ....bout d7 ;Jo shoin ; a defloit of 13,44

it rama.ined to oho th .t the dmf.loits now/ not the fault of
the Genes* tovOrnlant. jar:- ieth..11L1D..,211 hab full infonution at his

aispaaai and would, deal with the deficits frac' month to atonthe

no of
the shier senses of tLe short.i4e In deliveries midi the ousntity of (seal

rejoOted by the vli.r.lous



the 1111)ntha referred to,

this had arabxsttod to 368,000 tons or Gok; of the total tefiait for the
corT.00spolint; aeetod.

ee* 1,44 Get JO us were of JI1 rt tOtlk-a" iM

rt aloe in

re ;ird to the deficit in the deliveries to .-.'r.noe, ()An to 6he fast
that that otaintry had ?J.:fusel very lar,,a guamtitise. Eerr

,roAsob. o return tu tibia -Jestion of rejections later,







'nu t a!:

, 0,


- 10 -

i nut s ..o. :546-a


- 11 -

ese.einetee .o. -46-a.

;,err Lubeen would explAn that the ,yndloates did

loctl offices.

all in their power to ensure the production of the neceesary euantitles by the mince.

figuren of the deliveries aotually made
in their en-

ehoeed that it was :.ot always possible to execute the
tiret::, but as

eoon !:,i9

the -iederaufbauminieterium noted a defioit

in deliveries, it did all in its
local offices, to em:ee

ower, in collaborAion with the

3oo' the defioienciee at; far

in this connection he drew particular attention to all that hu(:+
been dolle both by the eiederaufteluminiaterium :sad the -eichskoh-

lenkommiesar to follow deliverieo ane to ma e them coil..31de :.4s

fur ae :oesiblo with the domande of the receiving oountries.


frequent oecaelons, not oni;i during the neotietions on the vroother braes, as coon as there was an;; fear that

rumen, but

thc deliveries Ii4ould not be reisularL carried out, neotiations

viers opened with the :flied experte and on licerL every occacion

metals had been fond of issuing from the psrtioulr difficulties.

Vs= ,,J-L=ATF, thought that the

experts must have ob-

t4Aned the impression from these ne?0,tiatione that .ier.nt,ny had

done all in her Tower to ensure the oxeoution of deliveries in
July let, a lottery: e handed to the Committee of eu.:.r-


anteee in ecrlin for transmission to the ;-e!)aratiOn
in view of the oomplainte v :ith reeard to the shortage in deliv-

eries, Turtioularly in ookin! slack.

in view of its erucezioua

;omen :iovernment had on that occasion even offer-

situation the

ed to mete olrohases in -gland for delivery to the Allies.
err .4A1.:14.1.11-iii:-.7.11 had already r fcrred to


the eiffiJultles

oaused by the large quantities of (soul rejected by the receiving

another oiroumstanoe v.hioh increased :,enney's diffi-

oultiou wee the

on reparation
hue received

ileetion of the re- exportation of uo l delivered

,,uring the last few weeks



roof, uhioh he tboulat would not be denied by the



- 13 -

e46 a.


irenob representatives, thet ::,000 tone of reparation °eel had
in one :-oeth betzi exIorted :roe _leeoe-ierr.ine to ewitJerland.
This oirete4etnoe had been generally tIisonesed in ,ierN4ny and
wee ce_lculeted to deoreaoe coneieere.bly the good 14111 of


aentmetore and the lubourine °leases.

11.e0LAZ asked for leroofo (-Jr the suppl;i of coke to

ewitzerland by dealere in :lseoe-.eorrainee

-I: replied that the evidenoe hue' been sup -


lied to the ,,Moo dos eouillerts einistreee;

ho wee :Lore-

over reedy to oubmit It in writirw, ae ht was eoeuainted with
numbcr of the trucke oe:..loyed and the eemee of the firms whioh

hed made theca deliveries.

The ,;ermar, Government had ale() learnt

thct the :Tench Crovernmnt bed been informed of those deliveriee,
and that it was takiw7 eteps to Ixevent re-exportation.

it re-

mained, however, e feet that it oxicted and sac continuin6.

The j1:..11; noted that this stuteeent Lee eoneiderably
diminished the weight of ;'err


would, hoviever, await hie proofs in



observed that owiez to the diffioultiee


experiences by oertein roil aye in 6ealing with the reparation
coal the ',;er:in .;overnment hed suggested the empleziment of other

routes and a lerger delivery throueh the iorts.
over, offered aupplice from mines et ::ix ela-OLapelle
been rojeoted o:


EA, moreYi.oh had

.round thz..t the uricee were too hi

would draw the attention of the -operation eommiosion to the fact
thet Germany had be.:un eeliveries of coal ac earl;, as eeetembor,

1919, although under the.Tre
liveriec until Eay 10th, 1920.

che was not obliged to bei;in delazing this re:rlod, with no con-

cession In return from the allied lowers, eermen;i had delivered

about 5,000,000 tons, which far exceeded the deficit for 19e-,
:hie was a .Toof beet to feet that eke
had done hc.r of the met

e of the very greatest diffloultiee.






added that 141 w

_.e.%red to submit copies

of the orders leaned by the -clohrkalenkommiew=r to tic -yndi3ates in order th.:t the .;o:Juiosion miclt otudy their ohi.:raoter

nd at its die oral all the neoesear


k:oouz ents.

that under the terns of the ,:ommis-

clones decision

lincole in tlo enliveries

was to L640

preeoriiied in

ounted to 1,;-44,000 tons;


t)Ie total of the deliveries of coal effeoted?


A.,:r:211 replied that uouording to the fi,uros

in lie i,osoossion C7verri,-:n;i 1-,d delivered to rr
of 00kfl.


:ono 5.9,000 tons

;:k.6,00(..: tone of coal t.,.nd 6;;,000 tons of lignite bri.*ettes.

in r6urd to the olestion of strikes the ZEALA


fuer -allmichrath agreed uith hi

dtily outut



as to their oonee,uencee.

n Janus;; and eci)rul:ry,

145.8 said to have

amounted to an fc'eragr: o.r nbout 311,000 tone per day, Lohilet be-

fore and after these months it 4tle said to have amounted to 3L0,000


h.L14:.-Th stated that the daily out!lut in the Ackhr
dairing Januar

19;.. amounted to 1319,500 tone;

ounted to 3L0,000 tons;

whilst in -eoember 19;.1, it had amounted

to '516,2100 tons and in ::ovember 319,500 tons.

in ,ebruary it a-

R.C. Minutes No. 346a





The CHAI2i,iAli further enquired how it was that


Germany no longer published any statistics in regard to
her metalurgical industry.

Since the armistice no

further official statistics had been published giving
the situation of this industry in Germany.

Herr FISCHER stated thPt he had no information


as to whether, before the ',w1r, the statistics to which the

Chairman referred were publishe6 officially by the Reich
or unofficially by certain industrial associations.


would enquire, and would give the requisite information.
The CHAIRLiAN pointed out that metallurgical


industry in Germany had a definite output;

before the

armistice the total of this output was included in the
officii=1 statistics.

In France this figure was still

published and he would submit it to the Commission but
he could not compLre the
longer published in Germany.
The C-:AIRLIAN next enquired whether the German


Government was acquainted with certtin proposals made by
the German Ambassador in Parts to the French Government.
The Ambassador had requested the French Government to
receive Herr Stinnes and other German manufacturers with
a view to reaching an agreement with the French manufacturers.

Herr Stinnes and his colleagues were ready to

place all the cOal required by French manufacturers at
their disposal.

Was it their intention that this coal

should be ten from reparation coal or was it to be
delivered in addition ?

As the proposal had been official

the German Delegation might reply without hesitation.



R.I. Vinnteu go. 346a.



A.nutea No. :7.462.


P.C. Ulnutos No. c4Ga.
fforr WALTAIOIRATE replied that the information received


by M. Mauclere confirmed his previous statownt,

He understood

that u further thousand tons htid been exported by a Strasburg

firm to the firm of 3ohaeffer 'land in Switzerind.

7e had

received thie information from various seuroes in ,lormany and

"witgterind and not from M. Le aormund.

le wsA5 thus in a

position to stAte thLt the news had caused some disquitude in

The C't!d:AAN reolled that lorr Wallmichrath had etted
that 7,000 tons were exported lonthly from Alsaoe-torraine to

The only fLot of this nfttnre which had been

reported was in filet fraudulent and had been punlohed as
M, Ileuelere 11:A stated.

M. MAUCIARE bog:red lei vo to explain that point.


of the ':,000 tone mentioned by Mawr Wallmiohrath, 2,000 had been
trfIced and immedii,te vanotione had been applied ea u result.

The ?wrench Delegaion would Initiate the -lost sot rchinrr enquiry

into the 1,000 tons which remained to be accounte3 for.

Sir J1MD TUMMY pointed out that the tr,blo submitted by


the 7renoh Government showed
19E2 up to 74oember 10th.

deficit of 17.2:7. for the yertr

The deficit for the Month of February

was muoh lermor and Amounted to :56X, whilst the fiRures for
the month of Deoember were not complete.

ler? ¶allmiohrath,

on the other hand, estimated the deficit nt

fcr lower fi7ure,

larking a rough calculation, omitting the month of IFebrunry and

inoludina the revised figures for Deoember, he obtained aplroximately the fi,,,mre of 14.6"

to "canoe and T.uxemburg.


for the deficiencies in the deliveries
lerr -allmichrath, on the ot'-ler hand,

gsvo a fiemre of 6.r. for the deficit in the deliveries to all
the Allies.



7.7. Minutes le. 346a.


!err WALTMC4RfiTR replied thet the difference woe due


to the fact thet the fiuree of 6.5.4 represented the pereentage
after the deduction of the quantities rejected.
nir .715.N BRADISURT pointoyi out th'J,, t1 the quntitios


re3eoted were omitted, the deficieney would be inertr,ued.

the Trench memerundu


he underetood thnt the fiFmros were b,,sed

on the quantities ocorted.
rerr WAT/IIICIRA,TE replied that the li'renoh qure


the amount of cool acaor)ted and excluded the quantities re2jocted.

In arriving at the Llevaan fiure, the quentitieu rejected were
treat ©d ae if they hied been delivemi.

3o that the 6.F.


amounted to 9.5%


JCff J IRAD1U7Y understood that the figure of 6.15

thou represented the difference between the Programme f.nlree
and the quE,ntities ten ered, %nd not the diffterence between the

votTremme firures r,nd the quentities aotually accepted.


deficit in the deliveries to the Alliee, emittin3 the month of
'February, amounted to 9.0 and not to 14.51.
!!err WALLMICIRATM, roplyin


to a question put by

lemelmane earlier in the Ueeting, etnted that the '2'erman

reprewlntrtivee b-sod their ottement on the most urgent pro,,rfmme
which provided for ! delivery of 1.7 million tone in Jolurry and
1.6 in the subsequent months.

The Prenoh figureu were, on the

other hand, based on the execution of the larger


Sir ,TTTN BPADBURY observed thet thin nocounte- for a

pert only of the difference.

e enquired whether `Tern

that the defloieney for the eleven months of 1922,

oxoluding the month of 'ebruary, in respect of the Pmounts accepted
by 7ranee and Luxemburg ae compered with the total of the 'JownieBien's programme, was correctly represented ey the figure 14.6.

Nair WAL7MIONRATH replied thr.:, before giving n definite

R.C. Minutes Do. 2462.


answer, the fTerman representatives would have to make the necoeeary cloulationts nnd comp' re the French figures with their own.
Sir J'!::


pointed out that it was very important

to reeoh an agreement on thin firuie, as boforo pronouncing
itt finding, the Commission naturelly wished to have definite
fi-urce at its disposal.

Importence but one of from

A diVerence of 1

was not of much

to 4.1, was important.

!err FISCHER thou -ht that it would not be possible for


the 3,errivl reprenentetives to give a generel reeumo of the pitmelon and t o e nee a eta temont from a juridiael point of view
hrd ?ends his stetement on behalf of the ;:olllon-

until ''err


;Le eerie as the evening of Jenuery Gth he had informed

the Jommietion that it would be impossible for n11 the reprenen-

tativee of the 3ormen lovornment to be prevent at tt meeting
and he therefore requeetee that the mooting uhould be adjourned
and continued the following morning in order to allow '`err Telbeen

to be present.
The 'looting wan adjourned at 5.Eu p.m. and reeumed on


'Tannery 9th at 9.30 a.m..

The ;carmen Deleeetion wee introduoed.


nerr LITB!'.311 understood thee. the members of the joe,mission

wished to hoer a detailed eta ter

t e to the manner in which the

oonl deliveries on account of reperstion were oerried out.


Zohleneyndiket oroh month received deteile from the 3ermen 4overnment as to the deliveries to be effected. It was firet given general dirnotions an to the totel fieuree of the deliveries required;
deta=ils of the proeramme were then wor;ced out at "so can, and the

77ndikat subeequentle received definite instruetione from the
lovernment ea to the execution of the proeremme.

The i:ohlen-

syndikat sent in dzAly reports to the .lorlen lavernment concerning
the eeeoution of the deliveries.

These reports naturally did not




R.C. Minutes No. 346a.

lanu'es no. 346a.


Difficulties Lis() frequently, Grose eL4


the port of

Duisburg 7uhrort, owin7 to laek of tonnaTe for
This reenited in the

few d!4ye.

coamulltion of rolling ;stock loeded

with conl at the norte :,nd the reilwup, were force4 to °heck
the trnneport.

'in, in winter, two tIr three atVg0(13 of

frost soifficlea to renior the leudinq of washed coal imposo.blo,

7nhrort could not be sent

nnd co -1 roluired forn-niebur
there but 111 to be el.ven
wag re. -Mired there or not.


different iiroction, wbether it
'nese difficra2tie;; re3ulted in

fresh deficits for Which on ono we

3tvikes in the tares, on the

ehipoin;.., in the ports

and elsewhere, vInsed fnrt' diffioult7.

"err uussrn he -8

or.refully elmminel the whole of the 19ZE 3011 1elivlr7 seaeon

and ?Ica cacertninei that dsrine that period t7ero aad uaen a
Dutch shiving strile, a dock strike at 7,1rtmund in ItYly and

qenerta 3eriarn rtAlwey etri::e in 7abrnnry.

otrikes brad cleo token pince.

There had, moreover, Oeon an

interruption of trtffia on the nhine

and wren all

these dii"ioulties were rookonkA together with the small
inevitable i.corl difl.anitles, he we bound to express
Lztonishment that in spite of 11.1ec difficultiev, the 3om-

mission'e progrwe htid been eYeoutekt with 3uc4 a snail

qerr 711r7711 had spent 20 years In the Loterwtional

coA.1 trede, the first 6 of willeh he had spent with the Kohlen-


"le had hod exrerienoe of transLotions with :girlieh,

Awrican and Jcpeneee minou End worad point. ont (end any
meirellnt wotad anrroborsto him!, that r

deficit of 10':

wee genertny admitted 'nt,_rt from nny rillo4cnce

or stri'

Then he aonaidered the pertlot:-r diffieultiee of the pro-

amme of deliveriee im,?osed on lormny Lnd thy ticial
efforts of the tohlenoynditat, the '.7ormln Governmext



P.C. I.:it:lutes no. 3,46a.


R.O. Minutoe ao. 346a.



In tho first pl,oe, Herr '7nllmichrnth and ''.err Inbsen hilve

oloLvly dhowzi tht vyrionci rPineons of foroe mPjenre, Ynd
oircuosttibac*, not with!o tl,e control of the lormen Government
hnvo actil-oined to 014/1130 the ler7li,n deliverir,s to fell behind

the nTop..Temmes fixed.

'irther, it :otwt be noted tnt lemn117

there iu a limit to the oblimation to melee deliveriee in the

This limit le fired at the point nt whioh any of Dues..

inc!reaso In delivortes vtonid be bnand eerionely to ondnoper

the exictence of the economic and the internal life of lerrnany,

It to recoteed in the 2resty of Vert:Pince.

a principle

In the reprrAlon lnoetion, tAt Oerltcny's obligations to
delivories eh.00ld oorse 't
do/iveri..m 4D'


P.A tho 'Unit


hnr otpnott7 to

h$71! vital rood u.

onrid Exi)relmion An n nnmt,or of provisions;


This lrinainle
I rofor to

274, Parepreph 4, If Annex II% nnl ?evIrTeph 13 of
Anne x V.


it ferthor rectal the strttanent of the Allied

Powors in thin nonnection, in !ht

rote donprtneti to the German

orag; Toleg.ation on June 16th. 1919.

helimvno that the

The lerrtr-n Onvornnent

(,11eri,tion Corrninsion, it itr deoleion,

o be,ond thin priroiple of the l!nit of lermrny's

obligption to ;Ia4e delierion, ollpocin177 cling) it in pr.rtiatlarly ernross48 in the .section on (mil dolivf,rion.
"Gerraen, 11, Ir fnot. 41oltrnred ell tho norl vhSol. B3-1,

in if

poeition to Itliver withort P:nrvr

life Pni

p'enerni ennnolvr.

her interml

*be lieu even reseel

7 helievp there le no need far -e to civp r niotvr,7 of
sitimtion to which ';ermon eoonomy has been broymtt bv

-forced deprIvtion
hte, on



19E2 Seri enj

coal, rirop

ne7,,ration lemnl!cion

ockvvionz, ,CeirSa dett21145 statcconto on
I will only piInt art ono,' rain Vrit daring
aonsidorably inorerasd %at. 14portation of coal

from athsr aountries, despite the f &r himher i)rioes which had




A.tiJailateo MO. 34iab

that, a the swim of

Herr r 130)1,;31


3sparatias Oloodoeton ow* wale, he hal WNW :srosidont of the 4rLfeakialltielleart-lselent in ario tor-al:tout


;ttaing the whole er that period he nod followed

the question of seal deliveries with the very greatest

attention, althoutli he bad not iainself waisted at the
intorwiewe betaen the

licd tux German experts.


lorw -i*allmiehrath hod it lad the day befell. matinee
antinually toot place throughout the yaw 1932 between
representatives of the !le men (love 3nuseat aiel



,ut th.:se *sett:coo the Urns& reprosentatiVes

nod coatianally uovotod their boat effort:: to the soluti n
of tho problem of ortrrying out in .!raotico the orLien of the
i,;0:1:18111 a I tai whioh were really lisposalhis of ovecutiue.


was finely connived that the Allied roprenientetives amt
hnvo salad the oostrieti.)n from those rolpoated 43:ffivoreaticne

that everything possible was boin .. done on the '4brocn side.

in those dissuasions r. way out et the diffieuIties had
always been founds sad a mass disavowed of obt:Aning

flea lemony the !Treats.% passible quantify of deliveries.
vegysae on the Tier ti aide had &Also ell in his ',owes,

Aio lade Vervain. be

Lfreat17 surprised to ror4

is the r reuoh ate Is the Allies that lemony
all,y roduad hew doliverios.

:qe was swam that this

gels was a political declaration sad thought that the
0111.14 PIMA vift110-4 %VA WA a politteal oripageotien,



thenria ex;iressell.

ia.ongtot that orvnthon to in the Yrehoh no tie

then 4tla rma niche in the 'IOW of its fromen was









*a, At as





liar aka tAbil;Btriff stoteti toot It wail 0011611 forma



that the dollrerles of eosi for tam your 1)U bat tallest short
of the pro foam* 144 6 arm Iqr tho ,:omisslofte

It was also

cocoon mound that the sotaal figures ,,ro, wed on both sides
tug searly aggsmod. .41owing for tit" snail disortpaney ia

the 3eraru fleillimai to r the month of January anki giving tin

*misfit of tom doubt In roopeot of those Metros to .ormity.

air ona 34,421 orriyod at an actual nose for tat shortage
of 2, million tens or over VW*

!le yea disposed to think

that aaottiing 114e 60,., of that hasnat vas dam to sautes Mali

*Wit be 60/soribed as ''foroo sajeuro", enoh as strikes, eta.
Alen was therefor* left ft fiefirilte short go of

not dm

to 'item reajourog, le Us aoxae of oseses width attested tile

material deliver/ of coll. -7'ners reteelaiel the inter fluesti'al
as to how far tam° deliveries hod hoes intorfesed with
OW filament economic, ourreaoy, awl flaw:At:1 situntla of

("hat was a point *limb he a LA not prose to art *


is detail at that strres

ha AO alswarly dismissed It st

VAaidelab1e length in *onmotion wits timber eiollverion, but
he wished to emphasis* Its Importune* Wi2014 oonsidering wiatior

the tailors ma dna to oases attain the ooutrol of the deems*

afire lam two sew eolflois ono, in 3ir John
SILOntEdfle view, laseper410 *Utast., to the smeoptans of

the ~sal put forward. by the mesh


there MO the 4isoisioa of the *1:: fV. Iola of blank list last.
Pt Si

;1r John 31,,ZWAt hot aisOaey stated, It sippossoi to his

hi) at 11I held that view, In spit* of the majority dastsicia

rinitio heti been toVon


.Wraission vas bound to deal




.:Anntes ,Ltee 34de

31.10 sig deilv



rin.i been

a matter of VOW i7r3 at

di moulty, ant had to sea extent oaused a differense of opinion
within the COMMileslem itself:

The ;;e,leliseicat followed m ;policy

blood on oempromieho mma pro

.311 he been fait c'ewel tower tOos

ocuo 110hore of the OhNlithel

thought acce.bable aid laipwr thos

some other Imesbere had they been left to themselves, wealg Noe
been disposed to consider aosiroble0

:As policy of the Conmissiln.. if a policy of ooka,r001,20


mould be inscribed ia onorol to
p 1*s lure la tiro

- ?mei bh4in to put cvlustant

'enema Otwormoont to golivor the maxiLum

Aantitins via tah Cron time to time Gould h4 ostraotod frm it.
regreames, t bereft re, IreSe Id& dOwoLwhish romosonted + lir

Jon* MADMINT thou.iat 14 the okiniln of everyone

the zeugma

mounts Nruloh it emit thettOtt likely emit be extracted from
*imam, visa tne deficiencies were, to r the tire beta; winirod

th a 'low to preeellrO alariC11104..At to loroVe Jeliveries

over the most period,

i;ntil a few secirs af.lo no °Motel

ine Ignition had been gl Ten b.

moath by month en tin

tee ;,:ommtssiqn that these foliar*,


ert Of tee ,,organ ,Aseerement

trosted as a emu& for toMtne Motion nwtor porogrovik 17 of

mem 1/4,

The last referees" mOdeh air aloha -31030Y WA been

Able to trace vrith mord to the application of that

prelri I ra

in au o Motel soamoniaati4n by the Oemaission itself vas in the
month of .1111seabsr 1921.

ol the 30th December 1921, the

iparati a Ceeteeleitiole 14 4 letter to the Paologolk


04promeed the hope that "it will no t be obliAned to Gas Mar the

qmostidn of welling the attenti-an of the alitod Govoroolits to
the fellure on the port of Germany to ful 411 gait r db 1 Ve..;1111s

14 rope to Lile del ivory of sea".
imAressioh no doubt


lzat extremel7, 474orJed

the richt of the ;.lonr:leei

to put


40.4algin so.34


j. 1. L..f.

tits* WWI" psirtassain a. 17or his own part air John
3:441/UT:T il,ai fist thialt that tag ::r alai to the

Gowersmonte to apply NI ainVes or onnstraist arisbr: out

of the applioatiels of pasokilwh 18 was Bleu) to produss aim

suits as satisfootory as those which had been obtalsoi by ths


;;opaktilli an up to tho

tt seenoti to kin iimpossibls

that that questing **M bo onesidereti in Tacna*, altogether

amrIP faun the Orval :e tinti

grastiv, ant dare

porfornenass tabs demanded faun ilernagir LA the future.

seuid not attempt the view that rttractraph 17 vim* in *RI way
intend at as a mama of yunisoai :4; -*e poesy for past defaults

italowt Ord to the tics when those ilefaults were

In that 03nnestion the use of Vs yard

"forthwith." me very instruotlyo.
it to sea rIe

.fir Joint BUDA/71T vast

that U at any ti a tip

,;or ralasion eassuataasd a.

h ditch it had
uo force to dont, it rould lat.p.atiataly sail in the auffport
efinat attitude, on the r...ort of )erisany

of those oh) had tile :ow:merry fovea at voile disloaal4
Tititt MIS tat) eitustinn rhioh ooeurred in too Intrwil r of
1431), whoa tas ,:evelaue 4aysnlan3e vsfussti ,:oLivory


tatieh was Mtn at the pit he 4 awaiting d brood.

was the position at Us sweat?

Up Is the quarter ending ixa1y Bist in; aortalh ono:totes
of *olive*, though lass in than tit Illitortsges
whisk tuid r, seriously arisen, night

sammiad as a dandle Asrinno0


finanat al

nn,.) trebly rove been


tiro the

L*011 *1 1011 militated arninst seal

dollvories woro a at so straws as they wort st

'two, dit a iladt

if a proposal .sad boon natio at the it of July, Mass peva/


- mutes


lir John AllADDIMIT 4)4 sot Agri rit that Noutine he

rale, the ,.liasti41 111 IVNOTO nintroversiol felM USA


imovitable, but Its ASA eontenti that the Cassissios

Alt/tests had, rightly sr wrongly, fo 1 lowed a sonata

42finito polloy with tegastl to (Rol delivories
pre sAnt g, ri00 IAL MN one to rivers. Mat poliey


!0:-.3Filesina was perfestly sonlatent so to &e, bet It was
impassible for aura, such aeWou to be tams brssequily

oat without re gerd to p raviolis


ue rsauost ands to the i.lorusiosinn lsy the &reach


Ialugation iu 0431UNIAtiatl vti tat Unbar elaliweries we* made

on the Oxprees dessani of the /mash


on tie

present u,rosion the wisest woe sate by the ;rensh
ielogsto in nig ant ammo

filar "ha stipsun ftvi

loom w;sot-sr awl significsamm etteuld bs attaeheti to this

attains,s but in eq woe toga etateasate

he boon

sots entail*, the Jorailesiet WWI Wan that the policqf
tow beiv argot% as UM Oustiestas vas the policy of the
zmoh lavermrpnt.


hs 0:14.111; pointed out th2t twat was set tla oaly
traosima on waleh the .:rohah ;:oluento was setts, is
eon° ert

tn ills Go le simat,


mob leverammt

knit taken its responsibility before the Alia rlenferenue
Its Delegate loos nil; rosy moinility before the Comission,

olearly he submittal his da& in complete
ageolhooat wi tn his lowermost,




.;Anutes No. 346a,



inewer in conr..eotion With the deliveries of tutor and the
Under those concition.s,

Oonnissi On had taiten its decision.

without detraatin in any way from the vi:ry

,.,(21,ht of

Sir John iradoury's ar,weest end the strict i^t arti,itty
which insdired him, the cJ13eaI81l h had n,..thin, to add.
He would 1.1*r.nk Jir John 31%41 _1y for statint; that 1-4

it was not as

'tit no oustruotion in the why

attitude which he would es eot from .ir Joan ir dbury

or from ny of his oollea ues.

The OH

11 had ,-.1ways

eon struck with the f ee, om with which each nierioer of

;(*.c1 Liesion ex-)ressed his views meth f_nd voted :,cJordin to

he .ifferenoes

the dictates of his own oonscienoe.

...filch were mound to arise in no way of eoted either the

»inesc of their rol., or their s )irit of
here re7ethed one .ueation .rid one ::,lone:

did the deficits in the deliveries of cosi represent e.
the 'asenin of


17 of

nnex IL

U. DIAL:4AX did not Taloa'. to speak at lerc,tft on a


.ueotion, the history of .thich had .1e 'n followed wassesin ly
ay the 20'3 iesion. ::o sleech ee.aid therefore ffeot his

vote, es

Jince in fuot,

dive/6..3+1143es of view

covered tee corsider tion of the rexulte &r IS

cat of the decision to co taken

the om-desion :.nek to

oest riethod of ensurin.,; more eLisfiostory deliveries.

corfined bilself to stating that


,erkaany ht,,d not c.ti.rriea

out the ire raiaae of the -orn .lesion. he did not think

ar yin; as to the
for his town cart he thoujit it

that there was myth in.; to

extent of the ceftoit;


sufiielent to state that for

rlinc 0





Ina es


- 54




'ale only fact vrorthy of '.e:ktlon was th..:t jud;.-ent had been

even and that, if Ilera:roy did not aot in aoce-d.Lnoe

therewith, the IrsAy enjoined on the Aavaiesion a

reference to the ,overnlents 3. D.ILACROlv. did not
IOU had ever waived this lrovise
think that the

in the Treaty, nor in f.ot ooilld it -alive done so


logiOal ednoluAon, the re:iatts of vhioh clid not

require to :a considered, los that then: existed a
serious 4.Lef,iult 411oh the ;ermine had not justified save

oonsiderations contra ry to the Treaty. The latest
info rmat ion ;:tve nothin to show that the- .,ernan

overn:wnt hAd aide the least effort to deserve :iny
POO Lai indu1_,enee.

should us notife,

default therefore existed, vthlah

nu relorted.

The Ilarguis 44,v GO noted that :11 the
sates ak,.Teek' on the -Tutorial fRota and the only





oe 346a,




!autos o. 346 a,





ralle 346a


llo, 34,6a,

.4-ainutos 'io. .i46




rn Len. to could f



,ierl oxrxs i h f i r

duty in the las tter.

if kir, a4lidojr yam acrd to xlroas in a foe,
words adult oratv bs4 Ladled to do, he would 8.4 that
any /1-4 tAtioct to to.000 *zoo

0;,..triordintry r



ears, non* by mouth, which

eary to cola 411 the dif;lonitioe -tie* tho oxporionoe of
vovious :souths last shown would rise,.

it vas aillierstandaOlo twit's a Anion

of ner on reluiralexis should of:i;ot iono attitude.
fasts (Al thlo *int were
o .1n; on on 'htss Int nd


ooth of re&t import nod in seediest/on with the attest

in th

at her

our000tion, it %Mad ebony

in fiikrnos., to -er..tuky, th t the report should f',1 lhasi

-,ercentq,a *kWh expressed tale 104 extent Of the

- Whi Ica t-Rie default lobo 1tsiort nt front the
huct ex,idinda -

an:Anoint Lvint of 'view, as it.
the roroontago of dirtiest which

was woall, and t hie seat

g had not Si 011ied

r000 nI,,ed as -orevbki

.,dradany hod. -sads u very ooLakderuale offort in a vary

ui fflcult ,14t1,er nd kaml ett;./Lned a very lar:; manatee/
of ovooeso.

*nithstrto confined kitillNiellt to

the olmntary def4ult ln t,ias

::-.1"t Of

slenally sM 1611

to Iowa leer Oapbillty. if, howevor,

reasons which t cal

he bore -Wan 7 a. resort, tao 'welt gat forblior **d leuld

deal with the 4.aho1e question of the failure of :or my
in tho ex )oution
unddr the Tniet7.


ropoid explain t: t the eenditione imposed ay he T'ro ty

exo,3rifiese to


that that if ob,Abilitylind affected not only ai:<radny's

financial sitnhtles bad her financial oOli :Atiow to tile
.11ies, out also her ooli -Alone line these: in rosooct
of 00u1 hind 400d.

Lie would nuethor

tine o inion




-it* areid eves mre encemeterteg a iivorolty of Interpretation.
Rs visual Caroller* ref. Skutt WIWI& 1111111r* than s lure And

staple settee of the dotietit be AVIS.
The .3


t lunged ,1r John



inxt no obetAeles hi trio way. it was Lhoprfore =dor.

sto4d Zh t te .Jcia Le..%on mad uoliftne i.t.3e1f .larely and
aVAlly to .1,rta., netteta.





t ,,tc;



oseo at 12s30

4-441t- 8,


letter sent
in French : to the French Government
in English: to the British
for information to the United States
of America.

Paris, 9th January 1923



The separation Commission has the honour to inform
the British Government that, at its meeting of the 9th January 1923,
it decided by a majority, the British Delegate recording an adverse
vote, that there was, in the deliveries of coal made to France in

192, a default on the part of G-rmany within the meaning of Paragraph
17 of Annex II, Part VIII of the Treaty of Versailles.
In accordance with the terms of paragraph 17 to which
reference is made above, the Commission has the honour to notify the
default thus declared to the Governments concerned.

The British Government is requested to find herewith
enclosed copy of the note of the French Delegation requesting the

Commission to find a default on the part of Germany, and also a copy
of the minutes of the meetings held on the 8th and 9th January, at

which the German Government was heard on the insufficiency of coal
deliveries and at which the Commission decided, in the above terms, to
declare Germany in default.


Louis Barthou
Leon Delacroix.

Paris, 18 rue de Tilsitt.
10 January,1925.

Personal a Confidential

dear Ben,

I enclose herev.ith coN. of the "Italian Criticism of British

Plan and Additional Proposals", dated January 4th 1923, submitted by the
Italian Ambassador della Totetta to the meeting of Prime Linisters.


is the delayed document referred to in next to last paragraph of page 3
of my letter to you of January 5th 1923.

Faithfully yours,

1 encl.

The Honorable Benjamin Strong,
Governor, iederal Reserve Bank
of New York, Nev York City.

JA "E3 A. LOC.,-IN
Paris, 12 January 1923
18 rue de Yilsitt.
Personal and Confidential.

Ey dear Ben,
';:e are sending herewith first draft copy of Linutes No.
346a (Exhibit A) of the meeting of the AeTaration Commission of January 9,
1923, which gives the debate in the Commission preceding the Commission's
report to the Allied Powers of Germany's "default" under Paragraph 17, Annex
II, Part VIII, of the Treaty, concerning shortages in deliveries of coal to
France during the :year l922 (letter reporting default herewith Exhibit B) .
On pages 55 - 60 of Exhibit A will be found certain expressions of personal
opinion of
Boyden made during the meeting.
It will be remembered that
under the terms of the Treaty, and the procedure of the Reparation Commission,
meetings of the Commission are secret. This principle was promptly violated,
as a more or less garbled account of what 1-r. Boyden actually said appeared
in the European and American press.

The French in forcing a report of "default" based on short
deliveries of coal, as in the case of the recent report of "default" on account
of short timber deliveries, were admittedly considering the technical position
-%.-hich such report would give them in their proposed occupation of the Ruhr. The
actual value of shortages in coal deliveries upon which the report of "default"
was based was ro-_zghly 44,500,000 gold marks (approximately iik1,145,000) representing 1,294,188 tons of coal and 990,564 tons of coke out of a total demand
for the same period (the calendar year 1922) of 6,124,500 tons of coal and
3,799,500 tons of coke.
In other words, Germany's shortage was 17,22p of the
Commission's demands.
The Ruhr Occupation:
On January 10 the French Government
issued the text of the notification made to the German Government the same day
In regard to the measures which were to come into force on January 11, 1923.
Un the same day and at the same hour the Belgian Government sent identically
the same notification to the German Government.
The Italian Government did not
send any notification. The following is a translation of the French notification
as published:

"In view of the default declared by the Reparation
Commission and committed by Germany in the execution of the programmes of the Aeparation Commission concerning the deliveries of
timber and coal to France, the French Government, acting in accordance with Paragraphs 17 and 18 of Annex 2, Part 8 of the
Treaty of Versailles, has decided to send into the Auhr a Lission
of Control, composed of engineers, endowed with the necessary
powers to supervise the working of the Lohlensyndikat; to ensure

J. A. L. Or.

To Governor Strong - Personal & Confidential.


"by means of orders given by its president, either to the
syndicate or to the German transport services, the strict
application of the programme fixed by the Reparatidon Commission; and to take all measures necessary for the payment
of reparations.
"The Italian Government has likewise decided to
send Italian engineers to take part in the mission.
"This mission will have powers defined by the
two annexed documents, which the German Government is requested to bring to the attention of the authorities concerned, at
the same time giving them the necessary instructions to act in
accordance with the directions which they contain.
"The French Government wishes to declare that it
has no intention at this moment of carrying out an occupation
of a military kind, or an occupation of a political character.
It simply sends into the uhr a mission of engineers and civil
officials, whose mission is clearly defined. The mission is
intended to ensure that Germany shall respect her obligations
under the Treaty of Versailles.
"The French Government will send into the Ruhr'
only the troops required to safeguard the mission and to guarantee the execution of its mandate. No disturbances and no
changes will be introduced into the normal life of the population, which will be able to continue working in order and
"The German Government has the greatest interest
in facilitating the work of the mission and the posting of the
troops which are necessary to protect it.
The French GoVernment counts on the good will of the German Government, and of the
authorities, whoever they may be.
"In the event of the operations of the officials
of the mission and the placing of the troops which accompany
them being: hindered or compromised by any action whatever, or
in the event of tho local authorities, by positive action or Iv
any neglect, causing any disturbance o the material and economic
life of the region, all copercive measures and sanctions deemed
necessary will immediately be taken.
"ANNIa TE. - --In view of the defaults of Germany
declared by the Reparation Commission in carrying out the deliveries of timber and coal due under the programmes established
by the said Commission, and with the object of ensuring in future the strict execution of the clauses of the Treaty of Versailles regarding reparations, a Lission of Control of the
mines and works of the occupied territories composed of engineers and civil officials, is created as from todar.
The engineers and officials of this mission will have full powers to
require all the administrative bodies, Chambers of Commerce,
organizations of employers, workmen, manufacturers, traders,
etc., to furnish all statistical or other information they may
think it useful to ask for.
"They will have the right to travel about throughout the occupied territory, to enter offices, mines, works,


J. A. L. Jr.

To Governor strong - Personal & Confidential.



"stations, etc., and to consult all books and statistical
The personnel of the German administration, the
representatives ce the industrial and commercial organisations,
will be required, on pain of severe sanctions, to place themselves entirely at the disposal of the engineers and officials
for the performance of their service, and finally, to act in
accordance with the orders which they will receive from the
head of the mission.
The head of the mission will have the
power to prescribe any modifications he may desire in the distribution of fuel or any changes in the destination of wagons
or of boats having fuel.
The engineers and officials of the
mission will be the bearers of a special service order, delivered by the military authorities, which will also serve as a
certificate of identity.
"ANNEe T:0.-- As from January 11, 1923, the programmes of distribution of coal and coke established or carried out
by the Kohlensyndikat will be submitted for aperoval to the
Industrial leiesion of the Ruhr, which will be empowered to modify them if it should consider it necessary. These programmes
must in particular make provision for the complete delivery of
the quantities pr. scribed for the countries of the Entente and
for the occupied territories of the left bank of the Rhine,
and must satisfy the needs of the territories newly occupied.
With these reservations nothing is changed in principle in the
general distribution of the fuel now in force.
"If infractions of the above directions by the Kohlensynelikat or the miners were declared, or if the qualities delivered were unsatisfactory, severe sanctions wculd be taken, independently of the alterations in the destination of trains or
boats which might be ordered be the industrial mission.
"Frequent tests :ill be made by the engineers of the
mission to ensure that the orders of the Kohlensyndikat have been
correctly given and strictly executed."
On January 9, the Belgian Prime Minister, ee Theunis, made a
statement in the Beleien Parliament, in effect, as follows:
"To our very great regret, I will even say to our
deep sorrpw, we had to recognise after a profound study that the
British plan was inacceptuble for Belgium. If we had accepted
this plan we could have abandoned for ever any hope of receiving
a centime for our pensions, reparations, and devastations. We
should have had not a centime to raise our ruins.
The British
elan did not involve a single pledge or a single special guarantee,
and I think it is useless to insist either on its special dispositions or on the serious modifications the plan made in the Treaty
of Versailles. Belgium would have had to pay for German coal and
coke double their value. Belgium was asked to make even heavier
sacrifices than the other States. She would have been ruined.
"It is with conviction (he continued) that I say
that since the signature of peace the German Government has


J. A. L. Jr.

To Governor Strong - Personal & Confidential.



"The heads of the German States have been convened
to meet Friday" (January 12, 1923) "to consider the
measures to be taken.
The success of our efforts
depends on unity of action. The aovernment will unceasingly continue its efforts until the situation is
At the same time the German President, Herr l'jbert, issuea a oclamation to the
German people in substantially the same words as the foregoing communiqué.

On January 11, 1923, French and Belgian troops occupied
the Ruhr.

The afternoon of January 11,
Poincare appeared before the
French Chamber and later the French Senate to explain the action of the L'rovernment.
At the conclusion of his presentation of the Government's position, he received a
vote of confidence of 478 to 86, and a majority in the Senate by a "show of hands".
In his speeches he particularly emphasized his thesis that the action of France
was not "an occupation of the Ruhr", stating "Our engineers are in Essen, our troops
camp outside the townr.
presenting the British proposal as impossible of acceptance by France, he nevertheless pointed to the "harmony" and "friendship" between France and England, stating that the present disagreement based on a difference
of opinion was "a disagreement of views between friends without other significance".
With particular reference to the British plan he stated that "it asked France to one
day risk the chance of receiving 11 billion gold marks for her total share in reparations whereas, as a matter of fact, she is already liable on this account for
'CO billion.
In addition this new reduction under the British proposal very imprudently offers the means for the rapid re-establishing of the old industrial and
commercial system of Germany. The British programme would at an early date reestablish Germany's supremacy over the rest of Europe.
The only concession which the
,programme offers us is to propose that we submit the whole question of securities
to a consortium of bankers.
I have no taste for making bankers the arbitrators of
the rights of France" (great applause)"I am happy to see this demonstration of agreement with ry view.
Indeed, in financial questions we will not confide to international bankers the destinies of our country". Referring to the withdrawal of American
contingents from Coblenz, he said, in effect, that this should not be considered as
a rebuff to France, intimating that the withdrawal was merely the culmination of a
domestic political campaign in America dating many months back.
In closing, to the
surprise even of his opponents, :1. Poincar6 evinced some doubt as to whether "without
British assistance the Ruhr would prove as productive as the French economic experts
were led to believe.
"Undoubtedly", he declared "theseizure of our guarantees :ill
be less productive, but even a small return is better than nothing.
It may be
England is right when she says our policy is wrong. We are not infallible, but up
to the present between Enghnd and France I will not ask you who has been deceived
the more often".
This latter statement, in our judgment, is a most significant one.

We have been talking with the Belgians on the Commission .ho
are very much discouraged in the present situation. Real Belgian opinion is entirely opposed to the Poincare ideas and action. However, with Holland somewhat unfriendly to the North, and with the possibility of Prance holding the Rhineland,
their only hope of gecenting unfavorable economic encirclement is to go with the
French, for so long as the French and Belgians hold the Rhineland
they at least


I/) "242 2



A. L. Jr. To Governor Strong - Personal & Confidential.



/// 42'3
assure for themselves an untrammeled economic outlet to Germany.
In connection with the present Belgian position, it is interesting to report the reactions of the British on the Commission. They tell us
"raw that the Belgians have definitely lined*up with the French they have surrendered
In the
their position of 'compromisers' which they have held since the Armistice.
past the Belgians have been in an especially strong position due to the absence of
an American vote in the Commission. They held a position enabling them to intervene
and suggest the compromise between the divergent French and British pdints of view
which have arisen in the past, and incidentally to reap considerable national beneIn the past we have felt that the Belgians have taken too
fits from such position.
In view, however, of our rupture with
much advantage of their special situation.
the French and the fact that Belgium has definitely lined up with the French, their
position, in the event of a reopening of Franco-British negotiations, will not carry
In -they words, Belgium is a Small Power and is
the same weight as in the past.
now definitely relegated to the position of a Small Power". ';:hile there is some
pique behind this British opinion it nevertheless presents some considerations of

1.4 Delacroix, with whom we have been talking, says he is hopeful that, how the French occupation of the Ruhr is efait accompli", and :ith the
French questioning its financial benefits, France will before long reach a frame of
mind desiring conversations with the British. Delacroix' forecast of events is as
He anticipates an early summoning by L. Poincare of the Germans to a
He is fearful that the German
He Is not sure the Germans will come.
policy will be by passive opposition to draw the French and Belgians farther and
farther into Germany, perhaps necessitating the calling out of additional military
Aside from its psychological effect, the cost would be considerably in
excess of any sums realizable from Germany. As to this passive opposition,
Delacroix referred to the striking example by the withdrawal of the Kohlensyndikat
from the occupied territor;- and by the German announcement of a cessation of reparaIn Li. Delacroix' judgment, progress of events
tion deliveries to France and Belgium.
will force the French to calling the British to their assistance in which event, according to Li. Delacroix, the British will be in the position of the arbitrator.
Optimism is
In our view, I.:. Delacroix is too optimistic.
either Delacroix' failing or blessing-we are not sure which. 111) one knows nor can
There are too many unknown fadtors. Ve feel that it will
guess what will happen.
take h. Poincare and the French public some months longer to appreciate the fallacy
It then may
of their position, and to have thepayahological courage to back dawn.
be too late as in the meantime they will be gradually drawn deeper and deeper into
the German mire. whether this process of being "drawn in" will be the design of
the German Government or whether it is the normal sequence of events following the
In the meantime the
Poincar6 policy of coercion is of little practical importance.
tendency will be for the French to give the maximum publicity lo items on the "credit
side of their Ruhr ledger" and the minimum publicity to items appearing on the "debit
PoincarOs speech in the Chamber he is
However, it will be seen from
preparing the French public for some "desillusionnement" as to the Ruhr occupation
being the panacea for all French financial difficulties.

The Hon, Benjamin Strong,
Governor, Federal Reserve Bank City.
Federal Reserve Bank of St. Louis

Faithfully yours,


Translation Bureau ao.6828.

AMEX 1731 a.


Intelligence Service.
PaRIS, January 11 1923.

No. 14/902-3655.

lir. ManFs.dyean,

General Secretary of the Reparation Commission,

R I S.

As a result of his work with the League of Nations in regard to
the revival of Austria, I requested my colleague, M.Pierre QUESNAY to
draw up for the Members of the Commission a report on the Treasures

adopted with a view to ensuring this revival and th3 results obtained.
In reply to this request M. Oalesnay has just communicated to me the
two notes which I enclose herewith. The first deals especially with the
examination of Austria's fiduciary ciroulatiot; the second is a general
report on the situation of the country at the beginning of 1923 and on the
prospects anticipatod for this your.
These two notes show to what extent tlw roival of confidence in an
improvennnt in the situation of Austria has contributed to facilitate the
task of the League of Nations. It may even be said that the encouraging
results obtained up to the present have been due solely to this renewed
confidence, I believe that the knowledx.; of these preliminary results in
regard to Austria may be of great us: in the examination of the measures
adopted with a view to the revival of Germany and to the improvorrnt of

her financial situation,
I should therefore be obliged it you would have I:, Quesnayla notes
reproduced and circulated to those to ahem they mi4y be of interest .
Eine 1 azurD

Maurice FMiE.

besalstia. kreau

kALOA 1n4

Po. fidid

January lb,

Nov, to TIC Iii.JAMIATI; 5 C U3' I3'.+ I V


The ireneh and deliginn aelogutIono have the honour to

lay War* the Coossisoida ter imadiato oorsider=lien the folio it
(in Airman, 1 ,


the Presets abti Belgian

tho to rm,n Government of the measures vhich thoy

Governments notifio

interddo4 taking.: in Coy sequence of tho nctleo given by the Toper:Atlas

comedgaloa under pl,reepaph 17 or Annex If to fart Vill of the Treaty

of Versilles of Gorampros agoAllat in the perform-roe of the
deliveries of sots and Mai deliveries of wood,
in its reply to %bozo notifications, 4A30411 Jamaary
19:09 the Gorman Government doo1or,..1 thrita

.54 long us this broseh of the grotty due to the violent
stature of the centre of dermas OCOTIONSIC life (outlives
Vs yraetioLl eonsequenses are not uvertod, dermal,
is not in u position to mAge deliveries to the ;ere
rospensibls fur this state of affairs,"

2be dermAn Govern:lc
Ael4r,tiort GonnileeIon by

civenoles Ott



t notified the said re;ly to tin,

letter dated Jeruary 1Z,

In an ofTleiJa stAement publIshk



by tho revs-




Await 11540,

the Aeichsicohlenkomnisaar annobnced that'
Wale Hsieh 11111 not sifts spy further pimento in imps"poet of ocv-1 delivered to OPMADO sad Belgium under the laylaiihm

"lion nammisata clauses, nor ph, the Snots of traturting nosh
"fuel by rail or waterway".
AS no- course of a meeting held at ,Set.en Os Jnstusry 1:59

1:4. under the ChnirmaNship of 4, CikT.. Chief of the

Issiun of control,

Aar? VAMLN, 'perking on beh4lf of the misiownerue confirmed the fact
that the managers of the mines had received from the vier' n :,uvtrutilent

the follCuine eommunieaties4

"Fr Ansa and Selena Waft oseried out
''v::nion of unoccupied territory, SernOmy is no longer in a
"pus/nor to supply itspelration Goole


"ate .nich & i 11 not m,s r.ny Iurther p4pmente in roe"peel of eon . delivered to these countries under the Aeparatien

"clauses, nor ray Om costs of trvnuporting such fuel by rail
"or vaterwuy,
2he fact is eonfirmed hy 4 telegro from the bureatt of

the ,epnve,tion Gomniseion 41 eseen, relived on oftmdary U, at $ Nu.

loo delivery of Aev-r nun coel Irle sage ea Jammary 14 91641

,tok:Or-ing to the latest infarmatiun received, th* deliveries were not
resumed out the loth.




on January lb at 1000 as Michas

The Berman Livestock Coorlisslos has officially irlonsei
the frernh and belgi4n Livestock :;ervioss *hot -11 deliveries,
both reparation :cad reiNtitution, will be stuipended im ediately,
mei that the trtits ready fur Jes!atableill not loeve,

Is SOrmsaishStan has been mews to the ltslian
Livestoin service .

No. 681A - b,


Annex 1734

ly a letter addressied to the trench and Deletion
Wortrioes, the 3elohsksmetisear hos officially
annoimo0d throt vepurIttiOn 418-liveries will be
suspended IA once.
.0 ocamumicc4tion hrs teen er,de to the Italian

(Z) No coscaunicktton hash bstn mud, by tin) der iun

authorities in regard to restitution deliveries
othe =r that livostesk4 ard up to the present there
has 1046 na ***10100110 it such deliveries. It
,,K, has
10 Iellerotuted, hemmer, that the German
that an etiderior the suspen'
sion of doliveritJAI Via bolos prepored4

Irfonmtion rcceived from ctber seeress by thc French

Delegetios Awe tint as early as JiArtaar7 14 a 43t14) train which VUS
reeky be leave was stopred by the %german authorities.
lies moo ..pplies to

firs n wont: hming 44 horses

destine& for Belgium which vas to :Leave Larovrr ou oguuary 12,
The French and AtilgiAt Delegations are of opinion
0114 those fasts 81148118t

:4) default by 4ermomy within the smening of

11,racrlIph 17 of Annex II to

VIII of the TreAty of Yersz!Alies,

neiooet the Ati;ar4ItIolt Uommls 1,41 tomediateky to declarep three

defaults tvd to civet nutice

th:3 iisdiately to %ilk-. Uovernments




January 10, 1923.

Dear Colonel organ:

noverncr Strong in his letter to you of January 8, did
not ,:,alke Dention of the letters you sent him u:Ver dates of

November 24,

P7 and 28, and those o7 Decemner 1 snd 8.

I am

sorry to say that this oversight was entirely my fault as I
failed to ,:lace these letters before bin for attention at the

time he answered the oth?re.
They will, however, be ?ersonally

aclnowledzed on his

return from Washington.
I trust you will pardon my


and hope that it

has in no way caused you any inconvenience.
Yours very truly,

Secretary to
Governor St rong.

Colonel James A. Logan, Jr.,
18 rue de Tileitt,
Paris, France.

ONMX 175a a

T.tafiLATIA atlitkakil - No. 62476



+1.4zTi.4:YnR:.:.153Is ti

MIAL,, January 1:), 1923,

t 1714

To the it i,._it.1/011 GOAA3 61411

On Jimmy lu, 114, tbo FronAk oat Deleon
uovcrnmerts sent to the Unman Government identical notifiw=tions concerning action to be t.4cen in the b sin of


In the mePntime this action has been lauxicheu.
Zhe German Govvrnmert has the to comnUrioalte
to the feparation cenmission the ..trove-montiona.' uotifications

(1), together with the replies just sent


(1) 4nnexes 1ij4; biev.41

(2) Annexes 17:;

the' oerman Uovernmunt



listed Jan.15, 1923

Rood. 9:53 A.. Jan. 16th

Secretary of State,

7ashing ton.
25, January 15, 8 p.m.

-iscellaneous reparation receipts January let to 15th:

Luxemburg coal 3,545 pounds, dyestuffs *1,260 credit Belcium.


British reparation recovery aot DeoeJber 606,000 pounds retained Great
Britain under .larch 11 agreement ends the army costs.



wia.A?tox ocanassios

oretariat Goner e.1.

aril, 16 1.kiszary 1923.

':ho Liemoral -;eorotary,
Asp twat ion

onsli 0.- ion

To the unorfloiLl Del ate for the


tod Aates of .zisri


to tre1.1.3nit herewith, for the infor?.3ttion

of your .;4,rvs;noont °copy of a letter .443 th. haz beeln aldressed

this drat; to the

noh, Britt*, itz,litst n LoI4ttn keeisrugents.

(s1'nattaro Mk:11a sa)
Assistant Generkl 3oorotury.

Letttir a. nt

th.r'rehohs toto dr: nob, Belgian and Italia*for vern
i 11 shs .i re ti sh Uombrzclent, said Goments. to U. ;.i./hoffiolki Delegate



16 January 1911.


The _i441201011 OOiti1 d ;011

he brit ish Goverment.
,ei:.rat ion Gansu/as ion has tlx hosour to Infonst tho British ['av-

erment that at the mooting held today tho 16th sh,nuary 19;:.3, it r,.'ol.ted follow-

isw decision by three votes, the brit ish Delegate abstaining*
January 13, 1922, there hns been 7X) dal ivory of reparation


ieis4konLatear ht,s offielaUy announcted, by letters addressed
2) t
ems. that mparation deliveries would be suspendto the drench sod *.lgit.n
ed at oz.'s*
ranch r.nd
3) the .4ornan Livestook Cernsiesion has offieially informed t)
11611:;ikin mites that L.11 6 I.ivories on reparation and restitution ao oust would
be ..t1;:f:ended, that the treins ready for despat ch wage not leaVes and that in
elites 34imiary 12, toe trains of cattle :Jed horses hulls be stopped by the
esr.e authorities;
lel 'borate putting into
this sitaations-rises from the voluntary
afoot of a notification raid* on .; wary 1 by the .;ersan Governeent to the
the terms of 7iiinh hive WS ansnmi rztei by the
/ire nth and IdIgian :iovo
demean dowanaseat to the iepttration Come. salons


velu7.t.ury nets .ret of this 6123 )(MS Ion of the perfc)raLnoe of roper*-

Lion tau: rectitution obligations referred to in tilt- Treaty is this olearly established, :vittiout its being necessary to aft tile 'L:terman Oreve rr. men t to Rive further






sins &taw y 13,
bit in the del i Tarte due to a'r an ce ztnd iseleium
o f Uor nrti rrj w i thin the met, fling Of rag;.'sph
trier© are tiro def.- ul Li on th a 0,

17 of *ktulen 11 to :art VIII cf the Treaty of Versailles in rettroot of coat tad
livestock to be &livered on rtparatIon as -*ell &s on restitution Actuount."
Inc tt3oora.,,G3 with the terns of primer& h 17 to which reference
13 made ebove

the Connission N,-.8 the honour to not ify the def.:Alto Vire de-

clared to the levermeLt 9

t..) ortserned.

if /ad) Louis blitT11011



Letro enro,:me
uvorneman t fr-Lrua::is


i t -Lien







co pie our information

en an ,/

ale jue

lei aux des ..tots


le 16 howler 192j.

14 tX1143.4014



.tions i'hon,:eur de Cairo eonlaitre aau ,owi)rueIstIon des
swat osi,,, Etutau Gourd, de sa se..noe tenue au:jourd'hui 16 Jawrier alio a )ris,
sio.Jaten.Ant do voter, la decision 01,41,1r.
par traits ioix,
Ita l;(441/8:0101i DSO is
co n sid er.Lnt


:ue de Ads le 13 *Lawlor cour.Int auoune ti. r.iaoss du da :Arbon de re.)aration
oto effect-ass;

,xtr lettre :AdrOdSefi
"kt) itte Le :.eichairon ia.,:er a fat con: aitre
4112, .,:erstioes trandale et cal,. quo .4.0s livraisons all titre de reoaration earAent
arrotee im edi almost I
la corn 4.031011 llamado 'our la eLo)tel a ottioiellemont al ni to -44-..
:erlices franoais et ael,,e .4u* touts& livraisons, tent reaaration itao ratitution* seraient arreteee, ;us los trains erste a etre o . ies no partirgient
et qu'offectivax.nt, doe is It shavier* deux tra.Ins do Jetail it de ell,..1%Lux
lez ,,utoritee ailemendost
ont ate arrotes


oons I. de rank

"Liu° cot eta.t de °hoses est /a suite donnee Yolontairclent et de irupos deli4ere
is cieferli,ent allenUnd wax Ouvernea lane notifleAtion i .ite le 1,2 ;invier

merits fr.nelis et uel,;e, notifie.tien Mont Les terms ont ate, -sr le
client 4. LiemArid., 00r, 431/114111)11 K 10,

-0T1,1108/i,11 COW

a ratious;


,:ons ids: F7,_11t :

".ioe la orm.:et,Jra folont Ire de eette sue )eneion do i'exe.lection, des deli Atione
est ainSi INIttyrnent 'taude re ):rations 04 do restitution prevints .3ar is
nt ft,ns kill' lel 801t Je.ioin de de sander au euvernietent allotment dos *wale dons


(.9 6:_ns Lee ii7F,400ill a taus a la ,'r-Lrae et a 10 /01,1.4110 depute le
13 danvier deux :lanitiosnts do l'ollookose au Liens du 4ar. 17 do 1' nnexe II a
Partie .1:1 du Trutt' do Versaillis, -3ettquetients oOndern:zit roe seotivoilent
slain ealui des restitulee oharoone at to Jet Ai* taut an titre des re

,onibIllinent ?Aux teriaos du P r., L7 ai-deezue cite. la 4N0trais.,ion a I 'bonne-1/r de noting, is es,n4uoaorsto ainsi etinstf,tse aux ouvernesente Interessose

.4 _net

:Auls i ial.!;DU


My dear

January 1",



Your last letter of January 5 is before me ae I write, but I have
not yet finished reading the enclosures which accompanied it.
They are all
mighty interesting and instructive.
Just now I shall not corm-ant on what you
have written me;
in fact, any coile.ent from this side gets a bit out of date
because of the rapidly changing con2itione; but I want to write you a little
bit of what is going on over here.
First, let me say that I think. Basil's views - as expressed in a
letter that he has just sent me - that France is liable to suffer some injustice
in public opinion of the world and of this country by her policy in the Ruhr
has a good deal of foundation.
The revulsion of feeling over herb has been
very strong.
Consideration for the real difficulties of the i'rench and for
our tradition of friendship with France is serving to restrain ublic expression
of feeling entertained oy a great many influential people that the French have
made a serious blunder.
I would not, if I were you, incline to the view that
seems to be expressed in the dispatches from newspaper correspondents broad
teat the public reaction to the French policy hex not been as severe in condemnation as they themselves exnected.
I think the fact is that in this
.ountry it is much sore severe than has been publicly expressed.
It is a little
bit like the restraint that one feels in criticizing a son or daughter or wife
when the father has just died.
shat feeling of co Isideration for France is
very deeply felt here, but, on the other hand, private expressions of views
about the present French policy expresses it as little less than suicidal.

I have been trying to make up my mind as to just what is likely to
develop as the result of the occupation of the ahht, and even a possible extension
of the policy of internal control of German affairs by the French.
Any view
just now can be little more than surmise until the picture develops a little
But I am very much impressed by one of the immediate developments,
which goes somewhat to confirm the impression that I formed when your earlier
letters came disclosing the possibility of the occupation of the Buhr.

Germany can only pay reparations as the result of the efforts of a
hard working population to produce the means of payment.
The government debt,
depreciated currency, inflated domestic prices and disordered foreign exchanges
are of less importance than this great question of production.
£'y first
thought when Boner Law announced his policy of tranquillity, and when the French
indicated the possibility of independent action, was that it would mean a
complete conversion of the mental attitude of the German population from tht
inspired by some incentive to work and pay reparations to one of sullen indifference, resentment, complete lack of incentive, and a general let down of morale.
So far as the reports now received contain anything on that suoject, it certainly
looks as though the immediate reaction is exactly that.
I do not take much

Colonel James A. Logan, Jr.




stock in the talk that it will be an expensive military enterprise for the
Probably it will cost little more to beard an army in Germany than it
The transporting of troops and
does in France; possibly not as much.
supplies would be the principal cost of military occupation over what France ie
The real cost will ne in the
now spending on her military establishment.
changed attitude of the Germans.
So does it not all boil down to a judgment
of what the French are after?
1? they are after reparation income, this will
greatly lessen their chance of getting it.
If they wish to exercise a complete
domination of Germany, prevent her recovery from the effects of the war, destroy
the possibility of Germany becoming a menace to the French, either in an economic
sense or in a military way, .1 presume that - at least provisionally - would appear
to be possible oy this position.
On the whole, I should be inclined to the
view that the French are more governed by their fears than by their intellect.
lee are awaiting with the keenest interest to see what unfolds in
Germany, but I can see mighty little hope of anything good coring of this eove.

Our English friends are working away with the Funding Commission, but
so far as I have any information, which is very slight indeed, I do not believe
that they have yet arrived at a formula which meets our public opinion, on the
one hand, and their financial necessities, on the other hand.

There is an excellent foundation for a reasonable bargain, and one
which Congress will ratify; but there hay be, of course, .difference of view
between their people and ours as to what is reasonable.
I think one thing is
certain, however, and that is that no plan of ihayment that comes within the
limitations of the funding bill is feasible or is regarded by their side as
being feasible.
The favorable eircumetancee are in a word the following:
The payment of 100 million dollars by the British has been convincing evidence to the country and to Congress that the British intend to pay.
Strong fears which have developed in the middle rest that if we
are not easy with our debtors, we nay lose our markets for the surplus farm
production of the country, has reacted upon Senators and Congressmen
from that
part of the country so that men like Borah and Capper are openly advocating
leniency and a modification of the terms of the funding bill.
The French occupation of Germany has rather elevated public
opinion ae to the 3ritish to the extent that it has depressed public opinion as
to the French.

Finally, with this background, it will be difficult to see how Congress
could decline an offer of a settlerent which contemplated full payment, although
the terms of i-ayment eight involve a temporary or eermanent reduction of the
interest rate and the distribution of the amortisation over a much longer period
than 25 years.
What will be produced of the negotiations it is impossible to
say, although I understand that to_day they are eetting right down to brass tacks.
There is no doubt that the President's ship subsidy bill was shelved.
The next item on the program of legislation in the Senate is some agricultural
credit scheme, of which two or three are now being debated.
Following that,
must necessarily come action upon the British proposal, if one is made.

Colonel James A. Logan, Jr.

January 18, 1923.

supply bills still have to be voted, so that there does not seem to be such
ohanee for a very large output of le7islation at this session, and nobody
wants to Be. the new Congress called into special session except the more
radical members who have just been elected.
Business conditions are pretty good.
There is very little unemployment in the country;
wages are high;
prices of farm products are rising;
on the whole, I should say we have a great deal to be thankful for, and eighty
little cause for discontent.

It looks as though Mac were a fixture in the Phili:-ines for the moment,
now that General Wood has finally decided not to accept the Presidency of the
University of Pennsylvania, and to remain in the Philippines.
hear that
Mac is doing a great job out there, as we of course all knew that he would.

A great deal of interest has been aroused here by ioy,len's statement
before the Reparations Commission in connection with the German default.
has especially centered around the suggestion, which way. widely ;uoted, that the
reparations' provisions of the Treaty of Versailles are unworkable.
I have no
doubt that the newspaper accounts of what he stated, before . is written statement
appeared, were considerably exaggerated.
The memorandum in regard to hoover's Toledo speech I have read with
the keenest interest.
My feeling hes been the*, ilocver sometimes oases public
statements upon information furnished him oy people who are not making as thorough
studies of the subject as they should. he has recently been quoted on the
subject of possible exports of gold from this country in a way thet I know was
?then I saw hi- it V!r:ehingtor, last week, I asked him to eeplain the
ground for his statement, and found that it was pretty sketchy.
Our best
opinion here at the bank is that notwithstanding the trend of our trade, which
is, roughly speaking, enlarged imports, and the probability of some reduction in
exports, will not be sufficient to overcome the progressive exchange depreciations
which are to be expected still in certain quarters;
that any ;old which we right
send to Scandinavia, Switzerland, Holland, Japan, Canada, or even India, would be
Rear a very small percentage of
our huge excess supply.
The eeserve hanks alone
hold 1 1/2 billion dollars of gold in excess of their minimux reserve requirements.
No such revolutionary change in the world'b trade is liaele to take place under
present conditions.
Please do not get discouraged in writing me if you do Lot always beer
from we regularly.
;'or the last few weeks I have had a combination of trips
out of town and a bad cold that laid me up part of the time in 6eshington and
part of the tire in riew York.

My best te you, Boyden and 3aeil.
Yours sincerely,

Colonel James A.

Logan, Jr.,
18 rue de rilsitt,
Faris, France.

c-3.-44.119 January 19:3.

7"17 rtte


as you know, I have alauys bee n against the occupation of the Ruhr or any
other measure of coercion that woul d be brought into operation before the total
liabilities of Germany -.were fixed: I have always thought that "energy" is to be
sholvi after "reason" and not before

But we art, now aced with the "fait accomoli", and as a Frenchman, I feel it


duty to do everything I can to help the French Government to make the best it

can out o f the present si tuai ion.

The Ruhr as a "gage productif" is, to aror mind, not destined to be a success.
le will by and by be induced to exploit the Ruhr resources ourselves, which is a
very bad method indeed. If a man wants to force his debtor to pay the usual course
is to threaten him with legal proceedings, and not to ta.Jce over his business and
look after it in lieu cf the debtor. The same applies to countries. By trying to
administer private business in the Ruhr 'V shall be involved in enT.ess difficulties, especially as regards the foreign markets. We may p erhap s be forced further
into Germany, and nobody can foresee what the conscauences may be. I don't wish
to act like Sir John Bradbury and start playing Cassandra; I don't wish to predict
catastrophes like the author of the Apocalypse; I erill only say that for the reasons ferpleined abo'e , I don't think the Ruhr, as n "gage produotif" will be a. resource producing process (1)

On the other hand, to occupy the Ruhr as a sanction is probably one of the
most effective measures that can lo taken; it is true , I think, that the Ruhr could

no t produce wealth for u s, but in hold, in{; the Ruhr we can prevent wealth from going into Germarg.

The idea of sanction, first presupposes the idea of an alternative to the

sanction; in other wardn, of a proem:I:me. It is therefore more necessary than e ver
to see whether a programme can, in the present circumstances, be estatlished by common Ea,;reement between all theA3.3lee, and Gertraay's debt definitely fixed.

Let us consider, therefore , what progress has hem made in that direction since
the Conference of Jamary 1st. Law's scheme wea, I think, inacceetable in its political part and the
reparation scheme of its financial part . But the German debt scheme of it; financial part is, I think, quite workable (except for the length of the moratorium, which
appears exaggerated).

present value of the German debt coaterplated can not be fixed accurately
because of the various terms of discount. It has been pointed out that th. present
value could be awthinc between S milliards and 50 milliards, bet in order to accept either of tho 9.,) two extreme f i-Tures , one would have to accep t absurd hypothe-

ses: to make it 27 milliards one would have to suppose that Germanv, although able
to redeem the whole of the first series Bonds within a year would be considered enable to i ssue the second series; t1 at i obv ion sly absurd.


The Vre ach Government has announced that 6,000 tons of coal have been sent
to manse in a thy. It eruct be remambeeed that 6,000 tons per diem represent
180,000 tons a month, i.e. about 1/7 of what Germany has been delivering up
to tne pre:a:alt.


In order to make it 50 milliards, on the other hand, one would have to suppose
tnat Germarg, although able to pay the interest on both series of bonds would be unable within a period of 3) years to redeem even one CO 1 d mark out of the first serlee: and that is equally absurd.

I therefore think it fair to accept Sir John I3radbury's own suggestion that the
present value is something near 37 milliards.
ile w let u 3 consider what the mieineue demand o f France i s, accord ing to M. Poincare 's own plan. This plan stated that France could not can sent to any reduction

on her share o f the A and B beads of the Schedule of Payments, i.e. 52j; of 50 milliards milliards.

lf we deduct these 26 milliards from the 37 milliards, there remain see)roxieately 11 milliards to satisfy the demends of Great Britein, Italy and Belgium.
Great Britain, since the Balfour Note, intends to recover from France or Ger-

many the am ivies which she would have to pay to emerive.

The debt of Great Britain, as it ct sood on the first of January was 1? milliards

gold marks approximately. It is clear therefore that no acceptable scheme of reparation was po ssible a,s long a,s G-32cat Britain wanted to recover 17 milliards a.rel

only 11 were available for Great britain, Italy and Belgium.

But 'm nave now heard by the newspapers that the United States were ready to

contemplate an abaterert of the in elrests on the British debt to something like 3 or
3 1/2;0. The normal. interest of mane/ or the open reareet being, now el-Tree-irately 6
or iti), it is obvious that the suggestion made by M. Baldwin represents MD 7J9 or less

a redaction by half of the Briti sh debt.

Let us assume that the United Stetee, understanding, their onn I-ate-est in a
businesslike manner, would apinly consent to a reduction of 50% on the British debt,
on the understanding that the payment of the 50`o would he eeriously underteken and
not simply recogaieed in more or less solemn Parliament speeches.
The British debt to wciald thus be 'educed to 17 milliards - 8 1/2 mil-



Great Britain 119. S aireeety received 1 1/2 milliards of French gold. Great Britain therefore would only be entitled to e-et, oven under the Balfour note, 7 milliards
either from Prance of from Germany.

If -me deduct those 7 milliards from the 11 .,!71.11.011. would be , as we have reen,
available on the 37 after Prance has teken her 26 milliard., c,,,e find that there
would be left only 4 milliards for Italy and Bele.ium, which is obviously inseffioient.
The share o f Ita2 and Belgium, accoreing tb the Spa pereentrce, on the A and
B bonds of the old ;Schedul e of Payments would be 18e3 on 50
iarde - 9 mir lards.

'de are therefore faced with a deficit eeua.1 to the difference between 9 and 4

milliards -

It seams to we obvious that; with a little good-v.1.13. on the pert of Frenoe,
Great Britain, Italy and relgium, such an ameunt, nonip sr atively ktma)11, oufeht not to
provent a general agreement being reaohed.

If such an as-reement vis reached, tae Prenoh Governu©nt, instead of working
on the deceitful theory of the "gage productif", could say to Germany: "I am occupying tiu Ruhr; here are your liabilities definitely fixed to an ampunt which you
can effectively pay. If you fulfil your obligation_;, the occ+ation will only be
theoretical and will be ,,rogressively reduced instead of extended. If on the other
hand you do not fulfil your obligations we can it the whalL, of your economic life
by isolating from the rest of Germany one of its most vital districts."



Dated January 22, 1923
itecd. 5:28 p.m.

Jecretary of 3tats
Washinuton, D.


4.5 January 22, 5 p.m.
B 840.

.4iscellaneous reparation receipts January 16th to 20th

Luxemburg coal 6013 pounds credit Belgium.




Faris, 19 January 1923.

18 rue de _ilxitt.

Personal and Confidential.
i;:y dear Len:-

re enclose as ixhibit A letter of January 13, 1923

addressed by the German representative, Herr A sher to the Ree arati on
°omission. This letter enclosed copies of the formal no tifications dated January 10, 1923, received by the German Government from the wench and
Belgian Goveennents, concerning the proposed action in the Ruhr Basin.

The text of the notifications of =ranee and nelgiure, as tarn from the
cress at the tiers, and in substantially the sane words, v.s renorted in
our letter of January 12, 1923. Kerr .eisher' s letter to the Commission


also encloses copies of the ,::Terrrad Government's replies dated January 12
to the French and Belgian notifications of anua-r.. 10.

It will De noted that the replies recite the
of "there being no legal justification for the action tafeen in the Ruhr Basin" which, according to the German contention, "is a violation of international law, as well as a violation of the Treaty of Versailles". It will be also noted the Germans claim:

"According to the e:4)ress statements of the Reparation
Commission in its I. ote of Larch 21, 1922, default in the case

of timber and coal deliveries could only be punished by a demand
for cash payments, so that further measures under paragraphs 17
and 18 are in this case excluded. :11,'-von the regular application
of p araLp. al) h s 17 - nd 18 should entail only economic rand financial
measures or measures sireilar in kind and ie,portance areainst
GerLan,y. These could only be measures carried out by the Allies
in territory where they are supreme, ar not measures which like

the present entry of troops and officials into the Ruhr Basin,

constitute the most serious violation possible of German sovereienty. :e'inally, under the Treaty any measures nermissible
against tier any can only be taivan by all the Allied Powers conPowe 's acting
cerrad in reparation together and not by it
alone. It is in vain that the i.'rench eovernment endea ors to
conceal the avity of this breach of the Treaty by describing
fact that an arrqyr at
its action as peaceful.
of unoccupied
and with war equpment is crossing; the frontier
,Ter:alia territory shows clearly that the -French action' is military.
The situation is in no way altered by the statement that
politics1 nature
has no military operations or occupation of a
in view; moreover, this -8f-ter:neat is no t final, -but is only made
for the time be ink.



J. A. L. Jr. To: Govermr Stone; - Perserial and Confidential.




"The Lierean Government notes that the only real reaeon for

this breach of the Treaty alleged by Feance is the fact that
Gerraany has fallen short to a relatively all extent in the

deliveries of timber and coal re,:cuirad for 1922. biter the
immense deliveries made by Lierenny for four years in fulfilment
of the Armistice and of the Treaty of' Versailles, ith the
reatest effort and to each an extent that her power.; of pro-

duction are exheusted , these paltry arrears suffice to enable
the i'rench Governnent to enter German territory in ;peat military strength and to lay hands on the most important of Cermany's economic possessions.

"The ..i-erinan 'Government foriael ly protests before the w hole

the violence here done to a defensaless nation. it can no t defend itself against this violence. Nevertheless, it will not subnit to the breach of the Treaty nor
assist in the execution of the trench plan as it is expected
.to do. It repudiates this sueeeeetion. The responsibility
world ac2ain:3t

for all cense uences falls on those Governaents alone who have
carried out this march into Germany. These cense uences can
already be seen in a further depreciation of the reark and a
sudden rise of all prices in Gereary; the futuee econocic end
cuaeee,aee.-.,es can not be foreseen. As long as this
breach of the Treaty due to the violent seieure of the eel:-

ter of eeraan economic life ceetinues are itc aractical consequences are not averted , Ger:x.1u is not in
ears _sea:ea:Tele for thie





tThe same text aas eneedoyed in the Gera ;.n reply to the Bele;ian Governnt.

underlininz of the last sentence is made by us to enphasize the practical
feature of the German reply)
In accord: rice with the last sentence of the forecoing, the German
Goverment issued instructions suependine. all deliveries in kind and all deliveries under the several substitution Restitution lereements to Belieium and France.
Aiaparently, however, they have continued to date to effect deliveries of coal to
Italy on reparation accouet. No Substitution Restitution
vent has been negotiated as yet between Gereary end Italy.

Before the arrival of the T-ench and Bcleian "Ids:dons of En ineers"

with their sweort

Frenc o-Belei an military c ant in Tents in the ILahr Basin, the
German Ruhr Kohlensynclikat hureiedly removed all their administrative and technical personnel and records freer Essen to Harnbur.P.!, where a new headquarters for

the Kohl ensyndikat was estab li shed . eimultaneouely, a nno tricement ;;T.s nnde o f t he

resignation of Herr Lubsen as Director of the Kohlensyndikat. Herr Lubsen, while
not the only Kohlensyndika.t Director, was nevertheless the effective and actual
German representative charged wi th e ffect ing rap aration coal deliveries. It is
assumed that his "resignations' was part of the German tactics for impedin.g fur-

ther reparation coal deliveries, for tactically at least, the " resignation" places
him beyond call of the Franco-Belgian authorities. ide are also informed that all




J. A. L. Jr. To: Governor Strong - Persona. and Confidential

Page 6.

-de are informed that the forrz-ning '3arthou plan has met with the
"general :.pproval" o f the french Government and that it will be presented to
the Commission at the "appropriate time". Disrec;arding t.ese "strings" as to
"general approval" and "appropriate time ", it is interest ing to reflect that
had such a basis of discussion been presented by the french last Lay during the
Bankers i.leetings or even last summer, these is every reason to bc1 ieve that the

"reparation 4usstion" would he been a settled issue by this time.
however, there appears little chance for its practical success.


The wench rEiy, or may not, submit a plan on the foregoing lines to
They may do so for the purpose of showing how reasonable their
demands actually are. Cur present judo nent is that such a plan will not be submitted in view of the present attitude of Germany and tlat it will be withheld
the Commission.

until this attitude has changed.

nleeting of the reparation Commission was hurriedly called January
16, 1923, on the joint re2uest of the 2rench and 3e1.0.:ians for the purpose of
for:sally re-oorting a "default" to the Jailed Governments under Par. 17, annex II,
Part VIII of the Treaty, concerning Gerramy's failure to effect deliveries of coal
and livestock to i"rance and Belgium, and on the official announoemtnt of the German Governnent that reparation deliveries \%ere su.incnded. The Briti sh interests
Koaball -Cook, Eir John Bradbury
were represented by the Assistant Delegate,

being "ill". The proceedins-s were pro forma. Very little said or to be said in
view of the 2ranco-Belian-Italian bloc. L report of default was made by a majority of three votes, the British Assistant Delegate abstaining. Cony of the
The Commission decided that no
formal report of default herewith as Exhibit
hearing of the Germans was necessary by reason of the definite German statement
of "suspension of deliveries in kind".

In connection with the reports of default recently made by the Commission, it is interesting; to note that the fundamental legal question involved concerning the -frairico-Belgian action in the Ruhr has not been mentioned. Germany's

suspension of deliveries in. kind is largely based on the legal theory that the
Allies have no right to act separately in the application of sanctions, nor to
take military action, and that therefore the action taken in the Ruhr constitutes
a breach of the Treaty, whidi justifies Germany in its refusal. This legal question depends on an interpretation of Par. 18, Annex II, Part VIII, of the Treaty

of Versailles, which the Commission has power to interpret°, but only by unanimous
vote. The ouestion nas never been thoroughly discussed in the Commission, though
the British view apparently supports the Germin contention. ..7e would not venture

to express a Ty definite opinion in this letter on this cuestion without hearing
a,rgur:ents, but our present impression is that the EnElish and German interpretation. is wrong.

ss regarda the future: The Frernh are hopeful that their policy will
force a change in the Gera.n attitude and that the Curio Goverment, which has taken such a definite position, will fall and be succeeded by one more conciliatory.
are convinced that Prance, having started
As stated in our previous letter,
be drawn deeper and deeper into the German mire.
on the Ruhr policy, 13 bound to
with results that can not be foreseen. In our jud ment, rance can bring iermany
"to heel" by coal starvation. IT:o one can guess what Prance will get out of the

J. A. L. Jr. Tor

Governor Straag:

Personal and Confidential.

Page 7

uhr; whatever she i'ets will be regarded and proclaimed as a victory for her
policy. Even thou; -;h she gets a little now, in our view, it is unimportait, as
it can only be obtained at the expense of the future. In other words, and under

present ccrucii tions, what France today can get from Germany through her Ruhr policy is at the expense of Ge_,_.rany's "capital account" and not her "income account".

.;uch expense will not be only at the cost of France and the allies entitled to
reparations, but also to the whole 'do rl ' s LIconomy. 'de feel that vine t her France
;jets anything or not she will stay in the Buhr, rauu lly beinL7 drawn in further
and further and never finding. the exact excuse necessary to enable her to step
out gracefully. The only thing that -JR can see at the noment :thich will force
k'rance out is a serious collapse of the - "rant with its resultinP: effect on French
taxation, giving reasonable French opinion a chance to assert itself and throw
out the Government.
Faithfully yours,


Enclz. 2.

The Honorable Benjamin :::tronL,7,

Governor, Federal deserve Dank of i;ew York,

1:ew York City.

_iris, 26 January 1923.
18 rue le Y-ilsitt.

Personal w Confidential

L7 dear Ben,

On Page 4 of our letter of January 19, 1923, we
referred to the draft "French proposal for the Reparation Program for
1923" which up until January 13, L. Barthou had proposed submitting to
also referred to the fact that, at the request of
the Commission.
Poincare, this proposal was withheld. ';id then gave a resume of the
Barthou proposal which, while impracticable under present circumstances,
This draft
nevertheless constituted-a fairly moderate demand on Germany,
proposal had been prepared by the French Delegation on the Retaration
Commission, under the direction of L. Barthou. It appears, however,
Poincare's definite objections it was withdrawn.
that meeting

On January 23, 1923, L. Barthou informally transmitted
to the various -Delegations of the reparation Coission the French proposals
for separation Program for the calendar years 1923 and 1924.
The proposal
was not at this time officially filed with the Secretariat of the Commission.
A summary of this proposal is attached hereto as Exhibit A, and includes:

Proposed decision by the Commission,


A proposed letter to be sent b2. the Commission
to the German Chancellor, and


A plan of financial reorganization.

A complete English translation of the forefr.ding will follow later.

Daring the afternoon of January 25,
Barthou officially filed the fogegoing proposal with the oecretariat of the heparation Commission, together with a Note kxhibit B) containing certain minor
amendments having the effect simply of "Lotting the I's and crossing the
T's" in the original proposal, and requested that the whole be considered
by the Reparation Commission at its meeting on Friday afternoon, January
All were greatly surprised by this most precipitate French action.
';c) are informed that the Belgians and Italians had no knowledge of the
contents of the French proposal until its informal receipt from L.. Barthou
on January 23, 1923. The Belgians and Italians, whom it is supposed are
supporting the French thesis against the British, were therefore placed
in a somewhat embarrassing position, not having had time to effectually

J. A. L. Jr.

To Governor Strong - Personal & Confidential.


consult their Governments on the pcsition they should take in the presence
They, therefore, vigorously protested,
of this very radical French proposal.
with the result that late last evening the French proposal was withdrawn
from the secretariat and replaced by a joint Franco -Belgian note to the
Commission asking the latter to record "a general report of default", as
per Exhibit C.
This will undoubtedly be adopted at this afternoon's
meeting of the Commission by the votes of the French, Italians and Belgians
voting "for" with the British "abstaining".

An examination of the French proposal shows a most revolutionary departure from past theses of handling the reparation question.
It is visionary and impracticable in the extreme. In fact, if it were accepted and if it could be put into effect, it would go far in actually making
the -reparation Commission, and the latter's Committee of Guarantees, the
real Government of Germany.
It would involve outside complications of the
most serious nature. Our own interests would be affected, not only from
the standpoint of its further wrecking the World's economic fibre and our
commerce, but our corporate interests engaged directly or indirectly in
business in Germany would find themselves in exactly the same position
as the "German industrial" so far as relates to the seizure of their values.
The whole plan, in our judgment, is sheer nonsense.
In view of the foregoing we were constrained to believe
that the proposal had been -resented from political motives rather than
from economic or financial ones.
The Sritish confidentially tell us that
it was submitted for the purpose of "blackmailing," the British Government
into support of the French G verment; that the French Government now realize that the nuhr venture is unsucceseul and even dangerous; and that
before long this fact 7.111 come home to the French people.
The British
hold that the underlying motive of the French in submitting this proposal
which seriously affects British interests was designed "to smoke the British
mil" from their present position of semi-isolation. The British also claim
that the drench were acted by the hope of somewhat similar results from
our own Government.
'i.e enclose herewith, as .uxhibit J, copy of a letter
which was confidentially handed us by a French official, and one who exercises a certain influence in the press.
It is interesting, as representative
of more intelligent thought in France.

:e recently lunched informally with L. Loucheur, and v:e
feel that what he said will be of interest to you.
Loucheur, as is
well known, is an aspirant for the toga no worn by a. :oincare, and on this
account his appreciation of L. Poincar6 is warped. Li. Loucheur said that
French public opinion today was uninstructed in the realities of the present
French policy but in the mas::, and for the present, supported the Poincare
On the other hand, he said that an overwhelming majority in both
the Chamber and Senate was opposed to a. Poincare, but could not act in view
of public opinion. He said;
"It is well known that I am against I:, Poincare,
but even I was forced to give my vote to L. Poincare in the recent vote of
confidence in the French Parliament".
He said that the Ruhr Occupation could
not possibly give any results, and that some graceful way must be found to get
 the French out of their present predicament, and before any further damage is

J. A. L. Jr.

To LI-overnor jtrong - Personal w Confidential.


The only hope that he saw was to join with the British at the earliest
possible moment in working out a joint solution.
He said that n
this end could not be carried out in the open in view of French public opinion.
He also said that the services of outside bankers and experts would be required
in the for a solution. French public opinion, however, would be antagonistic to any public calling of a Committee of Bankers or an Economic Conference.
In LI. Loucheur's judgment, the way of approaching a solution would be for the
French Government to confidentially open negotiations with the British through
the medium of some trusted French agent.
In the course of the negotiations the
banking world and the outside economic experts could be confidentia112 approached
for their assistance and advice.
Under L.. Loucheur's scheme a plan could be worked
up quietly and when finally announced it would be in such shape that public opinion would accept it gracefully and with relief on the general basis of its constituting "a victory for French policy in forcing Franco-British unity of action".
Loucheur said he had proposed this line of action to
Poincare, and the
latter was considering it. LI. Loucheur expressed every doubt as to whether the
British, in view of the position that 11r. Bonar Law has taken, would agree to any
such conversations so long as the Poincare administration remained in office.
Now, we don't attach undue importance to the foregoing, but it nevertheless
:presents an interesting line of thought, particularly as coming from one so
prominent in French political and business life.

In our judgment, the British all along have been overconfident
of an early change in French attitude.
Now that the French have started to
commit hart -kari we don't see how they can stop long enough for breath to do
anything sensible.
In our judgment, the best possibility lies in a change of
Government. Whether the period which will elapse before such change is to be
measured by weeks or by months is a question on which we would not care to express
an opinion.
Public attention is now getting concentrated on whether
or not the Germans are going to "lie down". We feel this is relatively unimportant. We expect that the Germans will have to "lie down" because the French
will have to make them, but whether they "lie down" or not the harm has been
When you consider that the fundamental requisits in restoration of confidence it goes without saying that you see no ;progress as yet towards this
fundamental no matter what may be the result in Germany in the next few weeks.
Faithfully yours,

4 encls.

The Honorable Benjamin Strong,
Governor, Federal reserve Bank,
of New York, New York City.
Etats-Unis d'Ameri,que.




.13-177AI: 73P 1923 - 1924.

The 7reneh proposal Includes:I

A draft decision for the Reptiration Commission.


A draft letter from the neparation Coalission to
the 'Urban Chancellor


A draft 7,1an for lerman financial reori,LnisrAion
to Oe enclosed with the letter to the werman
Chancellor (II).



Th© Commissin acting under Articles 234, 236, 240,




and Annex TI ?art VITT of the Treiity of Versailles in view of the
lerman lovernment'u reheats in ito lettere of :71reth 14th and ',:arch

27th, 1922, for a moratorium and considering that ..;ermany has already

been granted a hearing, decidee to accord the following partifl
morntorium for reparP-tion payments in 1923 and 1924 for the purpose

of enabling Germany to effect the financial reforms (us set forth in
the plan, see TIT below) considered uocessary to enable a resumption
of full reravation nayments In later years.

The aerman 3overnment is to pa; in 1023 and 1 24, under the head-

ings, Sohedule of Payments, anC also Artiolo 249 of the :roty, out not
including deliveries under Irticlee fl to 12 o

the Agreement of June

28th, 1919:

500 million gold mar4o in cauh per annum, as followe:
200 million
150 million
November 10th 150 million

liaroh 10th
July 10th


Deliveries in kind to the value of 750 million
gold marks per annum.

The Commission. reserves the right to inorerqie the payments in 1924

upon the recommendation of the Committee of auarantees.


In addition to the above, :lormany will be required (a) to moot

hor ontstending obligations of 1922 as fixed by the Conmisaon's deoisione of Ilnrch 21st and August plat, 1922;


to effect restitu-

tions under the existin3 arrangements and (c) to meet L11 other Tre:;ty
obligations including expenses of the Interilliod T':hinelend High

Commiecion, the Vilitary and Navel Control Commies/one, etc.

The Com-

misoion will shortly anro'moe its decielon concerning cletring offioe

7eqn!sitione and collections by the Allied lovornments

in occupied territory and receipts from the 13ritiall 7.eperetion 7eoovery

Aot nnd similar ':Qty Trill be credited ageinst paymente due under the

heudinl. of deliverie in wind.

lnly requisitions and collections of

mold or currency br the Oommitten of luarantoes will constitute croAte
against the eresoribed cash pay-lente.

The outstandim* differenoe.botween the payments effected in 1923

and 1924 under the nartiel moratorium tnd the total duo under the
Sohedule of ?aymente will constitute a ler:man debt with C interest

which must be liquidated before the end of 1930 over and above the
reF.!ulax "`',chedule of ?syments" annuities fellin r due before the end

of 1900.

The lomnisnion reserves the riht to annul, at any time, the mora-

torium offer to lermany in the event that there is any delay in effecting the prescribed payments or any failure to conform, to the entir8
oatiefaction of the reparation Commiseion, to the utipulatione contained
in the followin1T letter to the ler:Ian Chancellor (II). and the plan for

financial reorganisation attached to it (III).

In the event of such

annulation the full obligation(' under the ::cheiflile of Pay*onte and the

full obligation() aocruinT under Article 249 become ipso facto effective

with retroactive effect and all without prejudice to tho of ,fereement
of the .unction(' provided by the ?reaty.

II. 713 Mai?


The draft letter fins the :',aparstion cessaiseloa to tha deasou


;luamaallor first molts. the doeielea ainaliatsed above (I), awl the"
starA4a tast tin partial saratorina will ant bo effective italeall ileinang

tonally matortai.os (a) to folfill tile oblimativo


aced (b) to *moue, the Oomemtatioes ;:,laa for flinsolat rIlOrloaizatina.

la additi

pareet000 for faithful 7. rfoirmaa meant be Aim, Jim*

l'AZ Camay has profited by .a vv,zeto it ea Intbititat tv tsertnia rkaall11.11

of rotors


*Aug to Intelsat Oessaa

fOSIOt-140,f4 is cs

Errs* Proof

of the futility of any eellasise r pos the rust pollay,
he plan impasse iolias000


losiosi inluetrials to the frOss

love:west of re00 ailliou ireld aorta aoapeoxgr or the stabilization of
tko sort sal, is Witten, two ,a1101 ono halt billlu w31d

Mai POTr011Osite,

lag Gomorra Idahoan int.varatioa oblillitloas for 1y2 awl hued.


ability of acoson loduotriels to =et welt li It & odvamos oaaaot W
quootionel sad amid, therefore, be acooptoe out gasoaatoode :rah
adraneos will *Wile the 4olok ad tir4 uallee 3t,1141111 to Salome thole

balgote awl to *Mot ogyeroadoe.

:wish mei the Novas Jtat.,s vault eaten to otailasod soloirola


e Gaulle/ II will iletlIP::4 rat that portion of time dehodulo of eats

whleh pa fees that this watt*/ Ail

/alai/ere vim' ionso ofollsolo-

trtioa eta moaning that Caere trill to la isibetItution of anatml fur
Gomm adadoloteatigo, VAS mot to mem them Viii be OAF llmitatiak os tea
SOPA sr seers of the 3024111014111.11 irreelltiesillall or the ablictotlea tnt tea

Pert of all Gams ageds to pourtir infirm tts

Mae ti:


*wale of owoigliking fmeilitating the anoints' of the soatrole
is a so mooposos of She sweat &prolapses** reported by the Jerries.
151.1ft WO All a aeoult of tionmaerva attitude toward the flint esalltIonsi,

vtnieh latter 0%astitutes general default. the a, nolo :ovo roma hors
e, host oertoia guaroutoos Sties tostroatoos will be rstetasd during the
**tire period of tag

partial neratcritun as a guarantee

for foltOftl

porformemee by 4enneSr.

allied representanvoe will be rahotitutogl for Omar ropreseatatives


tri the earsallad territory for the yur-Ise et (a) oolleeting auto,
Suttee, export taxes aye 40R1 tarots, set (14 tor issuing export
Detroit*. etteettag *8 Ievr on foretell (renew tram exports eat

tao rrpormont to exporters of the pap*, mark OtiVaiout of mica

:no not *greases oaten Lug frz tilo foregoing oolleettorre

vii1 be ts+rliressd to the Cornitttoe of Ouaranteee.


orgarioations whatsoever are to be ouppreesed.

,:here will be

no dero&tions to tle fore,.;oing rube ueless speoifically authorThis euthorizat ion will be

by the Committee of luiAranteee.

limited to exceptional cases durie


erlod of transition and

only for supreme humanitarian i:lotives.

Taxoe will be rigorously collected without


olitoul pre-

taxes are to be auppresacd or reduced except un-

der the reserve that new taxes will to created 4Licl. have been
previously accepted ue satisfactory by the 1,ommittee of guarantees.
The special aosi3nment of the proceeds from taxes v.,111 be euppreused.

.:11 surpluses from tate bu(:zets drawn in accordance with

the principles herein ex:p:Teed are to be

aid into the ieich budget

as reparation credits.

We many must, so far es it is ;)cissible to accumulate gold

and forel n currencies from extra budgetary nouvelles devote these

accumulations to financial reconstitution and to rei-aration payment


for this purpose must levy on the. capital of the ..eich,

6 nnan ';Aates and German nationale.
oonetituto and lease monopolies for the sale


of certain products desillated by the lommission such as alcohol,
tobacco, matohee, salt, 5gkrar, petroleum and gasoline.

The .-xich

will cede the exploitation (yr railways and such other industrial

services as dosigmted by the COmmiosion.

-:.eich and the ,;er-

man -totes will lct out on shares their mines, forests and salt

1.ases Z.:41 contracts for the letting out ON tharea and

concessions are to be establiehed by the 'ierman :.;overnment in

agreemrt with the .:ommisoion.

',:hese leases one contracts will

provide for the payment of a lump sum by the conoee.ionnaire to

the ;',eloh or to the ceding .ALtea when posseesion is tt,.ken and

an annual renter both. on a sold basis to be paid, so far as possible, in al,preciated foreign eurrenaie8.

:..very oontraot con-

eluded since liovember 11, 1918 by the ;.tich or the



with reference to properties mentioned. above ufl.oh hve deprived

the lieioh or the lerman etates of the free disposition of such

properties or of part of the revenue therefrom, are to be canoelled L.nd the obligations resulting fromsuoh cancellation ;.re to ee
tret.ted as in paragraph 33 above.


.he ;eich will take delivery of eeauritics equal to one
v lue of all industriLl and commercial enter-

quarter of the ret1.2




1.1.-0,1rty in aermany or elseuhere.

The method

of ouch a levy wil: be drawn up by the .3erman Government in agree-

ment with tie Oommission.


eourities shall provide ,rier

to all other ri0-its or claime, past or future, an -c,Jumulative

riglt to

euarter of the revenue from the relevant enterprise

r exploitation.

.:Yoh securities are to enjoy rights equal at

lest to those enjoyed by the most .erivileged securities now 10sued or to be issued in future.

;al the securities uith all

their ri6hts and privileges are to be tramferrable and mortgageable.

The owners of :he property Cala levied upon are to receive



In addition to the .ore oing lcvy on capital, :germv.n in-

Custry will be obliged to loan to the :xich three billion gold
:arks, ao follows:-

(1) in gold or (furreLcios acoepted by the %;ommittes

of Guarantees before the "Iatee indicated


Laroh 1
July 1
i.ovcmber 1


.rch 2

July 1
_:ovember 1

500 million








1,500 million sold marks


(2) By paper narks or commoroial paper oalcuaated in
gold at the rate of tho day of


300 million sold marks before each of the following dates:
;.arch 1, July 1, November, 1943
attreh. 1, July, 1944

or a total of 1,500 million aold marks.

German industry is to receive its reimbureement in the form of perpetual rents equal to the gold values at the eats of payment.


German; must bear in miad from the beginning of the partial

moratorium they necessity of resorting as ft,r ae aoseible to internal and

external aold loans for the amortization of her capital


The form and conditions of the iasrpetual 1.eiCh rents to

be issued for t'ee foregoing pur-oses are to be drawn aa by the
Gorman C;overnment in agreeaent with the aeparation Commissiam.
The internal payments of the so annuities are only payable at
the end of any year when, in the same year, the 'aeich h-s totally

discharged all its Treaty obligations.

aeforred interest pay-

ments will carry no moratorium interest charges.

The aaymente

of roots are to be ut the most a nominal real valae and subject
to no increase as regards indemnity ahem the interest pigment:3
have be: n deferred darlag the r,orl od of reparation paymeate.

Ooncernina the flight of capital the German Government

will forthalth

ive effect to the existing instructions of the

Commission and the Committee of Guarantees and in the future shall
institute suoh new measures as may be directed.

The Co: mission

will not refuse to consider favorably aerman :roposals tending
toward a arogreseive return to free movement of capital.


ever, such a change of policy will not be possible until the
etabilisation of the mark is aseured and the program for financial reforms tending toward u normal regime for reparation pay--

mente aivee results.


lart :ertaininz to management and affeotetion of procoeds frori custone duties, levy on o':rortatione and
extra eue,:;stury reuources.

preceeda from cuetoms duties, exliort taxes,
five percent levy on exi=orte 40 eefince in i:arearaplis ii

_rticle 7 of the :dhedule of Euxuel-As ex-8 to es


to the

Committee of ..;uarantees and elao all payments accruing under
paragraph E without prejudice to any oociplementf_ry meeeurea

which my be taken in virtue of paragraph o of article 7 of the
zeihedule of iayments.

pe aeourities delivered under 1..ragraph 1 above ineludlef...;

the revenee tkerefrom and the ilroduct from any eveetue.1 aale

will be sequeetered by the Committee of auaranteee.

Ace', sa:Ae

securities can be Leed either as a cover for loans or 145 nego-

tiable values in aocerence with errtngemnte ooncluded botueen
the L;erman .;overnment and the Jommiseion.

',14 proceeds from

the revenue or sake of them scouritlec

to be hi.,Leleu in the

same menner ae the reeouroeu mentioned in ill.ragraph


Part i;ertainin3 to :.,enafv,enent end affectation

of Inemstrial Loan.

7he -roceedu from the indestrial loans deecribod in para.

eTerh J above will be turned over to the ,;ommittee. of 4uarantues

veloh latter will (a) elace 500 million .old marks at the dispo-

sition of the ;ern=

verement for tine stabilization of the :: :irk

by taking 300 million end 100 million e.nd 100 million gold merke
-fron the InCeetrial :=old loan on :1..oh lst, July let and Remember

1st, 1923 respectively; (b) the balance of the industrial 6-old
loan will be applied toward reptratiola cash eLyments prescribed
by, the Commission's decision

(0) the proceeds from the in-

deetrial pt.per merke or commercial paper loan are to be returned

to the 3erman .3overnwnt according to ito needs for financing deliveriee in kind or reimbureement of requisition
of payment effected by the Commission.

or aimilar means


Part pertaining to ;Jontrol.

The control is to be exeroieed by the ;ommittee of ivarani-

toes in the name of the kimmission.

This Uomrnittee iB to exer-

cise a direot observation on adainistration with aceese

to all souroee of information susceptible of finanuial censequenoeS.

it will have power to prohibit any inopportune expense

and to prescribe augmentation of receipts.

.eor oonstitutional or

legal obstacle can restrein this Jommittee in the exercise of its
action over the CAennan financial


:he Reioh ane the

omen etates :411 be jointly responsible to tree Uor mittee.


decisions of this committee will be immediately exeroieed by the
,7yerman authori ties.

peal to the


:;overnrent has the right of ap-

()omission from the :omnittee of %;uemnteee' decis-

lone but such appeal will not susrend the execution of those decisione.

The deoision of the Oommission on such an apleal will

be final.

Part pertainie3 to proueuure for makin,, effootive.

The German Government mukItibrward to the kmmission on .1b-

ruary 15th
(1) Its formal acceptance of the prodent ...0.4n definitely

agreeing to its loyal and complete application;
(2) A formal commitment :7)f .lerman industry duly euaran-

teed to the lean of tl.ree billion ;old mere .%


acceptances are to be transmitted simultaneously by the

several German states.

The application of the aeove irinoipiec

will immediately follow their aoceptance for all paints
powers of signatories are binding.

hero the

or stipulations requiring

intervention of legislative asoembliee definite agreomert .:met be

concluded before Parch lst, 192.

,'here legislative essemelies

will ILelude in their epprobations, a;:d confirm by legislation,


a full mandate to their respective governments for the execution
and development of this program without the possibility of modificat ion except in agreement with the Commission.

Po new Legis-

lative intervention will be admitted except in c'.ses `mere au-

thorized modifications are provided above.

xhibl t
Jaamary xf t11, 1118:6

tea P111111111111114,tpepra;44.1

Gems defaults se)1.1 fled to Interested peWors by dam

nieel iu oenfortIty with .-trtiole 17 .:max 11 of Torsaillos :mar
asestdemo yea instituted

artialm 18 of the WM. AiMadat ORKSISt

110160-041,1,011en of the Lahr aid tho ;01v.;are of 3turantsss for aoslasismae
of exetattioa of her aoparati,wa tiblir,atirms
For trim faltily* her obilgations Ilerreay hos adopted sit attired*

of conorel resletsnmi ant, *tat airmoti7 olmearao the *renal a um-Asaim, has *lased to effect pm/Wats sad dolivories to which she is baud.
SO FANO Delegatioa, la view of p moat situation are Itmlimviaff
that de sleep's ill will Bud bar lesietasoe 011ie, avoiding aw aielfalorstalding, proposes to the ,chn.4iseloa tits folloalni nedifieati ms of draft
deeislua sad. *overly*: latter to the Germs Ooreranett la reply to the

latter's sraratliiitsa sequost Tho Imo* Delegation sweetie:8 that prase**
text of Voss dsousonts, whisk west made be en's)" selerste, rialto

failure to attain Jes1M *jut.
1. Add to the first part of parsgsvph s of sewer; of drift
letter nefeiremes to default notifistioas dap Artialn 17 NM
+mastics, taloa nailer arthin 18, grat add at ties Gad of the sane

another phrase to tie offset "ia vise 041Meas attitud the Oeurdselea.
aotiag ea its ova total! acrd =preset, relOrrini7 tats riiilte of Ipoors.
masts as to amostroo is +n or to be tales towarrie Prormaue, mates th*
graining of a soratorivis 6°101W:sal ttpoa time retortion by ...Iliad o
as goaramtm for Aop anti= pasiseats al1 tie essaritles they have soizod,*
1. limadlatoly pasoodias Meant too wards Niesids to *mord"

sepia of too OvamAM of the draft 400isioll inserts "Ind considering, hewer* r, that feel lit les far Noland of flOneas:, *a ob I igati'iss
under the partial utorsto14111 plait osaati 1 Illissied nor inteined unless
limey ta`coo formal otearspint to oonforn Is the stipalations apse 16,1*

the WOMaille Ot tams itellitiss is onlialtit4t41, owl further,



!!es essurive twattllowet of this 41,11110m,mt%


414 to the

camrally of rile droll Anaintlniperngrarh


follows, "Inerostoon ectizn4 kr ,altel 1onarneonts tallwring Germs

eisfavalte will Amain in manure nneOr the eanditi)an roallisd in the



to this ilimintoseR

Paris, Janwex7 ?-:9th

TO m AgahltallaN COMMIV/ot

In replyias an Jams* V.

194 to tbe notifioutions by the

Preneh ato Dvlgian dovernflerts Tith respect to the sonotions ,teuided upon
by these tiovernmente in Oortaaquan00 of the deelsions rAf the deeper Lion

Coartission deolz,ring gernany to Atiaolt in the execution of the deliveries

of Wood araA coal, the 4ermun Uovcrnment hes stated;

"Al long as the violation of the ?mat, resulting from the
"violent seism* of the eeonaids eentt,r of Gerson", end the practical
Reoneecuenoes resulting therefrom, con Ione, aerator Will not be in a
position to make deliveries to the . (mere responsible for that state of
al a meitter of fact all Hoperatios deliveries to Pre.nee and
Balgilla have been suispendad *Anse that decluration.

ate irunch m

Belgium Detonates believe that the Oermm declaration

and its ectuall exsoutioo oonstitute a general default by Germany of Lin

ohliwtions within the mei,ping of par, 17

Annex 11, Part VIII of the Treaty

of Versailles,
Thor requiem% the CenesAbsiont


to dealers that deftmlt and notify

t immaatately to the worc,rnments


to - to addrese to the German Oovernient the le ttur of which the droll
Is sonessed hereto.

et netts


Nth et %ini:


21,11 004111:.:4-3.

le la 00410ELLOR

Ar ustiodtwes tee 110104


of the ilithase SiPtheaveriber

hiparettem oaesiseion
Iasi, the isms Sevemsert hes prooseed to the

wain these or fo,Ar
request for seempidea fres all ta$monts
1m Jimemarietb, the lieraraities OemodoOielt main* the
14th se
that ia het Mesta the time of repeal; trot sap.




the 33at Last.

sr, the ems ears

&emery Lathe the garIns uoverammet notleime

all'oaliviries ea spasm*
the Mejaseties Sommiesios that it hod 6tOppsi
se 11410110Stille to Frame and folciam.

In feet al.0 aslimeries to these

Inter the
Poem bye asseede and the /eremitism ceemiamis iw easievet,

tear eM *Mks

theiresslar se par. 19, of Alarm Il to Part VIII of the

treaty of Versailles. the SMSfel el/Mat of Geramag of hor

the mogartitias Oessisetaa believes esasseeestag WS It is not
eevessment latish has
aseeseavr I. sessiaer the request If the less*

Woes sal me veil br mesa of that feet.
easy Item eiremmeteasse, all the

qtr Oft Oth 19139

of the asbeisie

sees immeliateir is edema opt thsimemomels

OM it preview Ay basis Sao.



January 24, 1923.

Dear i4gie:

I have beer unable to write you lately because I

have been laid up with a bad throat which made it difficult for

rre to talk.

71e have been having some wretched weather,

so the doctor has advised me to go South for a couple of weeks

I wish I could write you fully

and I am leaving to-morrow.

about what is going on, but I can not very well do it until my

My beat to all of you in Paris.
Yours sincerely,

Colonel Ja'ree A. Logan, Jr.,

18 rue de Tilsitt,

Paris, France.



January 26, 1 92 3.

T HE it


THE GT:11:14i

In lettere dated holeaber 14th and 27 1922, addressed to
the :le: aation 00:a:dasion by the Lriegalaeterkommission, the German
etc. 'worriment asked to be released from all pz,ymeata in aso'n and for the
larger part of deliveries in kinck, for a p Ind of three of 1' cur years.
Un J: weary 13. 1923, the Iteparation C0113418/5i021 inferred the
Kriegalasterkornianion that it -sculd postpone tho pi-..yLatAut use on

January 15th wail Jamary oist

On the sine day, January 1 Oth, the uierman

ver nab at notii ied

the :reparation .;earilealen brat it 14a,.) stoz,ping all reparation
deliveries to these = ewers
deliveriea to t`ranoe and neigium.
have, in fuel, ceases ual, 1st. der the terms Oi p art:graph ti 17 of
..xtri ex II to l'ert VIII of the Treaty 02 Versi.illes, the reparation
t in to e
Go ma a.; ion has today deal ared GerEnny' s general de
pen:on-Janos of hee reparation obligations towards Arance anu
The asp trat 10/i GOLlai V ki ion t hauri:fe le wielders treat

it is

unnecessary to slept any decision regarding the rsurgat made by the
*red this re, ties t
bei I ts
German Go vert.mont

null and vad

of t ii provisiona of the
Ia these cone i tiosr s the
6,1921, 1:4.) c ono ciao.
6 of Payttents of


Laois ii...,:1;:,11OU

Leon iLL,-.G..w..)11

January If1, 1923.



(A eimiler letter was sent by the 3017ien Goverm3ent to the Gernan
Charge d'Affaires at Bruesele).

""!ly a letter of the 17th January, the IA/lister of Yoreign

Afffirs had the honour to recall to the German Charge d'Affaires tnat
the measures taken by the french and 3olgian Governments with the
cooperation of the Italian Government, to induce Germany to deliver

the coal which she owee to Yranoo, have in no way the charcter of a
These measures, as the German 'Government has

military operation.

been informed by a notifiootion of the 10th Jolluary, have been taen
on account of the default estrblished by the Reparation Co%raission
and comaitted by -Germany in the execution of programmes of tho

Reparation Commission ooncerning the deliveries of wood and coal to

nut as it wa

indicrte:, in ttle letter of 17th January, the

attitude adopted by the Industrials of the Puhr upon the instructions
from the Government of the Reich, has made it impoecible for the
Allied authorities to proceed in a friendly spirit and has obliged
them to requisition the coal which should be delivered and to effect
changes in routings in proportion as such action has been indispenocble.

The German lovernment in Pot commenced by deolarin

to the pro-

nriotors of the miners that the coal delivered by them for the account

of rpart.tions would not be paid for by the Government.
The Chief of the Mission of lingineers having nrAe it known that

the Allied Governments were disposed to pay directly for this coal, the
German lovernment forbade the proprietors to effect these deliveries
even if all oasts were paid.

?rom that time the obstruction of the German Government has not
ceased to increase.

The ReparLtion Comaission established the loth

January the defaults concerning coal and livestock respectively,
-alder the healin


of reparations as well as under the heading of

It made known to the German Government, 26th January,

towards ? ranee
the general default of Germany from her ooligtitions

and townrds 3e1gium.
the German Government by the instruotions which it has

given, by the exoitetions which/has not ceased to foment among the
functionaries of the railroadu and the postal, tolojraph and telephone

agents, not only in the Fuhr but Illeo on the left bank of the Rhine,
risks the bringing tbout of a disorganisition of the'exploitation of
the mines and factories of the Ruhr.
Under these conditions, taking into consideration the general
dof-ult estflaiehed by the Neparation Commission, the ?ronch Govern-

ment noting in virtue of Paregraph 18 of Annex II, Prt VIII of the
Peroo 7reaty, informs the German Government that from ?ebruary let
no shipment of coal. will tf,ke place from the occupied zone toward the

remainder of Germany.
case of necessity."

The whole under roservs of new sanotions in

Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102