Reparations

3965

Reparations

representatives of 21 governments, viz., Aus-
tria, Belgium, Bulgaria, Czechoslovakia,
France, Germany, Great Britain, Australia,
Canada, India, New Zealand, Poland, Portu-
gal, and Rumania. These agreements pro-
vided for the definite settlement of Ger-
many's reparation liabilities and for the con-
stitution of the Bank for International Set-
tlements as proposed in the Young plan. Fol-
lowing its ratification by the governments of
Germany, France, Belgium, Great Britain,
and Italy and the enactment of requisite laws
by Germany, the Young plan officially went
into effect, May 17, 1930. The Bank for In-
ternational Settlements'had previously been
established at Basle, Switzerland. After the
official inauguration of the Young plan,
France commenced the evacuation of the
Third Zone of the Rhineland.

Despite the optimism with which it was
received, the Young plan lasted only to the
end of the first of the 59 years of its pre-
scribed life. It was wrecked by a combina-
tion of the world depression, which already
in 1930 had seriously affected German econ-
omy, and the continuance of the Franco-
German political struggle. Mr. Hoover had
been apprised of the seriousness of the situa-
tion by reports from American diplomatic
and consular officers in Germany and other
parts of Central Europe. The President's con-
cern was aroused primarily because of the
large American financial interests at stake in
the German crisis. Of the $2,272,000,000 long-
term foreign debt incurred by Germany dur-
ing 1924-31, 55.2 per cent, was held in the
United States. Convinced of the necessity of
immediate action, President Hoover on June
20, 1931, after consultation with the leading
members of Congress in Washington, issued
from the White House his proposal for a
general moratorium. The statement follows:

The American Government proposes the
postponement during one year of all pay-
ments on intergovernmental debts, repara-
tions and relief debts, both principal and in-
terest, of course, not including obligations of
governments held by private parties. Subject
to confirmation by Congress, the American
Government will postpone all payments upon
the debts of foreign governments to the Am-
erican Government payable during the fiscal
year beginning July i, next, conditional on a
like postponement for one year of all pay-
ments on intergovernmental debts owing the
important creditor powers/

The response to the President's call for a
moratorium was almost unanimously favor-

able. Newspapers of all kinds of political
opinions, as well as financial, industrial and
political leaders with very few exceptions,
supported his action. The governments of
other nations most vitally affected also ex-
pressed their agreement, with the single ex-
ception of France. The French reply, received
on June 24, however, without declining the
President's proposal, contained reservations
and terms intended to safeguard the Young
plan. The following accord was finally ap-
proved and initialed in Paris on July 6, 1931:

'After an exchange of views the French
Government states that it is in agreement
with the United States on the essential prin-
ciple of President Hoover's proposal, and on
the following propositions, which may be
expressed thus:

*i. The payment of intergovernmental
debts is postponed from July i, 1931, to June
30, 1932. 2. However, the Reich will pay the
amount of unconditional annuity. The French
Government agrees, in so far as it is con-
cerned, that the payments thus made by the
Reich shall be placed by the Bank for Inter-
national Settlements in guaranteed bonds of
the German railroads. 3. All suspended pay-
ments shall be subject to interest in accord-
ance with the conditions suggested by the
American Government, payable in ten annual
instalments beginning with July i, 1933. 4.
The same condition shall apply to the bonds
to be issued by the German railroads.' Other
details were left to a committee to be formed
by the governments concerned.

In October, 1931, Premier Laval of France
visited Washington and conferred with Pres-
ident Hoover upon various Franco-American
problems, notably that of intergovernmental
debts. In 1932 the Lausanne Conference had
agreed upon terms for the final settlement or
the Allied reparation claims on Germany. By
the Gentleman's Agreement, the Allied pow-
ers pledged themselves not to ratify the re-
paration accord until 'a satisfactory settle-
ment' of their war debts to the United States
had been reached. Meanwhile the Hoover
Moratorium was to continue on German and
non-German reparation and on the war in-
debtedness of the various European govern-
ments to each other. During 1933, no 'satis-
factory settlement' of the debts owed to the
United States government was reached, In
1933 Finland was the only country owing war
debts to the United States which paid in full
Finland has ever since made each payment
falling due, and Hungary has made some
"token" payments. See WAR DEBTS,