Foreign Policy
Reports
The
Lausanne Reparation
Settlement
y?
November 23, 1932
Vol. VIII, No. 19
25t
a copy
Published Fortnightly
by the
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a year
FOREIGN POLICY ASSOCIATION
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EIGHTEEN EAST FORTY-FIRST STREET
NEW YORK, N Y
The Lausanne Reparation Settlement
by
Mildred S. Wertheimer
with the aid of the Research Staff of the Foreign Policy Association
INTRODUCTION
O N November 10, 1932, immediately after
the American elections, the French and
British governments, in separate notes to the
United States, requested a review of the ex¬
isting regime of intergovernmental financial
obligations. At the same time they asked for
a suspension, during the period of discussion,
of their debt payments due the United States
on December 15—$19,261,432 and $95,550,-
000 respectively. President Hoover, in con¬
sequence, invited President-elect Franklin
D. Roosevelt to Washington for the purpose
of discussing recommendations to Congress
which will “deal with this question in a con¬
structive fashion for the common good of
the country.” The President stated further
that he was desirous of exchanging views
with Mr. Roosevelt regarding the forth¬
coming World Economic Conference and the
Geneva Disarmament Conference which, he
added, “also has a great economic purpose,
as well as the advancement of world peace.”
Evidently these major problems of foreign
policy are to be viewed in Washington as a
unit.
The British and French move is a direct
outcome of the Lausanne Conference, which
terminated German reparation subject to a
subsequent satisfactory settlement with the
United States. The British note points out
that the Lausanne Conference found it neces¬
sary, “in order to allow its work to proceed
undisturbed, to’ reserve during the period of
the Conference the execution of the pay¬
ments due to the participating powers,”
and expressed the hope that a similar proce¬
dure might now be followed with respect to
the payments due the United States. More¬
over, reference is made in both notes to the
fact that the Lausanne Conference was held
in accordance with the decision reached by
President Hoover and Premier Laval of
France in October 1931, that the initiative
in settling the reparation problem should be
taken by the European powers concerned.
With the conclusion of the Lausanne settle¬
ment, the European powers feel that it is now
the turn of the United States to honor what
they regard as its implied promise to revise
the debt settlements after Europe had
reached a decision on the reparation problem.
The following report presents the back¬
ground and history of the Lausanne Confer¬
ence in an effort to clarify for American
readers the importance and significance of
the decision on the inter-Allied debt which
now rests with the United States.
The Reparation Conference which met
at Lausanne from June 16 to July 9,
1932—the thirty-fifth such conference dur¬
ing the post-war years—will doubtless go
down in history as marking the end of an
era dominated by the attempt to liquidate the
costs of a world war. Despite the warnings
of many economists that it was impossible
to transfer the huge sums involved across
international frontiers, the victorious pow¬
ers, in Article 231 of the Treaty of Ver¬
sailles, made Germany affirm and accept the
responsibility “for causing all the loss and
damage to which the Allied and Associated
Governments and their nationals have been
subjected as a consequence of the war im¬
posed upon them by the aggression of Ger¬
many and its allies.”
The bill for the war which was presented
to Germanv in May 1921 totaled 132 billion
gold marks ($31,428,570,000) as “compen¬
sation for all damage done to the civilian
population by land, sea and from the air....”
As war passions cooled, however, and the
workings of economic laws became more and
more evident, an admittedly temporary repa¬
ration settlement—the Dawes Plan—was ef¬
fected in 1924. The Dawes Plan did not fix the
total amount of Germany’s obligations, but
provided for a standard annuity of 2.5 billion
gold marks ($595,000,000). In 1929 the
Dawes Plan was replaced by the Young Plan
which scaled down somewhat the Reich’s ob¬
ligations and fixed a definite total sum, the
capital value of which was approximately
32 billion gold marks ($7,600,009,000), or
the equivalent of an average annuity of 1.9
billion gold marks ($473,700,000) for a
period of 37 years. The world-wide depres¬
sion, however, brought about a de facto
termination of the Young Plan in 1931, and
a year later the Lausanne Conference vir-
Foreign Policy Reports. Vol. VIII, No. 19, November 23, 1932
Published by-weekly by the FOREIGN POLICY ASSOCIATION. Incorporated, 18 East 41st Street New York. N. Y.. U. S. A.
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T i BlSSON VERA ZlHELBA Dean, MABEL S. INGALLB. HELEN H. MOOEITEAO. ONA K. D. R.NGWOOP MAXWELL S STEWART. M S
\Vdrtheimer.* John C. deWilde. Wilbce L. Williams. Subscription Rates: *5.00 a year: to F. P. A ',"' e ™* ?r A s * , r <
25 cents. Entered as second-class matter on March 31. 1931 at the post office at New York, N. Y.. under the Act of March 3, 1879.
November 23, 1932
221
tually abolished reparation. This Confer¬
ence, however, provided for a final German
payment of 3 billion gold marks ($714,286,-
000) which, when and if made, should prac¬
tically liquidate the Reich’s total reparation
obligations. Thus the German debt outstand¬
ing is approximately 2.2 per cent of the
Allied demands in 1921, and is actually less
than the amount of two annuities under the
Young Plan.
POLITICAL BACKGROUND OF THE CONFERENCE
The necessity of a definitive settlement of
the vexed problem of intergovernmental
debts was finally recognized by responsible
statesmen on February 13, 1932 when, after
numerous delays, a communique was issued
in Geneva in the name of the French, Ger¬
man, Belgian, British, Italian and Japanese
governments convoking a reparation confer¬
ence in Lausanne in June 1932. The object
of the conference, it was stated, would be
“to agree to a lasting settlement” of the
reparation question and “on measures neces¬
sary to solve the other economic and financial
difficulties which are responsible for and
may prolong the present world crisis.” 1
The increasing seriousness of the world
depression, which was daily becoming more
apparent, had forced this decision on the
governments. During the seven months
which had elapsed since July 1931 when the
German financial crisis had come to a head,
nineteen countries, including Great Britain,
had been forced off the gold standard. More¬
over, by the spring of 1932 the trade of the
chief countries of the world had declined
one-half in comparison with 1930; the num¬
ber of industrial unemployed was estimated
by the Economic Committee of the League
of Nations at 25 million; and a still larger
agricultural population was in dire straits.’
Two committees of experts, called together
by the Bank for International Settlements,
had met in Basle during the last half of 1931
to recommend measures for the assistance
of Germany. Both committees had stressed
the necessity of prompt action by the re¬
sponsible governments and had pointed out
the pressing need for adjustment of all inter¬
governmental debts because “transfers from
one country to another [in payment of inter¬
national obligations] on a scale so large as
to upset the balance of payments can only
1. Cf. Mildred S. Wertheimer, “The Financial Crisis In
Germany,” Foreign Policy Reports, Vol. VII, No. 26, March 2,
1932 ; also Maxwell S. Stewart, "American Commercial Policy
and the World Crisis," Foreign Policy Reporta , Vol. VIII, No. 6,
May 25, 1932. The British government had previously issued
invitations to a reparation conference which, after much dis¬
cussion, was to meet in Lausanne on January 25, 1932. Dr.
Brtiningr’s statement of January 9, 1932, that Germany could
not continue to pay reparation, caused such a flurry that on
January 20 It was announced that the conference would he
postponed. Even before Dr. Brtlning’s non-pos&umus statement,
however, there had been rumors current regarding the necessity
of postponement because of the need for a prior readjustment
of the Inter-Allied debt to the United States. Cf. Frankfurter
Zeitung, January 9, 1932; also Reparation und KriOgschulden
von der Hoover Erkldrung zur Lausanncr Konfercnz (Berlin,
Verlag der EuropSUschen Revue, 1932), p. 82.
2. Imports into the United States between January 1930 and
January 1932 declined in value 58 per cent; exports from the
United States declined 64 per cent during the same period.
Cf. League of Nations, World Economic Survey, Geneva, 1932,
p. 157; The Econoinist (London), June 11, 1932.
accentuate the present chaos.”’ Continued
uncertainty concerning the future readjust¬
ment of intergovernmental obligations was
such a serious barrier to world recovery that
it was obvious a settlement must be made
before the expiration on June 30, 1932 of the
Hoover moratorium. It was anticipated
that the definite decision to hold a con¬
ference in June would in a measure “ease
the international situation,” and that during
the interval some of the outstanding difficul¬
ties obstructing a final settlement of the
reparation and debt questions could be
brought nearer solution.
It was hoped, in particular, that the un¬
certain inner political situation in Germany
and France would be clarified by the elec¬
tions which were imminent in both coun¬
tries.* In Germany, however, these hopes
were only partially realized. The re-election
of President von Hindenburg on April 10
by a clear majority of 53 per cent constituted
the only stable element in an otherwise hope¬
lessly deadlocked situation. The provincial
elections of April 24 in Prussia and four
other states, comprising in all about five-
sixths of the Reich, resulted in a stalemate,
so that parliamentary government in a large
portion of the Reich became impossible.
In France, meanwhile, general elections
for the Chamber held on May 1 and 8
resulted in a decisive victory of the Left
parties, which defeated the previous govern¬
ment bloc of Right and Center groups headed
by M. Tardieu. The Radical Socialist party,
under the leadership of M. Herriot, made the
greatest gains and emerged as the largest
party in the new Chamber, while the Social¬
ists also increased their mandates. A new
Cabinet headed by M. Herriot as Premier
and Minister of Foreign Affairs took office
on June 4.
REPARATION POLICIES OF HERRIOT
AND VON PAPEN GOVERNMENTS
The official policy of the new German and
French governments with regard to the repa¬
ration question, as stated in their ministerial
declarations of June 4 and June 7 respec¬
tively, proved to be somewhat less unyielding
than that previously expressed. Chancellor
3. Report of the Young Plan Advisory Committee .... (Lon¬
don, H. M. Stationery Office, 1932), Cmd. 3995. Cf. Wertheimer,
“The Financial Crisia in Germany,” cited, for summary of the
findings and recommendations of both committees.
4. Cf. Mildred S. Wertheimer and Vera Micheles Dean, "The
Political Outlook in France and Germany," Foreign Policy Re¬
ports, Vol. Vin, No. 4, April 27, 1932.
222
The Lausanne Reparation Settlement
AMERICAN POLICY ON
von Papen did not reiterate the German
non-possumus, ia the government apparently
contenting itself with a general statement
which merely noted the disturbing influence
of existing intergovernmental obligations. * 5
Nevertheless, the government and the Ger¬
man people were at one in believing that the
Reich could and should not pay further repa¬
ration. Due to the financial crisis of 1931
and the reports of the two Basle committees
of experts, German public opinion took it
for granted that reparation had come to an
end—in fact, if not in law. The Reich was
in the grip of a rising wave of nationalism
which constituted a veritable risorgimento,
and which had its origin partly in resentment
against the moral implications of the Ver¬
sailles Treaty, particularly the war-guilt
clause which introduced the section of the
treaty dealing with reparation. 6 This senti¬
ment was further increased as a result of
Germany’s unilateral disarmament, and the
failure of the Disarmament Conference to
take action on the German claim for equality.
With the accession of the Herriot govern¬
ment, the French evidently recognized the
necessity of facing the fact that Germany
neither could nor would make any further
substantial reparation payments. In his
ministerial declaration of June 7, 1932, M.
Herriot did not reiterate the Tardieu-Laval
pledge to maintain the “sanctity of the
Young Plan,” but expressed the readiness
of his government to discuss proposals which
would promote world stability. There were,
however, definite limits beyond which no
French government dared go. France ap¬
parently considered that since Versailles its
gains from the peace treaties had been
gradually destroyed by Germany, which
had offered no compensation in return; that
it had made concession after concession
to Germany without in any way relieving the
tension in Franco-German relations. The
fact which rankled above all in French
minds was that German nationalism had
reached its culmination after French evacu¬
ation of the Rhineland five years before the
date specified in the Versailles Treaty. The
French believed that the Reich should have
been grateful for this concession; instead,
however, the growing Hitler agitation
against the treaty, the claim for equality in
armament, the widespread German senti¬
ment for revision of the Eastern frontiers
and resentment against the prohibition of
Austro-German union had fed the flame of
German nationalism. 7 Fear of the Reich
made it impossible, from the French point of
view, to grant concessions of any kind to
Germany at Lausanne without some quid pro
quo which would increase French security.
4a. Cf. p. 221, footnote 1.
5. Frankfurter Zeitung, June 5, 1932.
6. Cf. p. 220.
7. Cf. Der dcutsche Volkswirt, June 17, 1932.
INTERGOVERNMENTAL DEBTS
A further factor of perhaps equal im¬
portance in determining French policy at
Lausanne was the position of the United
States with regard to the inter-Allied debt.
France had consistently maintained that
there could be no reduction in reparation
without corresponding reduction in the
French debt to the United States. The joint
communique 8 issued by M. Laval and Presi¬
dent Hoover at the time of the French
Premier’s visit to Washington in October
1931 had been generally interpreted to mean
that, after the European powers had agreed
to reduce German reparation, the United
States would readjust the inter-Allied debt.
The United States Congress, however, in
approving the Hoover moratorium, expressly
declared against cancellation or reduction,
and on June 8, 1932, shortly before the Lau¬
sanne Conference convened, the State De¬
partment made an oral announcement that
the question of reparation must be settled
between Germany and its creditors; that
total cancellation would make the United
States the only government that surrendered
everything and received nothing, a situation
which certainly would not appeal to the
American people; and that Congress had
already declared against cancellation or re¬
duction in its joint resolution of December
1931. 8 This declaration was interpreted to
mean that, despite the Hoover-Laval agree¬
ment, the Hoover administration would take
no further action on such a controversial
issue before the November elections. As a
result, the European governments were faced
with the necessity of reaching a decision re¬
garding reduction or cancellation of German
reparation without any assurance that the
United States would eventually agree to
make a corresponding cut in the war debts.
The Lausanne Conference convened in the
dark shadow of this uncertainty.
The British and Italian governments were
of the opinion that cancellation of reparation
and inter-Allied debts would be the most ef¬
fective means of settling the world’s financial
problems and thus insuring recovery. 10 Many
in Britain and France, however, were appre¬
hensive that Germany, once released from
its entire reparation obligation, would in a
short time rise phoenix-like from the ashes
of its present economic and financial difficul¬
ties and, with its highly developed industrial
8. Cf. Wertheimer, “Financial Crisis in Germany," cited;
also Maxwell S. Stewart, “The Inter-Allied Debt; An Analysis,"
Foreign Policy Reports, Vol. VIII, No. 15, September 28, 1932.
Full text in U. S., Department of State, Press Releases t October
31, 1931.
9. New York Times, June 9, 1932.
10. Cf. Statement of Chancellor of the Exchequer, Neville
Chamberlain, in the House of Commons, February 2, 1932;
New York Times , February 3, 1932; ibid., January 13, 1932, for
summary of article in Premier Mussolini's organ, /I Popolo
d'ltalia.
November 23 , 1932
223
apparatus, constitute a formidable competi¬
tor in world markets. It was also feared
that the relatively small German internal
public debt would aid the favorable competi¬
tive position of the Reich. There was con¬
siderable feeling, therefore, that eventually
Germany would be in a position to make a
final reparation payments
Motivated partly by the international situ¬
ation as well as by the fact that France and
Britain are the two largest debtors of the
United States, M. Herriot invited the British
government to Paris for conversations pre¬
liminary to the Lausanne Conference" These
discussions, which took place from June 11
to 14, apparently proceeded in a friendly
fashion. Many observers believed that with
M. Herriot’s advent to power the French
showed more appreciation of the British
point of view, and that the British had made
every effort to understand the special cir¬
cumstances motivating the French position."
The official communiques and statements
issued to the press emphasized the similarity
of views of the two governments, and their
determination to make the Lausanne Con¬
ference effective.
THE WORK OF THE LAUSANNE CONFERENCE
The Lausanne Conference opened on June
16" and elected Prime Minister MacDonald
of Great Britain president, and Sir Maurice
Hankey secretary-general. In his opening
address Mr. MacDonald struck a note which
set the tone of subsequent public discussions.
He stated that “engagements solemnly en¬
tered into cannot be set aside by unilateral
repudiation,” and pointed out that this prin¬
ciple carries the absolutely essential corollary
that “if default is to be avoided engagements
which have proved incapable of fulfillment
should be revised by agreement.” After
stressing the necessity of a settlement on a
broad basis, Mr. MacDonald said:
“I repeat that in failure there is no France,
no _ Italy, no Germany, no America, no Great
Britain apart from the rest of the nations of
the world. There is nothing smaller than a
world, there is nothing less than a system, which
is crumbling under our feet.”
The British Prime Minister linked disarma¬
ment with reparation, stressing the fact that
“success at Lausanne cannot be fully reaped
without success at Geneva.”"
Acting on British initiative, the Confer¬
ence without delay drew up a declaration"
providing that payments on reparation and
war debts due powers participating in the
Conference after the expiration of the
Hoover moratorium on June 30 were “re¬
served” during the period of the Conference.
For the month of July these payments
amounted to approximately $43,000,000, com¬
prising mainly German reparation annuities,
both conditional and unconditional, and
11. Journal de Oenive , July 9, 1932.
12. Cf. The Times (London), June 9, 1932.
13. Ibid., June 11 and 13, 1932.
14. The six inviting powers were: Prance. Great Britain,
Germany, Italy, Belgium and Japan. The following countries
also participated in the conference: Australia, Canada, Greece,
India, New Zealand, Poland, Portugal, Rumania, Czechoslovakia,
the Union of South Africa and Yugoslavia. Bulgaria and Hun¬
gary were subsequently represented. Cf. Final Act of the Laus¬
anne Conference (London, H. M. Stationery Office, 1932), Cmd.
4126. The United States, contrary to its practice at previous
important reparation conferences, was not even represented by
an observer.
15. The Times (London), June 17, 1932.
16. The declaration was signed late on June 16 by Great
Britain, Prance, Italy, Belgium and Japan, and published the
following day. The other states represented at Lausanne sub¬
sequently associated themselves with it. Text in Final Act of
the Lausanne Conference, cited.
sums due to Great Britain from France, Italy
and Belgium on account of war debts, as
well as a payment from Czechoslovakia. 17 The
service of the Dawes and Young loans was
expressly excepted from the provisions of
the declaration. By “reserving” these pay¬
ments, the pressure of making momentous
decisions during the fortnight remaining be¬
fore the Hoover year expired was removed,
and the possibility of a default during the
Conference forestalled. The Hoover mora¬
torium, in so far as it concerned reparation
and inter-European war debts, was thus pro¬
longed.
GENERAL STATEMENTS
OF NATIONAL POLICY
The Conference proceeded, on June 17, to
formulate statements of national policy
which stressed the general economic situa¬
tion, rather than the reparation question in
the narrower legal sense, and were remark¬
able mainly for their moderate and non¬
provocative tone. The German Chancellor,
von Papen, spoke first, admitting the legality
of the Hague Agreements and the Young
Plan, but stating that it was not the task
of the Lausanne Conference to deal with
the legal aspects of the reparation question.
He reviewed the events of the last three
years of unparalleled crisis, the major causes
of which, he declared, were “international
public debt and uneconomic political pay¬
ments.” The Chancellor then gave a detailed
description of the German situation, the
grave unemployment leading to despair and
political radicalism, and stressed the declin¬
ing German export surplus which was
rapidly endangering the service on the Ger¬
man private debts. Herr von Papen argued
further that there was no danger that Ger-
17. These consisted of monthly annuity instalments of
8,325,000 gold marks due Great Britain from France on July
1, similar instalments due Great Britain from Italy and Bel¬
gium amounting to 4,500,000 and 1,575,000 gold marks respec¬
tively, and the Czechoslovak Liberation Debt amounting to
5,000,000 gold marks; a German reparation instalment of
132,000,000 gold marks to the creditor powers; and finally two
war-debt instalments due Great Britain from France and
Italy on July 15 amounting to £1,041,666 and £343,168 respec¬
tively. The Times (London), June 18, 1932.
224
The Lausanne Reparation Settlement
many, relieved of its political debt, would
become a powerful competitor abroad since
inflation had greatly weakened the competi¬
tive capacity of German industry.
Chancellor von Papen was followed by M.
Herriot, who stated that the French delega¬
tion accepted the conclusion of the Basle
Report"* that the present economic crisis ex¬
ceeded in extent the “relatively short de¬
pression” contemplated in the Young Plan.
The French agreed, too, that Germany’s
financial difficulties were in large measure
at the root of the world credit paralysis. M.
Herriot declared, however, that the Basle
Report had also confirmed the fact that Ger¬
many would certainly recover one day and
that German industry had created a work¬
shop on a grand scale. The French Premier
then pointed out how great would be his
country’s loss in the event of cancellation,
and stated that in his opinion such a solution
would be neither fair nor efficacious and
would not bring about a return to stability.
“For such a return, security must be im¬
proved,” he said. “We assert this principle;
there can be no political peace without eco¬
nomic peace, but there can be no economic
peace without political peace.”
Following M. Herriot, Mr. Neville Cham¬
berlain, Chancellor of the British Exchequer,
also urged the necessity of a final settlement.
Without regard to “capacity to pay” and
despite the special position of Great Britain
as both creditor and debtor, Mr. Chamber-
lain urged a “general wiping of the slate,
provided that all other governments con¬
cerned would do the same.”“
THE BRITISH ADVOCATE
A “CLEAN SLATE”
The conclusion of these general statements
marked the end of the first phase of the Con¬
ference, which then resolved itself for the
most part into private discussions between
Mr. MacDonald and M. Herriot. During the
course of these conversations, the British
Prime Minister attempted to convince his
French colleague of the advantages of wip¬
ing the slate clean of all European inter¬
governmental payments, both because of the
ultimate reaction of such a policy on the
United States in future negotiations regard¬
ing the adjustment of war debts and, above
all, on the basis of the general economic
arguments for cancellation. The French,
while reconciled to the fact that Germany
could pay nothing for the present, continued
to argue for the retention of the principle
of reparation payments and for the estab¬
lishment of safeguards to prevent the Reich,
in the event of economic recovery, from
gaining an unfair advantage due to superior
18. The Report of the Young Plan Advisory Commission,
cited.
19. Cf. The Times (London), June 18, 1932.
industrial equipment. The French demands
were eventually reduced to a claim for a final
German payment—the so-called solde net —
as a general German recognition of indebted¬
ness 20 and as coverage for the French debt
to the United States as well. Mr. Mac¬
Donald, in his role of go-between, so in¬
formed Herr von Papen. The German dele¬
gation, however, in an unpublished aide
mtmoire, refused to accept this proposal on
the ground that any future payment would
react to the detriment of its private credi¬
tors. At the same time, the Germans were
reported ready to offer compensation in
other fields, such as commercial policy and
the general reconstruction of Southeastern
Europe.
At this point, on June 21 and 22, through
the efforts of President Hoover to revive the
Geneva Disarmament Conference, the ques¬
tion of disarmament suddenly took the center
of the stage. As a result, there were many
rumors linking acceptance of the Hoover dis¬
armament plan with future American con¬
cessions in regard to debts but these were
firmly denied by the Department of State in
Washington. 21
In Lausanne the Anglo-French conversa¬
tions were deadlocked, and it seemed advis¬
able to initiate direct negotiations between
the Germans and the French who up to this
time had dealt with one another only in¬
directly through Mr. MacDonald. Conse¬
quently June 24, when Herr von Papen and
M. Herriot met for the first time for a per¬
sonal interview which was followed by a
joint meeting of the French and German
delegations, marked the beginning of the
third stage of the Conference. At these
meetings the German economic and financial
situation was once more described, and the
French again stressed the fact that in the
future German industry would certainly re¬
cover and make possible the collection and
transfer of some—perhaps limited—amount
of money. It was clear, however, that the
Germans must make the next move since it
was felt that in asking for remission of their
debts, which everyone agreed they could not
meet for the present, they should offer some¬
thing in compensation. 22 After this ex¬
change of opinions, the German and French
Premiers departed to spend the week-end in
Berlin and Paris respectively.
GERMANY INJECTS POLITICAL FACTORS
Before leaving for Berlin, Herr von Papen,
in a conversation with the editor of the Paris
Matin, remarked that “he was the first to
acknowledge the right of France to com¬
pensation for the renunciation of repara-
20. Cf. ibid., June 22. 1932; Der deutsche Volteicirt, July 8,
Frankfurter Zeitung, June 21. 1932.
21. Cf. U. S.. Department of State, Press Releases, June 25,
1932.
22. Journal de Gentve, June 24 and 25, 1932; Frankfurter
Zeitung, June 25, 1932 ; The Times (London), June 25. 1932.
November 23, 1932
225
tion.” The publication of this interview
caused a furor in the Reich. The German
Right press scathingly attacked the Chan¬
cellor for even admitting that France was
entitled to “compensation.”” Although von
Papen publicly stated that the Matin had
published the interview without his authori¬
zation, the incident undoubtedly forced him
to take a more intransigeant attitude on his
return to Lausanne, and was probably re¬
sponsible in part for the fact that, shortly
after the resumption of Franco-German
negotiations, political factors were thrust to
the center of the stage by the Germans.
Negotiations were resumed on June 27 in
an atmosphere which M. Herriot character¬
ized as much less cordial than that which
had prevailed the previous week. The Ger¬
man Finance Minister, Count Schwerin von
Krosigk, however, after repeating Ger¬
many’s case for complete cancellation, told
the French delegates that the Reich was
anxious to show its good will and was pre¬
pared to make a direct contribution, within
the limit of its restricted means, to a general
pool for the reconstruction of Central and
Southeastern Europe.” M. Herriot appar¬
ently still held out for a final payment and
for the principle of reparation; the psycho¬
logical difference between the reparation—or
“tribute” payments—for which the French
asked and a voluntary contribution to a
European reconstruction pool formed the
obstacle to agreement.
On June 29, Chancellor von Papen issued
a statement which showed plainly the effects
of his week-end in Berlin. Ostensibly made
to correct “misleading” statements which
had appeared in the French press regarding
the Anglo-French-German conversations of
June 28, the German statement declared:
“The confidence of the world can only be
restored if the victorious powers bring them¬
selves to eliminate the discriminating clauses
of the Versailles Treaty. If thereby Germany’s
equality of status and security were re-estab¬
lished, it might be possible for Germany to pay
its share toward the general effort of recon¬
structing world economy in the form of a contribu¬
tion to which the full restoration of economic
equilibrium in Germany and in the world is
naturally a prerequisite.” 28
This injection of political questions
created a bad impression and added to the
difficulties of the Conference.” In fact, it
was apparently due almost entirely to the
efforts of Mr. MacDonald that the Confer¬
ence survived this crisis. The British Prime
Minister suggested to the plenary session
which met on the afternoon of June 29 the
appointment of a “Bureau” charged with the
examination of the present position of repa-
23. The Times (London), June 27, 1932.
24. Ibid., June 28, 1932. Apparently this was the first time
the Germans had made such an offer.
25. Frankfurter Zeitung, June 30, 1932.
26. The Times (London), June 30, 1932.
ration in the light of the preliminary study
which had already taken place. By adopting
this course, the Conference was temporarily
estopped from adjourning without reaching
a decision. An Economic Committee, com¬
posed of the Ministers of Commerce of each
country, was set up at the same time to pre¬
pare a report on “the measures necessary
to solve the other economic and financial
difficulties which are responsible for and may
prolong the present world crisis”—a subject
which formed the second part of the Lau¬
sanne Conference agenda.
Thus Lausanne, for the time being, was
steered away from political difficulties. The
Bureau settled down to intensive work and,
while progress was slow, it may be said that
with the appearance of technical experts the
Conference entered its fourth and last stage
and came to grips with the actual details of
a settlement. For four days the Bureau dis¬
cussed possible arrangements for a final
German payment, probably in the form of
bonds to be issued by the Bank for Interna¬
tional Settlements when German credit and
the international bond market warranted.
There was talk of including an “index of
prosperity” for the Reich but the German
delegation stood firm against such a provi¬
sion, insisting that the Lausanne settlement
must be final and definitive as to amount.
The German payment was apparently still
envisaged as a contribution to a European
reconstruction pool. Herr von Papen’s po¬
litical demands of June 29 were not men¬
tioned, but a further difficulty arose when
the French insisted that some provision be
made in case payments to the United States
on the inter-Allied debt had to be continued.
The Germans, however, refused to accept
any such contingent arrangement.”
EFFECT OF AMERICAN
OPPOSITION TO CANCELLATION
The French insistence on a final German
payment, as opposed to complete cancella¬
tion, seems to have been strengthened by
the position of the United States. The
French delegation, at a private meeting on
June 29, declared that:
“In practice, cancellation pure and simple will
not give us the basis of an accord with the
United States. And failing a settlement with
America, a final settlement [°f the reparation
question] is not possible. The results obtained
at Lausanne will remain without definitive elfect.
This we affirm with all certainty.
“The French delegation, after receiving in¬
formation of a most reliable character yesterday,
has adopted a plan which it believes will facili¬
tate the pourparlers with the United States when
an opportune moment arrives. . . .
“The delegation believes that cancellation, pure
and simple, would actually be regarded by the
United States as an act of defiance with respect
to the principal creditor, whose title to pay-
27. Ibid., July 1, 1932; Der deutsche Yolksivirt, July 8, 1932.
226
The Lausanne Reparation Settlement
ment the delegation neither can nor wishes to
discuss.” 59
Apparently the French argument that com¬
plete cancellation would displease the United
States greatly impressed the other delegates.
The introduction of this issue seems to have
initiated the long and difficult negotiations
on the amount of the final German payment.
On July 2 the creditor powers agreed to
preliminary proposals on the basis of which
it was hoped that a settlement could be
reached. These “suggestions,” which were
handed to the Germans on July 3, included
cancellation of reparation and an eventual
German contribution to “economic recon¬
struction” by means of a bond issue of four
billion marks to be negotiated by the Bank
for International Settlements. It was sug¬
gested that the Bank’s council, acting by
majority vote, should decide when such
bonds could be issued without disturbing
normal economic relations.®
AGREEMENT ON A FINAL
GERMAN REPARATION PAYMENT
These proposals were not made in the
form of an offer to be accepted or rejected,
but German observations were invited.
These, however, were unfavorable and raised
several objections, again bringing forward
political issues. Instead of four billion
marks, the Germans apparently offered two
billion; they asked that the Bank’s decision
be made by unanimous vote; and they ob¬
jected to the incorporation of any proviso
making ratification dependent on a prior
settlement with the United States.” Finally,
the Germans demanded elimination of Ar¬
ticle 231 of the Versailles Treaty, the so-
called “war guilt” clause, which has been
more bitterly resented in Germany than any
other provision of the treaty.”
From this time on the Conference settled
down to actual bargaining and, although
superficially the differences between the
Germans and their creditors did not seem
important, actually the Conference experi¬
enced a period of extreme crisis during which
all seemed lost. The principal difficulty was
caused by the re-appearance of politics in
the form of the war-guilt and equality issues.
In the financial field the “clean slate” policy
had been abandoned by the British—whose
stand was doubtless influenced by the alleged
opposition of the United States to cancella¬
tion—when the Germans themselves came to
the conclusion that they could pay something
so long as it was not called “reparation.”
Furthermore, the Germans had indicated
that if the “war guilt” clause were elimi¬
nated they might even be able to pay a little
more. The Italians added a fresh com¬
plication at this point by announcing on
July 4 that they w T ere more than ever con¬
vinced that the “only possible solution at
Lausanne in the interests of all is the ‘clean
slate’ solution.” 92 The statement went on to
stress the necessity of a final settlement
along the lines of the Lausanne declaration
of June 16“ The explanation for Italy’s
action was doubtless to be found in the pre¬
vailing uncertainty regarding the inter-Al-
lied war debts.”
The Italian memorandum caused a slight
flurry, but did not divert the Conference
from its efforts to reconcile Franco-German
difficulties. The French declared that they
could not consider political concessions to
the Germans in any form, while the Germans,
feeling that they must have something to
compensate public opinion at home for a
final payment, remained equally firm. The
Conference reverted to its original procedure
—Mr. MacDonald talking in turn with M.
Herriot and Herr von Papen—but the dead¬
lock was unbroken. The only advance was
a new r German offer to pay 2.6 billion marks
instead of the original two billion. Political
difficulties, however, remained the real
stumblingblock.® It was not until midnight
of July 7 that there was any sign of com¬
promise when, in the small hours of July 8.
it was reported that the situation had im¬
proved. On the morning of July 8 a formula
was found and an agreement reached.
ANALYSIS OF THE LAUSANNE SETTLEMENT
The settlement falls into three parts:
1. An agreement with Germany concerning
reparation; a “Gentlemen’s Agreement” concern¬
ing ratification of the Lausanne settlement by the
creditor powers, which does not form part of the
Final Act of the Conference and was published
later; and a recommendation concerning non-
German reparation.
2. Resolutions setting in motion preparations
for two important international conferences, a
world economic conference, and a meeting to deal
with the reconstruction of Central and Eastern
Europe.
28. Memorandum dated June 29 prepared by the French
delegation and given to selected newspaper correspondents.
The oral declaration of the State Department on June 8 con-
Arms this statement. Cf. p. 222.
29. Cf. The Times (London), July 4, 1932.
30. Cf. The Economist , July 9, 1932.
3. A pact dealing with “future European co¬
operation” which was not part of the Final Act
and was not published until several days after It?
Conference had adjourned.
The political problems which had made
agreement so difficult, particularly during
the final stages of the Conference, are not
actually mentioned in the introductory
Declaration of the Agreement with the
Reich, which states:
31. Cf. The Times (London), July 5, 1932.
32. Cf. ibid., July 5, 1932.
33. Cf. p. 223.
34. The Economist, July 9, 1932; for final declaration re¬
garding inter-European war debts, cf. p. 228.
35. Cf. p. 222.
November 23 , 1932
227
“The Powers signatory of the present Agree¬
ment have assembled at Lausanne to deal with
one of the problems resulting from the war, with
the firm intention of helping to create a new
order, permitting the establishment and develop¬
ment of confidence between the nations in a mu¬
tual spirit of reconciliation, collaboration and
justice.
“They do not claim that the task accomplished
at Lausanne, which will completely put an end to
Reparations, can alone assure that peace which
all the nations desire. But they hope that an
achievement of such significance and so arduously
attained will be understood and appreciated by
all the pacific elements in Europe and the world,
and that it will be followed by fresh achievements.
“These further successes will be more readily
won if the nations will rally to this new effort in
the cause of real peace, which can only be com¬
plete if it is applied both in the economic and in
the political sphere and rejects all possibility of
resort to arms or to violence.
“The signatory Powers will make every effort
to resolve the problems which exist at the present
moment or may arise subsequently in the spirit
which has inspired the present Agreement.” 368 *
The actual agreement provides that Ger¬
many shall make an eventual payment to its
creditors of three billion gold marks in the
form of bonds to be delivered to the Bank
for International Settlements as trustee.
These bonds are to carry interest at 5 per
cent and sinking fund at one per cent, and
are subject to the following arrangements:
1. The bonds will not be negotiated by the
Bank for International Settlements for at least
three years (not until July 9, 1935), and all
bonds which the Bank has been unable to nego¬
tiate during the following twelve years—by July
9, 1947—are to be cancelled.
2. The Bank is to negotiate the bonds—after
the . expiration of the three-year period—by
issuing them to be sold on the world markets,
“as and when posssible, in such amounts as it
thinks fit, provided that no issue shall be made
at a rate below 90 per cent.”
3. The proceeds of the bonds are to be placed
to a special account by the Bank for Interna¬
tional Settlements, but the definite allocation
of the funds “shall be settled in due course be¬
tween the Governments, other than Germany,
signatory to the present [Lausanne] Agree¬
ment.” The original plan of a European recon¬
struction pool seems to have been dropped, thus
making it possible to apply the final German pay¬
ment to a debt settlement with the United States.
Thus it is left to the discretion of the
Bank for International Settlements, which
“shall take the advice of the President of
the Reichsbank” but may act by majority
vote,* to decide when and in what amounts
the bonds may be issued without endanger¬
ing German credit or disturbing normal eco¬
nomic relations.
It is difficult to estimate the precise value
of the Lausanne settlement. If, however, the
full amount of the bonds is issued in July
1935—a most unlikely eventuality—the Ger¬
man annual obligation would be 180 million
gold marks for a period of 37 years, and
35a. Final Act of the Lausanne Conference, cited, p. 6.
36. Article 1, paragraph 8.
the present value of the total payment (dis¬
counted at 5 per cent) approximately 2.6
billion gold marks. 87
The fact that the bonds may not be issued
under 90 is designed to safeguard German
credit from a premature negotiation of these
securities. 88 Nevertheless, the Bank for In¬
ternational Settlements has the right, five
years after the signature of the Lausanne
Agreement, to vary the selling price of the
bonds if it feels that German government
credit has been entirely restored despite the
fact that quotations on other German bonds
remain under 90* On the other hand, the
German government may request that the
rate of interest be lowered below 5 per cent
if it has proved possible to market the bonds
at par. Furthermore, the German govern¬
ment has the right to redeem at par bonds
which have not been marketed. In deter¬
mining the terms of issue of the bonds, the
Bank for International Settlements is to take
into account the desirability of giving the
German government the right to redeem
them after a reasonable period. A further
safeguard for the creditor powers is to be
found in the provision that one-third of the
proceeds of any long-term" foreign loan is¬
sued by the German government or guaran¬
teed by it after the Lausanne Agreement
comes into force is to be used by the Reich
to redeem an equivalent amount of the bonds
negotiated by the Bank for International
Settlements. On the whole, however, the real
essence of the agreement is that the Bank
will issue the bonds in amounts and at times
when they can actually be absorbed by the
world markets. This can occur only when
German credit has been completely restored,
and a corresponding revival of international
credit and trade has taken place.
The final undertaking Germany has ac¬
cepted in the Lausanne Agreement cancels its
previous obligations under the Young Plan,
with the exception of the service on the Dawes
and Young loans which the Reich must still
meet. The Lausanne settlement has left un¬
disturbed the following German obligations
37. Cf. Erich Welter, Das Ablcommen von Lausanne (Frank¬
furt-am-Main, Societats-Verlag. 1932), p. 16 et seg.
38. There was apparently Borne sentiment at the Conference
in favor of allowing- Germany's creditors to endorse the bonds
and thus stand security for them, an act which might have
artificially raised their value and made It possible to float
the bonds earlier. Such an endorsement, however, would have
made the issuance of the bonds dependent on the credit of the
creditor states rather than on German credit, and it was
therefore felt that it would in the long run defeat its own ends.
rbUL, p. 13-14.
39. Such action requires a two-thirds majority of the board
of the Bank for International Settlements.
40. For a period of more than twelve months.
41. Reparation payments in kind are also cancelled with
the exception of deliveries already contracted for which are to
be the subject of a further settlement. Conversations to this
end have apparently already taken place.
228
The Lausanne Reparation Settlement
OUTSTANDING GERMAN OBLIGATIONS*
(in millions of RM)
Year ending
Dawes
Young
Belgian
Mark
Mixed
To U. S.
Army of
Totals
June 30
Loan
Loan
Settlement
Claims
Occupation
1933 .
... 85.2
63.8
22.6
40.8
25.3
237.7
1934 .
... 83.9
63.8
26.0
40.8
18.6
233.1
1935 .
,... 82.6
63.8
26.0
40.8
18.6
231.8
1936 .
.... 81.3
63.8
26.0
40.8
18.6
230.5
1937 .
.... 80.0
63.8
26.0
40.8
18.6
229.2
1938 .
.... 78.7
63.8
26.0
40.8
16.4
225.7
1939 .
.... 77.4
63.8
26.0
40.8
16.4
224.4
1940 .
.... 76.1
63.8
26.0
40.8
18.6
223.3
1941 .
.... 74.9
63.8
24.5
40.8
18.6
222.6
1942 .
.... 73.5
63.8
20.1
40.8
25.3
223.5
Runs until ,
.... 1949
1965
1966
1981
1966
*Cf. Welter, Das Abkommen von Lausanne, cited, p. 18.
Furthermore, the arrears in reparation pay¬
ments under the Hoover moratorium,
amounting to 1.6 billion marks, are cancelled
and the settlements in regard to these annui¬
ties voided. The loans made by the Bank
for International Settlements to the German
railways from the unconditional annuities,
under these agreements are cancelled, so
that it will be unnecessary for the Reich to
repay them."
During the period of transition until the
Lausanne Agreement comes into force, the
declaration of June 16, 1932" will remain in
effect as concerns Germany, and all further
payments from Germany under the Young
Plan and the repayment of the sums post¬
poned under the Hoover year are suspended.
Furthermore, non-German reparation is
suspended as well, and the question of its
eventual settlement has been referred to a
committee which is to consist of one repre¬
sentative from each of the governments con¬
cerned. 11 This settlement is to be made by
"viewing [non-German reparation] within
the framework of a general settlement.”
PREPARATION FOR A
WORLD ECONOMIC CONFERENCE
The Lausanne Conference also initiated
preparations for two further international
meetings. A committee was appointed to
submit proposals to the Commission of In¬
quiry for European Union concerning the
reconstruction of Central and Eastern Eu¬
rope and stressing the need of measures: to
overcome the present transfer difficulties and
make possible the progressive suppression
of existing systems of exchange control; to
42. By the London agreement of August 11, 1031, the un¬
conditional annuities due under the Young Plan were paid Into
the Bank for International Settlements by the Reich during
the Hoover year and moat of this money was then returned
to the German railways In the form of a loan. Cf. Report of
Committee of Experts respecting Suspension of certain Inter -
Governmental Debts falling due during the pear ending June
30, 193Z, together with Protocols and Declarations signed at
London, August 11 and 13, 1931 (London, H. M. Stationery
Office, 1931), Cmd. 3947.
43. Cf. p. 223.
44. F. M. Theunis (Belgium) was subsequently appointed
chairman of this committee. Cf. The Times (London), July 11,
1932.
45. M. Georges Bonnet of France was appointed chairman
of this committee which met at Stresa September 5-20, 1932.
This conference will be discussed in a subsequent Issue of
Foreign Policy Reports.
revive trade between these countries them¬
selves and between other states; and to over¬
come the difficulties caused to the agricul¬
tural countries by the low price of grains. 16
The agenda of the Lausanne Conference
had specifically charged that body to decide
on measures necessary to solve the world
crisis. Having reached an agreement on the
reparation question, a resolution was ac¬
cordingly passed by the Conference listing
the main financial and economic questions
which must be studied by a world economic
and financial conference and providing for
a committee of experts to prepare for such
a conference, which it invited the Council
of the League of Nations to convoke."
The formal signature of the Lausanne
agreements took place on July 9, 1932 at a
final plenary session of the Conference. Be¬
fore the signatures were affixed, Sir John
Simon, British Foreign Secretary, stated that
the declaration of June 16, 1932" suspending
all payments on intergovernmental obliga¬
tions as between the powers represented at
Lausanne had been extended to apply to the
French and Italian war debts owing to Great
Britain "until the coming into force of the
Lausanne Agreement or until it has been
decided not to ratify that Agreement.” In
the latter eventuality, the legal position
would be the same as that existing under
the Young Plan, and the “British and French
(Italian) Governments would have to exam¬
ine together the de facto situation which
would be created.”" The Final Act of the
Lausanne Conference was then signed with
great solemnity, and Mr. MacDonald made a
valedictory address in which he said:
“There are no more Reparations! Those great
payments of sums which represented no transfer
of goods have not been a punishment to one
nation but an affliction to all. . . . Europe cannot
exist alone . , . whatever arrangements we have
come to [at Lausanne] will have to be fitted into
a world framework . . . [they] must have a
response elsewhere.”
46. The United States was asked to participate iTT the work
of this preparatory committee and has accepted.
47. Cf. p. 223.
48. Further Docitments relating to the Settlement reached at
the Lausanne Conference (London, H. M. Stationery Office.
1932), Cmd. 4129.
November 23 , 1932
229
These last remarks were interpreted as
aimed at the United States.*
THE “GENTLEMEN’S AGREEMENT”
It had become evident before the end of
the Lausanne Conference that this interpre¬
tation was correct and that an understanding
regarding ratification had been reached at
Lausanne which was not incorporated in the
published text of the final agreement. The
latter merely states that the settlement will
come into force as soon as it has been ratified
by Germany, Belgium, France, Great Britain,
Italy and Japan; meanwhile, the transitional
measures suspending all payments are to
remain in effect. The question of eventual
non-ratification had been raised by Chan¬
cellor von Papen at the plenary session of the
Conference on the evening of July 8, when
he inquired what procedure it was proposed
to follow in case one of the six powers did
not ratify. To this query, Mr. MacDonald
replied that he wished to put on record in
the name of the inviting powers that, in the
event of any inability to fulfil the agreement
and its annexes, a further conference would
be held. He refrained from stating, how¬
ever, that in case of non-ratification the
Young Plan would be in force once more.
Meanwhile there were persistent ru¬
mors that the chief creditor powers had
agreed not to ratify the Lausanne Con¬
vention until they had reached a satis¬
factory settlement with their own creditors
—i.e., the United States. American dis¬
patches from Lausanne stated that such a
“Gentlemen’s Agreement” existed, and the
French press was equally definite on this
point." The London Times also published a
guarded reference to it on July 9. Never¬
theless no official publication of the agree¬
ment was made when the Lausanne Agree¬
ment was published on July 8. The general
gratification, particularly in the United
States, at the successful outcome of the
Conference was largely destroyed when it
was learned that the settlement was depen¬
dent on prior readjustment of the debts
to the United States. Furthermore, in the
British House of Commons, the debate on
Lausanne, which had been fixed for July 12,
was preceded on July 11 by a strenuous
attack launched by Mr. Winston Churchill,
who declared that the entire work of the Con¬
ference had been nullified by the secret agree¬
ment. 62 There were renewed attacks and de¬
mands for official publication of the agree¬
ment when Mr. MacDonald defended the en¬
tire Lausanne settlement in the House on the
following day. In reply, Sir John Simon
stated that as soon as the assent of the other
50. Cf. Royal Institute of International Affairs, Bulletin of
International News , July 21, 1932.
51. Cf. New York Herald Tribune, July 9, 1932 : New York
Times, July 10, 1932; Le Temps r July 9 and 10, 1932.
52. The Time3 (London), July 12, 1932.
signatories had been secured, the document
would be published, and it was finally issued
as a British White Paper on July 14.“
This document revealed that the Gentle¬
men’s Agreement—officially called a proces-
verbal — had been initialed by Belgium,
Great Britain, France and Italy on
July 2, six days before the final settlement
was reached at Lausanne. 8 * From the fact
that the agreement was initialed as early as
July 2, it may be regarded as a concession
to France in return for the latter’s sacrifice
of German reparation, and as a logical and
natural outcome of the general uncertainty
with regard to eventual action by the United
States on the war debts. As one commenta¬
tor has stated:
“The simple fact is that certain of the Euro¬
pean creditor countries were not willing finally
to sign, seal and deliver an agreement affecting
one side of their budgets until they knew where
they stood in regard to the tangled skein; of the
international debts of which the debts to Amer¬
ica are a very important part.”®
ANGLO-FRENCH PACT FOR
EUROPEAN COOPERATION
Besides the Gentlemen’s Agreement, an¬
other arrangement negotiated at Lausanne
came to light after the Conference adjourned.
On July 13 an Anglo-French pact was an¬
nounced concerning “methods for promoting
future European cooperation.” This instru¬
ment states that, in accordance with the
spirit of the Covenant of the League of
Nations, the signatories “intend to exchange
views with one another with complete can¬
dour concerning, and to keep each other
mutually informed of, any questions coming
to their notice similar in origin to that now
so happily settled at Lausanne which may
affect the European regime.” Furthermore,
the signatories pledge themselves to work to¬
gether and with other delegations at Geneva
to find a solution of the disarmament question
“which will be beneficial and equitable for
all the powers concerned.” The agreement
applies also to cooperation in preparation
for the World Economic Conference and
states that the signatories will “avoid any
action of the nature of [economic] discrimi¬
nation by the one country against the inter¬
ests of the other.” Other European gov¬
ernments are invited to adhere to the accord."
The reception of this pact was very mixed.
In France it was regarded as a revival of
53. Further Documents relating to the Settlement reached
at the Lausanne Conference, cited.
54. It was notified to Germany and acknowledged by Chan¬
cellor von Papen on July 9, but the Germans had nothing
to do with its Inception or formulation; on. the contraryi they
took pains to point out that the agreement could in no way
be interpreted as drawing Germany into a united front of
American debtors. Cf. Welter, Das Abkommen von Lausanne,
cited, p. 9.
55. The Economist, July 16, 1932.
56. Italy, Belgium, Germany, Poland, Hungary, Greece,
Spain, Czechoslovakia, Yugoslavia, Albania, Bulgaria, Norway,
the Netherlands and Lithuania have adhered to the pact.
230
The Lausanne Reparation Settlement
the Entente Cordiale, as a distinct triumph
for French diplomacy, and even as paving
the way for a united Franco-British front
both against Germany and in future debt
negotiations with the United States. In
Germany and the United States, however, it
was criticized for these very reasons. Fur¬
thermore, the fact that the accord, although
open to other powers, was published as a
Franco-British agreement gave rise to
charges of bad faith. In order to allay mis¬
apprehensions, the British issued an official
statement on July 14, declaring that “there
is no truth in any statement that it is ap¬
plicable to the question of the British
debts to the United States. The use
of the words ‘European regime’ expressly
excludes from its purview any questions
affecting non-European countries.” 67 Never¬
theless, the first favorable impression made
by the Lausanne settlement was distinctly
dimmed by the emergence of these supple¬
mentary pacts and the coiifusion attendant
on their publication.
CONCLUSION
It remains to estimate the actual accom¬
plishments of the Lausanne Conference. On
the positive side, reparation as such no
longer exists. Even before ratification of
the Lausanne settlement, the transitional
measures providing for suspension of Euro¬
pean intergovernmental obligations afford a
breathing-space which counterbalances to
some extent the uncertainty caused by the
Gentlemen’s Agreement. A second positive
advantage is to be found in the fact that the
Lausanne settlement recognizes the danger
to world economy as well as the virtual im¬
possibility, of transferring huge sums of
money from one country to another without
corresponding exchanges of goods and/or
services. In the third place, in recognition
of this fact, the final German payment is so
hedged about with safeguards that if and
when it is made it can neither disturb Ger¬
man economy nor clog the channels of inter¬
national finance and trade. Moreover, despite
the delay on account of the Gentlemen’s
Agreement, it appears doubtful whether any
future reparation conference—to be held in
case of non-ratification of the Lausanne
Agreement—would be able to turn back the
hands of the clock and draw up a settlement
which did not recognize these essential eco¬
nomic facts so clearly affirmed at Lausanne.
Finally, the Lausanne settlement seems to
have been received with satisfaction by both
the British and the French. The former
feel that, on the whole, it is the best solution
obtainable; the latter appear satisfied despite
the undoubted sacrifices which the agreement
entails for France. This feeling is due to
some extent to the fact that, although France
was virtually isolated when the Lausanne
Conference opened, at its close M. Herriot
had been able, in the eyes of the French, to
57. The Times (London), July 14 and 15, 1932; Le Temps,
July 15. 15 and 17, 1932; Journal de Genive, July 15, 1932 ;
Der deutsche Volkswirt, July 15, 1932.
68. The j Economist, July 16, 1932.
establish a close political entente with the
British. Furthermore, Paris feels that
Lausanne is a prelude to successful negotia¬
tions with Washington. 6 *
Although from this point of view the Gen¬
tlemen’s Agreement—which evidently made
possible a settlement at Lausanne—may be
regarded as a positive achievement, it also
constitutes the gravest factor on the negative
side, for the postponement of ratification of
the Lausanne Agreement until a satisfactory
settlement has been made with the United
States necessarily prolongs the uncertainty
which has been such a serious obstacle to
world recovery.
Although France and Great Britain are
satisfied, the German reaction to the
whole Lausanne settlement, for the present
at least, must be placed in the negative
column. The Social Democrats and the few
remaining Liberals recognize that it repre¬
sents a great advance, but the powerful Right
groups appear thoroughly disappointed. This
feeling is probably due in large measure to
the fact that the German delegation* pro¬
jected into the Lausanne deliberations burn¬
ing political issues which were not men¬
tioned in the final settlement. As a result
the Right press in the Reich was able to use
these unfulfilled political demands to obscure
the concrete achievements of the Confer¬
ence. 60
Despite these drawbacks, the outcome at
Lausanne seems to have given some measure
of hope to the world. M. Herriot, addressing
the Assembly of the League of Nations on
September 29, 1932, declared:
“. . . Lausanne is the most important step
taken since the war toward re-establishing con¬
fidence in political affairs and in business. Lau¬
sanne was the ‘great, bright spot' in a lurid pic¬
ture of mistrust, fear and hatred."® 1
59. Probably under pressure from Berlin. Cf. p. 224 et seq.
60. Cf. W. Rt>pke. “Nach Lausanne,” and W. Hagemann,
“Lausanne und die Zukunft,” Zeitsehrift fUr Polttik, August.
September 1932.
61. League of Nations. Verbatim Record of the 18th Ordinary
Session, Fifth Plenary Meeting, September 29. 1932.