Almost 80 per cent of the funds utilized by the C.R.B. for relief work in occupied Belgium and France and for rehabilitation following the Armistice were advanced to the Commission by the treasuries of Great Britain, France, and the United States in the form of loans(370) to the Belgian and the French Governments. In liquidating its affairs the Commission accounted to the Belgian and French Governments(371) for its stewardship of these great sums and at this point the Commission's responsibility ended. Subsequent intergovernment loan settlements, since they include, among larger items, these same sums, have a connection, however indirect, with public relations of the Commission. Moreover, the Chairman of the C.R.B. was a member of the American World War Foreign Debt Commission, which negotiated the settlements with Belgium and France. The selected extracts of government agreements and of treaties which follow, though not from the C.R.B. archives, serve to conclude the financial history of the relief work.

In view of the fact that the Versailles Treaty and the United States Government recognized a distinction in the case of Belgium, between pre-Armistice and post-Armistice loans, which materially affected subsequent debt settlement arrangements, the documents here presented relating to the Belgian war debt and those relating to the post-Armistice loans to Belgium are placed in separate groups. A third group concerns the loans to France.


1. The Belgian War Debt

The Belgian war debt, as considered in the Versailles Treaty,(372) includes all sums borrowed by Belgium from the Allied and Associated Governments up to the 11th November 1918. The total was nearly a billion dollars, of which the creditor governments(373) were France and Great Britain, in approximately equal amounts, to the extent of 82 per cent of the total, and the United States 18 per cent. These totals include government advances to the C.R.B. for Belgian relief as follows:(374)

From French Treasury

$ 94,181,410.78

From British Treasury


From United States Treasury


These figures indicate that approximately 90 per cent of United States loans to Belgium prior to the Armistice were utilized by the C.R.B. A much smaller percentage of the Belgian war debt to France and Great Britain was devoted to relief (about 24 per cent in each case).

As there were no further relief loans to Belgium (through the C.R.B.) by Great Britain(375) or France after the 11th November 1918, the provisions of the Treaty of Versailles whereby Germany became responsible for the payment of this Belgian war debt settled, as far as Belgium was concerned, her indebtedness to Great Britain and France for relief subsidies. With such post-Armistice loans as Great Britain and France made to Belgium for reconstruction and other purposes, the C.R.B. had no concern. But with regard to American relief loans the situation was different. The United States did not ratify the Treaty of Versailles and could not look to Germany, as the Treaty provided, for reimbursement for the war loans to Belgium. Furthermore, after the 11th November 1918, Belgium received additional advances from the United States, part of which were turned over to the C.R.B. There were, therefore, war debts and post-Armistice debts, both involving relief funds advanced to the C.R.B. for settlement by direct negotiations between the Belgian and United States Governments. The following extract from a report of the World War Foreign Debt Commission describes the negotiations for the funding of the Belgian war debt.



376) describing the negotiations respecting the Belgian pre-Armistice debt to the United States


The total principal amount of obligations of foreign governments originally held by the Treasury was $10,338,058,352.20. Such obligations were acquired by the United States under the authority of the Liberty bond acts which authorized the Secretary of the Treasury, with the approval of the President, to establish credits in favor of foreign governments engaged in war with enemies of the United States against which cash advances were made for the purpose in general of enabling those governments to meet commitments made in the United States in connection with the prosecution of the war; ....

. . . . . . . . . . . . . . . . . .


The present members of the World War Foreign Debt Commission are:

Andrew W. Mellon, Secretary of the Treasury, chairman
Frank B. Kellogg, Secretary of State
Herbert Hoover, Secretary of Commerce
Reed Smoot, United States Senator
Theodore E. Burton, Member of the House of Representatives
Charles R. Crisp, Member of the House of Representatives
Richard Olney, formerly Member of the House of Representatives
Edward N. Hurley, formerly chairman of the United States Shipping Board
Garrard B. Winston, Undersecretary of the Treasury, is secretary of the commission

. . . . . . . . . . . . . . . . . .

While the integrity of international obligations must be maintained it is axiomatic that no nation can be required to pay to another government sums in excess of its capacity to pay. The commission in its settlement with Great Britain, made on June 19, 1923, and in subsequent negotiations or settlements has adhered to the principle that adjustments made with each government must be measured by the ability of the particular government to put aside and transfer to the United States the payments called for under the funding agreement. Nor does the principle of capacity to pay require the foreign debtor to pay to the full limit of its present or future capacity. It must be permitted to preserve and improve its economic position, to bring its budget into balance, and to place its finances and currency on a sound basis, and to maintain, and if possible, to improve the standard of living of its citizens. No settlement which is oppressive and retards the recovery and development of the foreign debtor is to the best interests of the United States or of Europe.

. . . . . . . . . . . . . . . . . .


The Belgian Government notified the American ambassador at Brussels on June 7, 1925, that Belgium desired to open negotiations in Washington for a settlement of its debt.

On August 10, 1925, a Belgian commission consisting of Baron de Cartier de Marchienne, Belgian ambassador to the United States; Baron George Theunis, formerly Prime Minister of Belgium; Monsieur Emile Francqui, vice governor of the Société Générale de Belgique; and Monsieur Félicien Cattier, head of the Banque d'Outremer, appeared before the commission. The Belgian commission was accompanied by the following experts: Monsieur J. Boet, director of the Ministry of Finance; Monsieur J. B. Vincent, administrator of the Treasury; Monsieur J. Warland, director of the public debt; Monsieur André Terlinden, director of the Société Nationale de Crédit à l'Industrie. Monsieur Robert Silvercruys served as secretary general of the commission.

Meetings of the commission with the Belgian commission were held on August 10, 11, 12, 13, and 14, 1925. The meetings were then adjourned to permit the chairman and Senator Smoot to submit the terms of a tentative settlement to the President at Plymouth, Vt. A final meeting was held on August 18, 1925, at which an agreement was reached. The debt-funding agreement was signed on August 18, 1925, and was later approved by the President. It will be submitted to Congress for its approval at its next session .....

In the settlement arrived at the Belgian debt was divided into two parts. It will be recalled that at the time of the Peace Conference at Paris in 1919, Belgium advanced a claim for war damages as a prior charge on reparations amounting to $1,000,000,000 in gold; that she also claimed that Germany should be compelled to redeem in gold 6,200,000,000 paper marks forced into circulation in Belgium during the period of German occupation, which marks had been redeemed by the issuance of Belgian francs by Belgium; and that she also maintained that France, Great Britain, and the United States should cancel her war debts, representing sums advanced prior to November 11, 1918. During a critical period of the Peace Conference, largely at the instance of President Wilson, Belgium was induced to reduce her claim for war damages from $1,000,000,000 to $500,000,000, and to abandon her claim for 6,200,000,000 gold marks on the condition that France, Great Britain, and the United States would forgive her prearmistice debts and would look to Germany for repayment of the sums due. On June 16, 1919, M. Clemenceau, President Wilson, and Mr. Lloyd George signed a letter addressed to the Minister of Foreign Affairs of Belgium stating that each would recommend to the appropriate governmental agency of his Government that upon delivery to the Reparation Commission of bonds of Germany to be issued in reimbursement of all sums which Belgium had borrowed from the three Governments prior to the armistice, each Government would accept a proportionate share of the bonds on account of Belgium's obligation to repay the loans, which obligation was thereupon to be cancelled. This arrangement was incorporated in article 232 of the treaty of Versailles. Although France and Great Britain ratified the treaty, it was not ratified by the United States. The question of the release of Belgium from her obligation to repay the prearmistice advances was separately submitted to Congress by President Wilson in a communication dated February 22, 1921, a few days before the close of his administration, but never came up for consideration. Although the representatives of Belgium at the Peace Conference understood that the action of President Wilson in negotiating the peace treaty and making the agreement was subject to ratification, it was not anticipated that he would experience any difficulty in securing ratification in the United States. The man in the street in Belgium always regarded the failure of the United States to confirm the agreement of President Wilson as a breach of faith.

While the commission was aware of the fact that no legal obligation rested upon the United States as a result of the assurances given Belgium at the time of the Peace Conference, it nevertheless felt that there continued a weighty moral obligation upon this Government, since as a result of the action taken by President Wilson Belgium had waived rights which otherwise it might have obtained. This differentiated the prearmistice debt of Belgium from all other debts due the United States from foreign countries.

The provisions of article 232 of the treaty of Versailles were not carried out by Germany. The failure of Germany to fulfill its reparation obligations finally resulted in the adoption of the Dawes plan of August, 1924. In an agreement of January 14, 1925, signed at Paris, apportioning the Dawes plan receipts among the several countries entitled to reparations it was provided that 5 per cent of the annual payments by Germany available for reparations (first deducting certain priorities, such as service of the German external loan of 1924, army costs, and the like) was set apart to provide repayment of the Belgian prearmistice debt. France and Great Britain agreed to accept their proportion of the amounts to be received, and Belgium has been relieved to this extent as a debtor of these two nations. The portion of these receipts which would have been payable to the United States if the treaty of Versailles had been ratified by this Government is being paid to Belgium by reason of her prearmistice debt to the United States, and Belgium agreed to pay over such amounts immediately to this country. The commission did not accept the Belgian proposal that amounts to be received from Germany be substituted by Belgium for repayment of the prearmistice debt. The commission, however, felt that under all the circumstances the United States should not ask Belgium to repay more than the principal of the prearmistice advances. A schedule of annual installment payments over a period of 62 years, without interest, the payments to be a direct obligation of Belgium irrespective of receipt of payments from Germany, was finally agreed upon by the two commissions. The amount of the annual installments increases until it reaches $2,900,000 in the sixth year. . . . .



of TREATY OF VERSAILLES, Part VIII, Reparation; Articles 231, 232, 233



The Allied and Associated Governments affirm and Germany accepts the responsibility of Germany and her allies 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 imposed upon them by the aggression of Germany and her allies.


The Allied and Associated Governments recognise that the resources of Germany are not adequate, after taking into account permanent diminutions of such resources which will result from other provisions of the present Treaty, to make complete reparation for all such loss and damage.

The Allied and Associated Governments, however, require, and Germany undertakes, that she will make compensation for all damage done to the civilian population of the Allied and Associated Powers and to their property during the period of the belligerency of each as an Allied or Associated Power against Germany by such aggression by land, by sea and from the air, and in general all damage as defined in Annex I hereto.

In accordance with Germany's pledges, already given, as to complete restoration for Belgium, Germany undertakes, in addition to the compensation for damage elsewhere in this Part provided for, as a consequence of the violation of the Treaty of 1839, to make reimbursement of all sums which Belgium has borrowed from the Allied and Associated Governments up to November 11, 1918, together with interest at the rate of five per cent. (5%) per annum on such sums. This amount shall be determined by the Reparation Commission, and the German Government undertakes thereupon forthwith to make a special issue of bearer bonds to an equivalent amount payable in marks gold, on May 1, 1926, or, at the option of the German Government, on the 1st of May in any year up to 1926.

Subject to the foregoing, the form of such bonds shall be determined by the Reparation Commission. Such bonds shall be handed over to the Reparation Commission, which has authority to take and acknowledge receipt thereof on behalf of Belgium.


The amount of the above damage for which compensation is to be made by Germany shall be determined by an Inter-Allied Commission, to be called the Reparation Commission and constituted in the form and with the powers set forth hereunder and in Annexes II to VII inclusive hereto.

This Commission shall consider the claims and give to the German Government a just opportunity to be heard.

The findings of the Commission as to the amount of damage defined as above shall be concluded and notified to the German Government on or before May 1, 1921, as representing the extent of that Government's obligations.

The Commission shall concurrently draw up a schedule of payments prescribing the time and manner for securing and discharging the entire obligation within a period of thirty years from May 1, 1921. If, however, within the period mentioned Germany fails to discharge her obligations, any balance remaining unpaid may, within the discretion of the Commission, be postponed for settlement in subsequent years, or may be handled otherwise in such manner as the Allied and Associated Governments, acting in accordance with the procedure laid down in this Part of the present Treaty, shall determine.



from the PRESIDENT OF THE UNITED STATES, February 22, 1921, to the SENATE AND HOUSE OF REPRESENTATIVES regarding pre-Armistice loans to Belgium


I herewith call your attention to an agreement with Belgium made by the British and French Premiers and myself, which is embodied in the following letter:

June 16, 1919

M. Hymans,
Ministre des Affaires Etrangères,
Hotel Lotti, Paris


The Reparation Clauses of the draft Treaty of Peace with Germany obligate Germany to make reimbursement of all sums which Belgium has borrowed from the Allied and Associated Governments up to November 11, 1918, on account of the violation by Germany of the Treaty of 1839. As evidence of such an obligation Germany is to make a special issue of bonds to be delivered to the Reparation Commission.

Each of the undersigned will recommend to the appropriate governmental agency of his Government that, upon the delivery to the Reparation Commission of such bonds, his Government accept an amount thereof corresponding to the sums which Belgium has borrowed from his Government since the war and up to November 11, 1918, together with interest at 5 per cent unless already included in such sums, in satisfaction of Belgium's obligation on account of such loans, which obligation of Belgium's shall thereupon be cancelled.

We are, dear Mr. Minister,

Very truly yours,


In recommending to you that Congress take appropriate action with regard to this agreement, certain facts should be brought to your attention.

The neutrality of Belgium was guaranteed by the Treaty of London of 1839. In considering the reparation to be made by Germany it was agreed that the action of Germany, in grossly violating this treaty by an attack on Belgium, obligated the German Government under international law to repay to Belgium the costs of war. On this principle the Treaty of Versailles (Art. 232) provided that in accordance with Germany's pledges already given as to the complete restoration for Belgium, Germany should undertake, in addition to the compensation for material damage, to make reimbursement of all sums which Belgium had borrowed from the Allied and Associated Governments up to November 11, 1918, together with interest at 5 per cent per annum on such sums. This obligation was to be discharged by a special issue of bearer bonds to an equivalent amount payable in gold marks on May 1, 1926, or at the option of the German Government on the 1st of May in any year up to 1926.

For various reasons the undertaking defined in the above letter was not embodied in the Treaty. Belgium's obligations to the United States for advances made up to the date of the Armistice amounted to approximately $171,000,000, and to England and France they amounted, I am informed, to about £164,700,000. In view of the special circumstances in which Belgium became involved in the war and the attitude of this country toward Belgium, it was felt that the United States might well agree to make the same agreement respecting pre-Armistice loans to Belgium as England and France offered to do.

Advances made by the Treasury to the Belgian Government from the beginning of the war to the Armistice amounted to $171,780,000. This principal sum, however, includes advances of $499,400 made to enable the Belgians to pay the interest due November 15, 1917, and $1,571,468.42 to enable the payment of the interest due May 15, 1918. The interest on the advances has been paid up to April 15, 1919, the interest due from May 15, 1918, to that date having been paid out of Treasury loans for which the United States holds Belgian obligations, which, however, were made after November 11, 1918, the date of the Armistice. This latter advance would not come within the terms of the Agreement above mentioned. If, therefore, the United States accepts payment of Belgian obligations given before the Armistice by receiving a corresponding amount of German obligations, it would seem that it should receive German obligations amounting to $171,780,000 with interest from April 15, 1919.

Although it is understood that England and France will take their share of the German bonds when received by Belgium, I am informed that the Reparation Commission has not as yet finally determined the details of the issuance of the necessary bonds by the German Government. A recommendation at this time that suitable legislative action should be taken may appear somewhat premature, but in view of the approaching termination of my Administration I have brought this matter to your attention, hoping that suitable action may be taken at the appropriate time.


February 22, 1921





of REPARATION COMMISSION'S STATEMENT of Germany's obligation, 31 December 1922,(
378) naming the amount for which Germany is obligated to issue bonds to Belgium on account of the Belgian war debt


Allies Loans to Belgium [Belgian war debt]..............G.M 5,624,000,000



of Agreement(
379) between ALLIED AND ASSOCIATED GOVERNMENTS, Paris, 14 January 1925, regarding the distribution of the Dawes Annuities. Article 4, Belgian War Debt

A) As from September 1, 1924, 5% of the total sum available in any year after meeting the charges for the service of the German external loan, 1924, and the charges for costs of commissions, costs of U.S. army of occupation, annuity for arrears of pre-May 1 army costs, prior charge for current army costs, and any other prior charges which may hereafter be agreed, shall be applied to the reimbursement of the Belgian war debt as defined in the last paragraph of Art. 232 of the treaty of Versailles.

B) The amounts so applied in any year shall be distributed between the powers concerned in proportion to the amount of the debts due to them respectively as at May 1, 1921. Pending the final settlement of the accounts, France shall receive 46%, Great Britain 42% and Belgium (by reason of her debt to U.S.A.) 12%.


2. Post-Armistice Loans to Belgium

The principal of obligations for cash advanced by the United States to Belgium after the Armistice was $175,430,808.68, and of this total 60 per cent, or $104,642,122.60,(380) was employed by the C.R.B. for relief and rehabilitation in Belgium. As before mentioned neither the British nor French treasuries furnished financial support to the Commission after the Armistice. Their respective Governments, however, did open credits or supply cash to the Belgian Government in the first few months after the war, though the amounts were not large in comparison to United States loans to Belgium. In January 1919 Great Britain opened a "Reconstruction Credit" of £9,000,000 for Belgium on a strictly commercial basis.(381) The terms of settlement of this debt are given as of interest in relation to the terms of the Belgian settlement with the United States.

French advances to Belgium after the Armistice are reflected in the budgets(382) of these two countries in the years following the war. This debt amounting to approximately 240,000,000 French francs had apparently been liquidated by 1927, when a note accounting for the disappearance of this Belgian debt in the budget of that year explains that it was offset by sums which were due Belgium as a result of the occupation of the Ruhr. There were, thus, no funding arrangements in this instance.



383) referring to Belgian post-Armistice debts to the United States

Repayment of the postarmistice debt, amounting as of June 15, 1925, including accrued interest, to $246,000,000, was arranged on lines substantially similar to the settlements made with other countries. A detailed statement of the calculation of this portion of the debt is also set out in the agreement. Payments of principal are spread over a period of 62 years with interest in arbitrarily fixed amounts during the first 10 years, and interest at the rate of 3% per cent a year thereafter.

After the preliminary periods the total payments to be made by Belgium each year for the remaining 52 years of the debt-funding period will be approximately $12,700,000 a year. The adjustment of the early payments on both the prearmistice and postarmistice debts was made to bring the total annual payments within Belgium's capacity and particularly to meet her present difficulties in obtaining foreign exchange because of the unfavorable balance of her commodity trade, the shrinkage in her income from foreign investments, and the lack of other invisible items in amounts sufficient to offset her unfavorable commodity trade balance, and further to aid her in her efforts to balance her budget and place her currency on a sound basis.



of Explanatory Statement presented to Chamber of Representatives of Belgium, Session of the 9th February 1926, regarding the debts of Belgium and of the Belgian Congo Colony to Great Britain

The discussions relating to the consolidation of the respective debts of Belgium and the Belgian Congo Colony to Great Britain have resulted in Accords which were signed at London on December 31, 1925.

As you will see below, the basis of the arrangements concluded is the same for both debts; but the principle of the financial separation of Belgium and of the Colony, which is laid down in the colonial Charter, rendered necessary the conclusion of two distinct Accords.

The present proposed law is for the purpose of ratifying these two conventions, of which the text in the English language and a translation are annexed hereto.

The Belgian debt to be funded amounts to 9,000,000 Pounds sterling. It represents the amount of the credit, called Reconstruction Credit, which Great Britain opened to Belgium by virtue of a convention of the 31st of January, 1919, regarding which detailed information was furnished to Parliament in the annex to the statement of the situation of the Public Treasury on January 1, 1923 (pp. 153 to 156).

According to the terms of the said convention, this credit was destined to "facilitate the task of the Belgian Government and its nationals in the placing of orders for products and articles manufactured in Great Britain necessary for the restoration of Belgium until such time as she shall have been indemnified by the enemy Powers."

This credit, which has been completely utilized, has been "carried on a special account at the Bank of England in consideration of the periodical discount, at 5%, of Treasury bonds of the Belgian Government, drawn up in sterling at three months, to the nominal value of 9,000,000 pounds sterling, these bonds to be renewed until the receipt of the indemnity to be furnished by the enemy Powers permits of the Belgian Government's paying this off.

"The first sums received by the Belgian Government as a result of compensation or indemnity by enemy Powers" stated this convention further, "will be devoted to the liquidation of the above-mentioned Treasury bonds, pari passu with the liquidation of all similar advances received from any one of the associated Governments."

The English reconstruction credits therefore constituted a distinctly commercial post-war debt, entailing a kind of privilege on Belgian priority, which has become exigible in fact by reason of the payments of Germany to Belgium.

England, however, did not exact repayment on the proceeds of German reparations; already in 1922, on the contrary, she admitted the principle of the funding of this debt.

The negotiations begun at that time remained in suspense so long as the capital question of German reparations was not settled; they were taken up again shortly after the conclusion of the Washington Accord of August 18, 1925, and, on the initiative of the British Treasury, were from that time onwards conducted jointly for the Belgian and Congolese debts.

The debt of the Belgian Congo to England has quite a different origin from that of Belgium.

During the course of the year 1916, the Government of the Colony, the metropolitan services of which were functioning in London and Havre, found itself obliged to have recourse to a loan to meet the disbursements which could not be covered by the regular advances which the Allies granted, for war necessities, to Belgium.

These disbursements, which were estimated for the years 1916, 1917 and 1918 at 3,500,000 pounds sterling ....

. . . . . . . . . . . . . . . . . . . . . . . . . . .

The essential terms of the two Accords, Belgian and Congolese, are as follows:


5% per annum from 1st of January 1926 onwards, payable semiannually on June 30 and December 31 of each year; the interest already paid by Belgium on the Treasury bonds for the period subsequent to December 31, 1925, as well as that incurred to that date and remaining due by the Colony, form the subject of appropriate adjustments.


In twenty-five years as from the sixth year, by successive repayments on the 31st of December of the years 1931 to 1955, in accordance with the redemption tables annexed to the Accords; during this period, the annuities required for interest and redemption combined remain fairly constant.



3. Loans to France

Government subsidies to the C.R.B. for relief purposes in Northern France came from Great Britain, France, and the United States. The amounts were as follows:(384)

British Treasury


United States Treasury


French Treasury


The sums are small compared with the total war loans to France by the United States and Great Britain, which amounted to about $4,000,000,000 and $3,000,000,000, respectively. The two debt settlement agreements between the United States and France, and Great Britain and France, extracts of the terms of which follow, have not as yet(385) been ratified by the French Chamber of Deputies.



386) describing the debt funding negotiations with the French Debt Commission headed by M. JOSEPH CAILLAUX

A French debt commission, headed by M. Joseph Caillaux, finance minister of France, appeared before the commission on September 24, 1925, to negotiate a settlement of the French debt to the United States. The following were the members of the French commission which accompanied M. Caillaux: M. Emile Daeschner, French Ambassador at Washington; Senator Henry Berenger; Senator Louis Dausset; Senator Fernand Chapsal; Senator Paul Dupuy; Deputy Vincent Auriol; Deputy Lucien Lamoreux; Deputy Maurice Bokanowski; Deputy Pierre de Chambrun; M. Joseph Simon; M. Moreau-Neret, Ministry of Finance; M. Haguenin, Inspector of Finances; M. Lacour-Gayet, financial attaché of the French Embassy at Washington.

Joint meetings with the French representatives were held on September 24, 25, 28, and October 1, 1925. The two commissions were unable to reach an agreement before the departure of the French commission from Washington on October 2, 1925. The negotiations have not been suspended, however. It is expected that they will be continued either through regular diplomatic channels or through special representatives of the French Government coming to this country to confer with the commission.

In order that the public might be fully informed as to the attitude of the commission in its discussions with M. Caillaux and his associates it was decided at the conclusion of the negotiations to release to the press the essential proposals made by the commission.

The following statement and proposal was handed M. Caillaux on September 28, 1925:

"We have had the privilege of considering your statement of this morning. We understand this to be a reaffirmation of your proposal to us of the 24th instant; that is, that you should pay $25,000,000 annually for the first 5 years, $30,000,000 annually for the following 5 years, $60,000,000 annually for the following 10 years, and $90,000,000 annually for the last 42 years, this sum completely to extinguish the indebtedness. We have stated the reasons why this sum in our opinion is inadequate.

It seems to us that you consider the above proposed annuities are an application to your indebtedness to us of the principles discussed between France and England as applicable to the war debt of France to England. But we wish to point out that an examination of the existing settlements and tentative agreement between France and England discloses an entire difference. We find that the principles of these arrangements, if applied to the debt of the United States, would imply a larger obligation upon the part of France to the United States than that contained in our proposal below. . . . .

. . . . . . . . . . . .

The net result of the application of the principles [British-French] to the American debt would bring about that France should pay to the United States an annual amount of $161,000,000 for the first 20 years, and $61,000,000 thereafter for 42 years. These payments would be altered if the annuity of $61,000,000 were deferred for the first seven years and added to the subsequent period, as discussed in London. It seems to us that those principles of repayment are infeasible to France in the application of its indebtedness to us.

. . . . . . . . . . .

You have requested that we should be more specific and we have now the pleasure of laying before you a definite proposal:

(1) We propose to consolidate the entire indebtedness into one total sum. The amount of this indebtedness as of June 15, 1925, with accrued interest at the rate of the existing French obligations, is about $4,227,000,000. We propose, however, that interest should be calculated upon the most favorable basis of our previous settlements, under which the principal, with accrued interest would as of June 15, 1925, amount to about $4,025,000,000, being a concession of over $200,000,000 in accrued interest.

(2) We propose that the French Government should undertake to pay the principal of the debt in annual installments graduated upward during the period of 62 years, as is the case of the other settlements made by the United States. This would require at the first year the sum of $20,000,000 on account of the principal, being approximately one-half of 1 per cent of the total principal, the payments on principal increasing gradually over the entire period of 62 years. You will recognize that in the arrangement of this schedule it has been the desire of the American commission to so arrange the payments as to meet the economic and fiscal necessities of France.

(3) There therefore remains the question of the rate of interest to be paid upon the debt. In our desire to meet the difficulties of the French Government, and at the same time to provide that the American people may secure some return by participation in the increased strength and productivity to be expected in France, we propose that interest the first year shall be at the rate of one-half of I per cent per annum, and that this rate shall increase each year by one-fourth of 1 per cent. This would bring an interest rate up to 3% per cent at the thirteenth year, and this to remain as the maximum for the balance of the period."



387) describing further negotiations (1925-1926) for funding the French debt to the United States

After the Caillaux commission returned to France negotiations for the settlement of the debt were informally continued through the French Embassy at Washington.

On December 1, 1925, the commission received and considered an unofficial proposal of settlement. The proposal was further considered at a meeting of the commission on December 3, 1925, when it was decided that it did not furnish a satisfactory basis for discussion.

On January 23, 1926, Senator Henry Berenger, the newly appointed French ambassador at Washington, called on the chairman of the commission and indicated that he desired to reopen negotiations for the settlement of the debt. Further informal conferences were held from time to time with representatives of the commission. Settlement of the debt was authorized at a meeting of the commission on April 29, 1926. The funding agreement was signed and approved by the President the same day. It has been approved by the House of Representatives, but has not yet been approved by the Senate. It has not yet been ratified by France. Copies of the statement issued to the press and of the agreement appear, respectively, as Exhibits 90 and 93, pages 254 and 257.

The amount of the debt funded was calculated on the same basis as in previous settlements; that is, with interest at 4 1/4 per cent to December 15, 1922, and 3 per cent thereafter to June 15, 1925, the date of the agreement. After deducting a cash payment of $386,686.89 made upon execution of the agreement, the total indebtedness funded into bonds was $4,025,000,000. This amount is to be paid in annuities commencing with $30,000,000 in the first year and rising to $125,000,000 in the seventeenth year, continuing at this figure until the sixty-second year, when the amount will be $117,674,104.17. A statement of the amounts payable annually to the United States appears as Exhibit 94, page 262. Under these annuities the total principal funded will be repaid in full with interest thereon as follows: after the first 5 years and for the next 10 years, 1 per cent per annum; for the next 10 years, 2 per cent per annum; for the next 8 years, 2% per cent per annum; for the next 7 years, 3 per cent per annum; and for the remaining 22 years, 3% per cent per annum. Over the entire period the United States will receive $6,847,674,104.17.



for the settlement of the War Debt of France to Great Britain(

The British and French Governments, having arrived at a definite settlement of the debts due by France to Great Britain arising out of the Great War,

The undersigned, duly authorised by their respective Governments, subject to such ratification as may be required, have agreed as follows:

1. France agrees to pay, and Great Britain to accept, the following annuities in full and final settlement (subject to the provisions of Article 7 of this Agreement) of the War Debt due by France to Great Britain, in respect of which Great Britain holds French sterling Treasury Bills to the value of 9653,127,900, viz:--


£ millions

During the financial year 1926-27


During the financial year 1927-28


During the financial year 1928-29


During the financial year 1929-30


During the financial years 1930-31 to 1956-57 inclusive

12 1/2%

During the financial years 1957-58 to 1987-88 inclusive


The above payments will be made in sterling at the Bank of England, London, in equal half-yearly instalments on the 15th September and 15th March of each year so that the first instalment shall be paid on the 15th September, 1926, and the last instalment on the 15th March, 1988.

2. France will issue and deliver to the British Treasury on or before the 15th September, 1926, a bond in respect of each of the instalments provided for in Article 1 of this Agreement.

3. The payments due under all bonds issued in accordance with this Agreement shall be made without deduction for, and shall be exempt from, any and all taxes and other public dues present or future imposed by or under authority of France or any political or local taxing authority within France.

4. France, at her option, upon not less than ninety days' notice to Great Britain, may postpone payment of a part not exceeding one-half of any of the half-yearly instalments due under Article 1 to any subsequent 15th September or 15th March not more than three years distant from its due date, but only on condition that in case France shall at any time exercise this option as to the payment of any instalment, the instalments, falling due in the third succeeding year cannot be postponed at all unless and until the instalments due three years, two years and one year previous thereto shall actually have been paid in full. All such postponed payments shall bear interest at the rate of 5 per cent. per annum, payable half-yearly.

5. If at any time it appears that the aggregate payments effectively received by Great Britain under Allied War Debt Funding Agreements and on account of Reparations or of Liberation Bonds exceed the aggregate payments effectively made by Great Britain to the Government of the United States of America in respect of war debts, an account shall be drawn up by the British Treasury, interest at 5 per cent. being allowed on both sides of the account; and if that account shows that the receipts exceed the payments, Great Britain will credit France against the payments next due by France under Article 1 of this Agreement with such proportion of that excess as the payments effectively made by France under Article 1 of this Agreement bear to the aggregate sums effectively received by Great Britain under all Allied War Debt Funding Agreements. Thereafter a similar account will be drawn up by the British Treasury each year, and any further excess of the receipts over the payments shall each year give rise to a credit to France of a proportion of such excess calculated in the manner indicated above. On the other hand, any deficit shall be made good by an increase in the payments next due by France up to a similar proportion of such deficit within the limit of the total amount of the credits already allowed to France under this Article.

For the purpose of this Article any capital sums which may hereafter be realised by Great Britain in respect of Reparations or of Liberations Bonds will be taken at their annual value, taking account of amortisation.

6. The accounts relating to the war debt of France to Great Britain shall be finally closed, and the British Treasury shall be entitled to retain any sums credited or to be credited to France in respect of such accounts. Save as provided in this Agreement, the contracting parties and their agents reciprocally renounce all claim or counterclaims against the other contracting party or their agent in respect of the above-mentioned accounts or the services an supplies to which they relate.

7. The sum of £53,500,000 shall remain as a non-interest-bearing debt of France to Great Britain, the repayment of which will be settled by a further Agreement. Meanwhile, the British Government will retain (without interest) against this debt the gold remitted to London by the French Government during the war under the Calais Agreement.

8. Upon the execution of this Agreement and the delivery to Great Britain of the bonds of France to be issued hereunder, duly executed, the British Treasury will cancel and surrender to France the French Treasury Bills at present held by Great Britain.

Done in duplicate both in English and in French, the original English text being authentic in case of difference.

London, this twelfth day of July, 1926

For the United Kingdom of Great Britain and Ireland:

Chancellor of the Exchequer

For the French Republic:

Minister of Finance


12th July, 1926


In assuming the responsibility of signing the agreement for the settlement of the French war debt to Great Britain and thereby accepting the payment of the annuities fixed on the sole credit of France, I feel bound to explain that in the opinion of the French Government, the future possibility of making payments and transfers across the exchange of the amounts required to assure the fulfilment of the debt settlements with the United States and Great Britain inevitably depends largely on the continued transfer of receipts from Germany under the Dawes Plan. If, therefore, for reasons outside the control of France, such receipts should cease completely or to an extent greater than one half, a new situation would be created and the French Government reserves the right in such an event of asking the British Government to reconsider the question in the light of all the circumstances then prevailing.

It is subject to this express reservation that I am ready to sign the agreement which we have drawn up.




12th July, 1926


I have received your letter of the 12th July. As I have explained His Majesty's Government must maintain the position that the settlement which we have arrived at of the French war debt to this country depends, like that debt itself, on the sole credit of France. You will realise that in the hypothetical circumstances that you mention, Great Britain would already have suffered a diminution of the receipts from the Dawes Scheme, which we have taken into account in arriving at the various debt settlements and this is one of the factors which would have to be borne in mind in the event of any reconsideration of the question being desired by the French Government. Subject to this I do not object to the statement that you make.

In the event of any modification being made, I should expect, in, order to secure equal treatment among creditors, that other creditors of France would take into consideration a corresponding modification of debts due to them.

Believe me my dear M. Caillaux,

Yours sincerely,



4. Relief Subsidies and United States Debt Settlement Concessions

The sums advanced by the United States to the Allies during the war were raised by the Government through the issue of Liberty Loans, the current interest (up to 4 1/4 per cent) and other charges on which have to be borne by the American taxpayer. In obtaining cash advances from the United States Treasury, the Allied Governments signed certificates of indebtedness bearing in general an interest rate of 5 per cent.(389) In funding the war debts the United States did not hold the borrowers to these terms, but on the contrary, as the preceding documents show, the debt settlements with Belgium and with France not only reduce the interest charges prior to the date of funding but arrange a schedule of payments in amounts and over such a long period of time as to effect considerable cancellations. It may not be out of place to compare these concessions, which must be borne by the American taxpayer, with the United States' advances to the C.R.B. for relief to Belgium and Northern France.

Belgium is relieved of her pre-Armistice debts to the Allied and Associated Governments by the Treaty of Versailles. Furthermore, the Paris agreement of the 14th January 1925(390) which regulates the distribution of the Dawes Plan annuities, stipulates that Belgium shall receive that portion of the annuities due by reason of the Belgian pre-Armistice debt to the United States. The subsequent direct United States-Belgium settlement covered the total Belgian indebtedness to the United States the amount of which, prior to funding, was $483,426,000.(391) The principal of this total Belgian indebtedness as funded, after the elimination or reduction of interest charges was, however, $417,780,000. This amount is funded over a period of 62 years(392) by means of annual Payments, the present value of which, at 4 1/4 per cent interest payable semiannually, is $225,000,000. Concessions to Belgium thus indicated amount to over $258,000,000, or somewhat more than the United States advances to the C.R.B. for Belgian relief.(393) Moreover, as mentioned above, the United States waived in Belgium's favor the German annuities on account of the pre-Armistice portion of the debt.

In the case of France and the United States, the French debt prior to funding was $4,230,777,000, whereas the principal of total indebtedness as funded was $4,025,000,000. The present value of the annual payments at 4 1/4 per cent interest payable semiannually over the 62 years period is $1,996,509,000, or 47.2 per cent of the debt prior to funding. The amount of United States Treasury advances ($109,753,510) actually utilized by the C.R.B. for relief in Northern France is of small matter compared to the concessions(394) thus indicated.

Chapter 15

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