To make certain her safety was the first duty of France. To secure reparation was her second. Duties common to all, it is true, but made peculiarly imperative to my country by the losses and suffering she had sustained.

Here, again, the interests of France were in accord with the general interest and with justice. Germany was doubly responsible for the destruction caused by the war; due first to her premeditated aggression and then made worse by her systematic savagery. War is an atrocious thing. Germany knew what she was doing when she unloosed it. But by her methods she made it more atrocious still. Cruel war on civilians to win quick victory was the doctrine of the German General Staff, often expounded ex cathedra, before Louvain and so many other cities had seen its hideous application. But cruel war for greater profits in peace time; cruel war that gold might be won by the sword was also the doctrine of German captains of industry in whose eyes the adversary of to-day was the competitor of to-morrow. Much of the destruction was systematically wrought, far from the front, in order to ruin permanently the occupied districts to the future advantage of German industry. This conception of war, enhancing the responsibility of the beaten aggressor, doubly justified full and complete reparation.

In the month of February, 1916, when Germany was expecting victory to result from her onslaught against Verdun, the Quartermaster General of the Imperial Armies sent to all the Chambers of Commerce, to all the financial, industrial and commercial associations of the Empire, a book of 482 pages, with maps and charts, entitled: Industry in Occupied France. This work, prepared by two hundred reserve officers, chosen for their technical qualifications, described the state of destruction of each of our industries, at the time of publication. This destruction was of two kinds. The first and less important resulting from battle and bombardment; the second more frequent and more serious resulting from the organized pillage of factories and from the removal into Germany not only of their stocks of manufactured goods and raw material contained, but also of their machinery, their equipment and often even essential parts of their plants. The purpose of the book? "To give an idea of the resultant effects for Germany of the destruction of certain branches of French industry." For what object? To give German industry advance information of the markets in which it could replace us after the war and also, by a refined cynicism, to supply profitable customers in the persons of the factory owners robbed and despoiled by the German Army. Are examples wanted? Here are a few taken at random from this monstrous plan of brigandage.

Foundries. Production (and therefore receipts) will fall off heavily in these foundries, owing to the removal of the machinery.

This loss, which will be considerably increased by the cost of reconstruction, will so prejudice numerous enterprises, from the financial point of view, that it will be difficult for them to resume operation, or to restore this to its former level.

As regards steel mills, an indirect effect upon Germany is possible in this sense, that, owing to the considerable deterioration suffered by French locomotive works and car shops, French Railways will probably be obliged to buy their rolling stock in Germany, and the resulting orders will go to German plants.

Textile Mills. As all metals lacking in Germany, such as copper, brass, bronze, etc., have been seized and taken away from French factories .... resumption of work will encounter great difficulties. An enormous market, especially for German manufacturers of textile machinery, will be found in the north of France.

Bleaching and Dyeing. All copper parts and leather belts have been taken out and sent to Germany. An important outlet is thus made for German machine manufacturers.

Woolen Mills. In the factories almost all the copper boiler parts have been removed, as well as all leather belting. Electric wiring has been taken out in many factories. The small electric motors will be removed between now and the end of the war. In the region of Avesnes and of Sedan, several factories have been so gutted that a certain number of their looms, abandoned to the weather, may be looked upon as scrap iron.

To what extent will the continuation of economic war after peace is declared prevent France's recovering the advantage now possessed by Germany who has suffered practically no destruction from the war? This is a question that German industry will have to study.

Germany should be in a position to resume her full productive capacity in the manufacture of yarn at least one or two years sooner than France. This result will be all the more satisfactory in that the sister industries of weaving and dyeing, as well as the export trade, will benefit equally thereby, and that this last, especially, will be in a position, not only to recapture the markets it has lost, but even to acquire new ones where France so far has been the only furnisher.

Ceramic Industry. Attention is drawn to considerable war damages in the destruction and requisition on a large scale of electric installations and wiring.

The German machine makers should find in this field a good opportunity after the war of selling their wares.

By properly directed effort, Germany should succeed in capturing the few French foreign markets, notably in Turkey and the Balkan States. The long stoppage of work in the French factories and their inability to manufacture and export immediately after the war should contribute to this.

Sugar Industry. The French refineries, with a few rare exceptions, have suffered greatly from the war. None of them has escaped requisitions. Everywhere their stocks of sugar, of treacle, their provisions of coal, coke and petroleum, rubber and leather belting, live stock, consisting of horses, oxen, etc., carts, harness; implements, narrow gauge railways, patent trucks and electric wiring have been removed, and in only a few shops, four or six, now working for the Germans, has indispensable equipment been left.

But the damage done to the refineries themselves and their equipment is even more serious.

Lack of superintendence, occupation by troops, removal of the above mentioned objects, have already caused great damage; but the refineries have suffered still more from the taking out of all copper, brass and bronze appliances.

War wastage has caused such damage to whole series of refineries that their reconstruction would be impossible. Even those that survive, in a more or less damaged condition, will long feel the disastrous effects of the war. The French sugar industry should disappear as a competitor on the world market during the next two or three years. It will, at the start, scarcely suffice to supply the country's own needs and to replenish exhausted stocks. To a certain extent, it will be obliged to have recourse to special German factories for purposes of reconstruction; for the French machine shops situated for the most part in the North and reduced in their productive capacity by the war, will be inadequate for this task.

Leather Industry. French competition will be unable to make itself felt for eighteen months. German industry can find a considerable market for several years in the North of France and assure itself, for the future, important outlet, formerly monopolized by French products in Asia Minor and European Turkey.

Coal Mines. The districts will be unproductive for years to come, owing to the removal of the machinery and the flooding of the shafts.

France will have to buy her machinery in Germany and, even if the rich beds in the French territory occupied by the German troops were to continue in the possession of France, it might be foreseen that Germany would have to deliver a higher percentage than in the past, owing to the deficit in French production.

Breweries. Breweries have suffered heavy damages owing to the removal of all articles of brass and copper. Those only have been preserved which have made beer for the troops, and they have been operated by the Army as military breweries. Their number is not large.

The brewing industry in the occupied territory may be regarded, for the greater part, as annihilated. Certain brewers, who were among the most prosperous, will need at least two years to restore their plants, even if they replace in part the copper by iron.

A large part of the orders will come to the German machine makers, if they can promise quicker delivery than their English and American competitors.

Paper Industry. The damage caused by the war to the plants and the buildings in the paper industry is considerable, as important copper piping has been removed, as well as brass forms and cylinders which it will be difficult to replace after the war.

For example: In the paper mills of Bousbecque alone, nearly ninety tons of wrought copper have been taken out.

German machine makers who, before the war, found in the paper industry a very important outlet for their product, must strive to secure the work of reconstructing these mills, in order to eliminate the inevitable competition, especially from America. American machines would otherwise easily install themselves in this industry, from which, afterwards, it would be difficult to drive them out.

The Cotton Industry. In the occupied territory the greater number of the spindles and bobbins will be able to operate only six or eight months after the corresponding German industry has started working again.

These quotations are tragically enlightening. The damage sustained by French industry, object of this inquiry, interests German leaders only in the measure of its beneficial effects upon corresponding branches of German activity. To the Army---which does its work conscientiously---the task of destroying capital and throwing labour out of work; to the business men the task of getting the most out of it either by the conquest of markets formerly held by France, or by the sale to French pre-war competitors of machinery and implements which the German troops had stolen from them! This confidential document, which M. Klotz laid before the Supreme Council in February, 1919, is not only indicative of an amazing psychology, it is the necessary preface to any study of reparations. In the case of Germany, we are confronted not only by the inevitable desolation and ruin of war, not only by the responsibilities of a war of aggression, but by intentional and methodical destruction. Germany killed not only to conquer, but for profit. Beaten, she has to pay. Such the verdict of Versailles.

The verdict was known in advance and astonished no one. All the declarations of the Allies, all the votes of their Parliaments, all the messages of President Wilson, all the speeches of M. Clemenceau and of Mr. Lloyd George, finally all the accepted bases of the peace, had laid down the Allied programme in perfect accord with the dictates of their conscience. On the principle, there was no disagreement; but in its application this stupendous problem calling from destroyed towns and devastated fields for billions involved difficulties such as no political assembly had ever before met or solved.


At the end of January, 1919, a special Commission is created by the Supreme Council to study the problem. It comprises the highest financial authorities of the victorious countries. At its very first meeting, it frankly propounds the fundamental question: "What is Germany to pay?"

I recall the legal bases of the question. These bases were embodied not only in the general rules of international law,. but also in the diplomatic correspondence which had preceded the Armistice of November 11, 1918. This correspondence had both defined the necessary conditions of an Armistice, the study and framing of which had been intrusted to Marshal Foch and the general bases of peace laid down in President Wilson's message on January 8, 1918, which in turn accorded with the declarations of the European Governments, dated December 31, 1916, and January 10, 1917. Concerning reparations the important passage is found in Mr. Lansing's telegram of November 5, 1918. It is worded as follows:

When the President formulated his peace conditions in his address to Congress on January 8, last, he declared that the invaded territories must be not only evacuated and liberated, but restored. The Allies think that no doubt should be left as to what this stipulation means. They understand by it that compensation will be made by Germany for all damage done to the civilian population of the Allies and their property by the aggression of Germany by land, by sea, and from the air. The President is in agreement with this interpretation.

Furthermore during the meetings held on October 31 and November 1, 2, and 4, 1918, by the Supreme Council of the Allies for the final drafting of the Armistice clauses, M. Klotz, Minister of Finance, had said:

"It would be prudent to preface the financial questions, in the Armistice itself, with an explicit reservation of all future claims of the Allies, and I propose the following text: 'With the reservation that any subsequent claims by the Allies and the United States of America remain unaffected, reparation for damage done.' "

M. Klotz's proposal was read a first time on November 2 and on the fourth it was finally adopted. These were the two texts which might guide the Commission in its work.

The meeting of February 10 showed that these texts had given rise to two contradictory interpretations. One was put forward by all the Powers represented, with a single exception; the other, by the delegate of the United States. The views of the majority found an admirable interpreter in Great Britain's principal delegate to the Commission, Mr. Hughes, Prime Minister of Australia, a little man, deaf, impetuous, clear-minded, a blunt and aggressive orator. This view was that Germany, without exception or reserve, should reimburse all the costs of the war, including damage to persons and property, and war expenditures.

"The right to reparation," he declared, "rests upon the principle of justice, pure and simple, in this sense that, where damage or harm has been done, the doer should make it good to the extreme limit of his resources. This principle is universally recognized by all laws.

"This principle demands that the sum total of the cost of the war should be borne by the enemy nations .... From the points of view of both logic and justice, it is absolutely impossible to distinguish between the claim to the right for restoration in the devastated regions, and the claim for damages in general .... Those who have mortgaged all they possess in order to free Belgium, have suffered from Germany as much as Belgium herself.

"Let us take the case of Australia. She has lost nearly 60,000 killed, and about 190,000 mutilated or infirm for life. Her war debt is 300,000,000 pounds, or 7,500 million francs gold, a crushing burden for a nation of five million inhabitants. It may be that so far as civilian life and property are concerned, my countrymen have not endured actual sufferings; but the sacrifices they have made and the damage they have suffered, are no less great. Full and complete compensation is due to them as to all other Allies.

"The house or the factory of the Belgian is in ruins. The Englishman's is mortgaged for war expenditure. The damage to him is quite as real, quite as great, quite as direct. Germany owes Great Britain reparation for war costs as unquestionably as she owes reparation to Belgium for the ravages she has committed."

To these general arguments of equity, Lord Sumner, the second British delegate, added legal reasons borrowed from international custom and from the text of the Armistice. He recalled that war costs had been demanded by the Allied Powers from France in 1815 (700 millions); by Austria from Sardinia in 1849 (25 millions); by Prussia from Austria in 1866 (40 millions); by Prussia from France in 1871 (5,000 millions). He added:

"The reimbursement of war costs is the constant practice of international law.... No particular clause, either in the Fourteen Points or in the Armistice, excludes this reimbursement."

The American Counsel, Mr. J. F. Dulles, a clear and forceful logician, did not of course deny any of Germany's responsibilities, but, as a lawyer, he declared that he was dealing with a contract which, in his opinion, limited the right of the Allies to claim anything beyond reparation for all acts committed in violation of international laws and for direct damages suffered by the civilian population. He said:

"The American delegation associates itself absolutely and without reserve with all that has been said concerning the enormity of the crime committed by Germany. Besides, the United States have their war debt also, constituting a terrible burden. So as it is in accord with our inmost feelings that the principles of reparation should be severe, and with our national interest that these principles should be given the widest scope, why is it that we propose only a limited reparation?

"It is because we are not facing a blank page, but a page covered with a document at the foot of which are the signatures of Mr. Wilson, M. Clemenceau, M. Orlando and Mr. Lloyd George.

"The proposal of the United States is therefore that we demand from Germany full reparations, but only those stipulated in the contract with Germany concerning the conditions on which peace could be signed.

"Accordingly, first comes reparation for acts which constitute an obvious violation of international law. This, therefore, implies complete reparation for Belgium.

"Then, restoration of the invaded regions, and reparation for damage done to the civilian population and its property."

To this argument, M. Klotz who, as President of the Commission, was the last to speak, forcefully opposed an argument of fact and of law which, without convincing Mr. Dulles, made a great impression upon all his colleagues.

"You speak of a contract," he said. "For my part, I know only of one---signed by the Allies and by Germany---that is the Armistice. Well, I read in that: 'With the reservation that any subsequent claims of the Allies and the United States of America remain unaffected, reparation for damage done.' It was I who asked for the insertion of that clause. All the delegates accepted it. Its meaning is clear.

"I conclude therefore, first, that there exists no contract under the terms of which reimbursement of war costs was renounced, and second, that there is in the Armistice a contract according to the terms of which the right to reimbursement has been expressly reserved."

A long discussion brought additional arguments to strengthen M. Klotz's contention. I will quote only the principal ones. M. Chiesa, the Italian delegate, drew attention to the fact that, inasmuch as Mr. Lansing's note referred to "all" the damage caused the civilian population, this definition covered the war costs and indirect damage, as well as direct damages. M. Mori, the Japanese .delegate, added: "The question before us is the same as that of the costs in a lawsuit. The sum total of the costs of the war must be paid by the aggressor." M. Proutich, the Serbian delegate, drew attention to the fact that the Fourteen Points applied only to Germany, not to the other belligerents. M. Loucheur ended his summing up of the discussion with the words: "No indemnity" did not mean "no reimbursement for war expenses." Mr. Hughes asserted that, since the violation of Belgian neutrality created, as the Americans themselves admitted, Belgium's right to total reparation, the same right existed for the guarantor Powers, obliged, under the Treaty of 1839, to defend Belgian neutrality. Mr. Dulles replied to each of these different arguments in turn. He insisted especially upon that of M. Klotz, asserting that the diplomatic correspondence of October, 1918, referred not to the bases of the Armistice but to those of the peace; that, accordingly, it bound the Conference, charged with the elaboration not of the Armistice, but of peace; furthermore the Armistice, whatever its wording, could change nothing in the accepted bases of the peace.... As no agreement was reached, it was decided to ask the heads of the Governments for their interpretation, and the meeting was adjourned.

After the legal aspect, so full of fine points, let us consider the facts which had also to be weighed. The demand for full and complete reparation presented by M. Klotz and Mr. Hughes had justice on its side. Moreover, it had held so large a place in the English elections of December, 1918, that it was politically impossible for Mr. Lloyd George to abandon it; and so long as Great Britain supported this claim all the other Governments---especially those of countries which had suffered most from the war---were bound to stand by her to avoid being overwhelmed by abuse. It is certain, however, that looking at the problem as a whole, this total demand led to actual figures, the very magnitude of which was absurd and in the special cases of some countries it also led to results contrary to what had been expected.

The amounts to be demanded from Germany for damage done to persons and property, reached the sum of about 350,000 million. For the Allies as a whole the war costs on the other hand amounted to 700,000 million francs. The following table gives an approximate estimate:

In thousands of million francs
Great Britain 190 27.1%
United States 160 22.8%
France 143 20.1%
Russia 92 12.9%
Italy 65 9.2%
.....Serbia .............} .....53 .....7.8%
.....Greece ............}
Total 703 99.9%

The figures revealed that, if we were to insist upon the three claims---damage to property, damage to persons, war expenses---we would reach a total capital of 1,000 thousand millions, the payment of which over a period of fifty years would represent taking into account interest and sinking fund more than 3,000 thousand millions, a sum so great that it is unreal. If, faithful to this reasoning as logic demanded, we had demanded also on the ground of full and complete reparation and in accordance with full justice payment of indirect damages, loss in operation, loss of profits, etc. we should perhaps have reached some such fabulous total as 7,000, 8,000 or 10,000 billions. It was clear that, if the Conference was to get practical results, it would have to move only with extreme prudence.

At this time also certain delegates began to be worried by the thought of surprises awaiting the countries they represented. Belgium's first delegate to the Commission, M. Van den Heuvel, had not hesitated to show his uneasiness. He said:

1 'Everybody recognizes Belgium's right to total reparation, because her neutrality was violated. But, as a matter of fact, what will this right amount to, if we accept the English view of full and complete reparation for everyone? What will really happen? The total will inevitably be enormous. Consequently it will be necessary to reduce all the debts proportionately, as is done in a case of bankruptcy. Then the claims of the small Powers will never be paid in full."

Mr. Dulles, taking advantage of this remark, immediately added:

"The American proposals are those which, if not in principle, at least in practice, will ensure the maximum of reparations and their most equitable distribution. To demand the whole gigantic total of the war costs---I agree with M. Van den Heuvel---will endanger the accomplishment of the precise reparation to be fulfilled by Germany, and to which she is compelled to recognize that she must submit and which will absorb her resources to the utmost limit. "

The French representatives could but listen to these words with the most serious attention. For examination of the figures established the fact that, as far as France was concerned, they expressed an unquestionable truth. Among the claimants, France headed the list with respect to damages to persons and property. Out of every hundred francs paid by Germany under these two heads France considered that she had a right---proved by the actual figures---to sixty-five, the other Powers getting thirty-five. But under the head of war costs, out of every one hundred francs received, we had a right to only twenty and the others to eighty. Combine these two propositions, you will see that, if the war costs were not exacted, France could claim sixty-five per cent. of the sum paid by Germany, while if they were, she could get only forty-two and five tenths per cent. Our interest---owing on the one hand to the danger of an excessive total, on the other to the play of percentages---was thus to demand, in opposition to the American point of view, damages for pensions in addition to property damages but, in accordance with that point of view, to leave aside war costs which ranked us lower among the Allies than the two other classifications.

This was the solution urged by the French delegation during March upon the heads of the Governments, and this also was the solution decided upon at the end of the month. From then on the discussion was rather one of form than of substance, rather political than financial. The Americans had made a thoroughly just concession to Franco-British demands by adding pensions to damages to persons and property and agreeing that deaths and wounds should be considered as injuries suffered by families, whose resources were lessened by the loss or incapacity of their members. This done, they were ready to write purely and simply in the Treaty: "Germany shall reimburse damages and pensions." The British and the French in fundamental agreement with this asked, however, that for political and moral reasons something further be added. They wanted the Treaty to make clear in law Germany's total responsibility for all the expenses of the war. They wanted it to make clear by specific declaration that, if full and complete reparation were not demanded, it was only because of material impossibility. They wanted this impossibility to be set forth in such manner as not to shock public opinion, ill-informed, as one may imagine, as to the statistical facts. Mr. Lloyd George insisted:

"We must not take out of our draft some indication of the enemy's incapacity to pay all he owes. We must in some way justify the action of the British and French Governments, which find themselves obliged to accept less than the full payment of war costs. We must make it thoroughly clear that, if we do not exact it, it is not because it would be unjust to claim it, but because it would be impossible to obtain it.

"Our public opinion requires reparation as complete as possible. I have communicated to M. Clemenceau a report of a debate upon this question in the House of Commons and it gave him some idea of the violence of the sentiments expressed there. Mr. Bonar Law wrote me after this debate that Parliament had shown itself ill satisfied with his statement."

And M. Clemenceau added:

"It is a question of wording. But I agree with you that it is important to say that our right to compensation is not limited, and that it is we ourselves who, in view of what is possible, have fixed a limit."

It was thus that agreement was reached, in the course of two meetings, on the text of Articles 231 and 232 of the Treaty.(31) These articles have often been misunderstood and their apparent contradiction has been bitterly criticized. The above should dispel all possible misconception.

If it had been a question of principle only, it is abundantly clear that in equity neither France nor any of the Allies should have borne a cent of the war costs. But it was a question of political realities and possibilities, not a question of ideals. We were bound first to remember that the American delegation, whose approval was necessary , refused absolutely to claim the war costs; then that if war costs were claimed, we should arrive at a total of more than a thousand thousand millions, obviously irrecoverable; finally that pro-rata distribution would have given France only forty-two per cent. instead of the sixty-five per cent. she had a right to demand under the head of damages and pensions. In the necessary and inevitable imperfection of solutions, the one which the French delegates put through was unquestionably the best, and we can say, as did M. Barthou in his report on the Treaty, that by exacting from Germany the full and complete repayment of damages and pensions, the "Peace Conference, all things considered, handled the matter well."

We now knew under what heads we could claim from Germany. It remained to fix the amounts we could claim. The damages subject to reparation had been defined. It was now necessary to calculate the amount of these damages, a difficult task indeed for so soon after the Armistice an exact estimate of the devastation was virtually impossible.

This impossibility, combined with the legitimate desire to make the Treaty as definite as possible, suggested as no exact estimate was forthcoming the statement of a lump sum. This solution at first sight offered attractive advantages. The creditors would know at once the sum total they wore to receive. The debtors would know the sum total they were to pay. The credit bond, if all agreed to discount it, would be immediately negotiable. Such a sum once established there would be no further difficulties, either for the Governments or for the Reparations Commission save that, which under this plan or under any other remained the essential difficulty---Germany, forced to accept a system of annuities, might some day refuse to pay.

To these arguments of convenience, the French delegation without ever wavering, always opposed, throughout the six months the Peace Conference lasted, the arguments of law and justice which were finally embodied in the Treaty. It was its duty to take this stand, first to give effect to one of the most frequently declared war aims of France (Notes of December 30, 1916, and January 10, 1917, resolutions of the Chamber and Senate of June 5 and 6 following, meeting at Versailles of October 31, 1918, and finally the Armistice itself). It was its duty, because the lump sum by its very principal excluded that full and complete reparation for damages, the perfect right of France to which no one had ever contested. Again, it was its duty because the lump sum by its modalities, and everyone of them was minutely discussed, led to an inadmissible reduction in our rights, and because this reduction once obtained Germany alone, and not France, would have benefited from the potentialities of economic improvement the future might hold.

For these reasons, which are decisive, France, in 1919, refused the lump sum. She refused to fix the amount of Germany's debt summarily and at random. She refused to accept as the basis of this debt---the inevitable result of a lump sum---Germany's present capacity of payment. She refused to give up her right to full and complete reparation for all the destruction to life and property caused by Germany. She refused to choose for fixing the German debt the moment when Germany is at her lowest. She wanted to reserve to the victims the future benefit that would accrue from the possible revival of the aggressor. These principles permeate the. whole Treaty and it is right that they should.

In January, 1919, the discussion had begun in the Technical Commissions. These latter hesitated before the heavy responsibilities to be incurred and reserved decision on all the essential points. In March and April, the matter passed to a smaller committee, upon which M. Klotz and M. Loucheur represented France, and to the Council of the heads of Governments., Several hundred meetings were held, both day and night. The question of the lump sum, with two or three others, absorbed the greater part of this effort. On March 26, at a meeting of the Council of Four, M. Loucheur presented the problem. Up to the very last our three representatives held together to obtain a settlement that did justice to France. M. Loucheur said:

"I must repeat emphatically that the lump sum offered us is not sufficient to repair all the damage done to persons and property. What becomes of the pledges we have given? What will our people say?

"France has a right---solemnly recognized even before the signing of the Armistice---to full reparation for her sufferings and her sacrifices. What I ask is that the Treaty shall record this right. If I acted otherwise, I should be acting against the interests and rights of my country.

"I do not fear a public discussion. No one to-day can make an absolutely certain estimate of the total of the reparations due. That is an easy matter for ships which have been sunk. It is much more difficult when dealing with a region entirely ruined and devastated."

And, the same day, M. Clemenceau declared:

"I cannot forget the document we signed on November 4, 1918, and sent to President Wilson on the subject of reparation for war damages."

On March 28, the discussion continues and in a long statement, our Minister of Finance defends the plan presented by the French delegation. He summarizes it thus:

"The Germans are obliged and have pledged themselves to repair the damages. We do not know to-day what such reparation will cost. Improvised estimates would be imprudent. The only system is the following: The Reparations Commission will fix the amount---when it has all the facts. Then according to the amount of the debt thus ascertained, it will settle the figure of the annuities and the length of payment."

The French contention is so strong that, at this meeting, Mr. Lloyd George recognizes it is preferable not to fix any figure in the Treaty. But the American experts hold to the lump sum and repeat in its favour all the arguments that France had just refuted. On April 3, 4, 6, and 7, the two contentions continue to be opposed. It is objected that, under our system, the payments would extend over more than a generation, We reply that this is not certain and that even if it were so, it is just to inflict this burden upon Germany rather than upon France. Minimum and maximum amounts are suggested. We reply that our damages were not matters for bargaining, and that it is their real and not their approximate amount which must be reimbursed us. M. Clemenceau brings the final argument:

"It must be made plain that Germany recognizes the full amount of her debt. It is not enough to say that we recognize it.

"I demand, in the name of the French Government, and after consultation with my colleagues, that the Treaty fix what Germany owes us, by specifying the damages for which reparation is due to us.

"We will fix a period of thirty years, if you wish it, and we will give the Commission, after it has calculated the amount of the debt, the mission of obtaining payment in these thirty years of all that Germany owes. If that is found to be impossible, the Commission will have the right to prolong the payments beyond thirty years.

"In no case will I agree to allow either the Treaty or the Commission to fix an amount below what is due us. Such settlements are haphazard and the burden of them would fall upon France. I repeat in no case will I be able to subscribe to them."

From that day on, our success takes shape and agreement is reached within a week. If it were necessary to add the justification of facts to the reasons of principle advanced by the French delegation, it would suffice to recall the amount of the lump sums proposed by our opponents: 125 thousand millions for the Allies as a whole. France's share, under this system, would have been approximately sixty thousand millions. Now the minimum estimate of our damages was at least 125 thousand millions and the capital of our pensions represented fifty thousand millions.(32) If then we had yielded, we should have accepted less than half of our minimum rights. That is what M. Clemenceau would never consent to.

On May 7, the Treaty was handed to the German delegation. Article 232 embodied the French contention accepted by the Allies. On May 29, Count von Brockdorff-Rantzau presented his answer. He, too, preferred the lump sum, but the figure he suggested was still inferior to those we had rejected; 100 thousand million gold marks, of which twenty thousand millions, were to be paid before May 1, 1926, the rest in annual installments calculated pro rata of the German budget, and payable, without interest, in fifty or sixty years, the actual value of which at six per cent. represented only about thirty thousand millions.

I have told, in connection with the occupation of the left bank of the Rhine, the serious crisis through which the Conference passed at that time. On all sides the question was asked: "Will they sign?" Yet as to how they were to be made to sign there was no agreement. Some, like Mr. Lloyd George, wanted to make concessions; others, like M. Clemenceau, insisted on adhering to the verdict rendered. Like all the great problems of the peace, that of the reparations came up again for re-examination. Like them, it led to further discussions, closer, more intense, more thrilling than the first. During the first days of June, Mr. Lloyd George said that the members of his Cabinet were all of the opinion that we were asking Germany for more than she could pay. He added that the sharpest criticism was directed against the unlimited and undefined character of the debt imposed upon the vanquished. So he asked for a thoroughgoing revision of the Reparations Clauses, and inclined under the influence of Mr. Keynes to the lump sum proposed in March by the American experts. M. Clemenceau answered by a formal refusal.

"Like you," he declared, "I am advised as to public opinion in my country and I must take it into consideration. French opinion believes that the Treaty does not exact from Germany from the financial point of view all that it ought. France is the country that has suffered most from the war and she is convicted to-day that we are not asking enough from Germany. This conviction finds expression in the speeches of eminent and moderate men, like M. Ribot and M. Millies-Lacroix.

"You must understand this state of mind. British opinion does not complain because Germany has to give all her colonies and all her fleet. This is natural, for each nation sees the question from its own point of view. A feeling no less natural in France will be that British critics occupy themselves too exclusively with continental questions."

This first effort was not sufficient. For although President Wilson, on all questions like disarmament and the left bank of the Rhine, shows himself in favour of the firm policy, advocated by M. Clemenceau, he was, on the contrary, influenced in the financial problem by his technical advisers who were anxious, above all, to reach a quick solution. He recalls this by declaring:

"You know that for practical reasons the American experts have always favoured a sum to be fixed immediately."

So he finds himself in agreement with Mr. Lloyd George in believing that "so long as the Germans remain in complete uncertainty as to their obligations, they will be unable to find any foreign credit." This objection is not so sound as it seemed, for according to the terms of the Treaty itself Germany's debt has to be completely established before May 1, 1921. So now M. Clemenceau is all alone, and not once, but several times he has to return to the attack.

"The proposal of the American experts," he said, "would destroy the Treaty. We have in the very first lines of the chapter on reparations laid down the principle that the damages enumerated in the annex must be repaired. If we fix a lump sum to-day how can we tell whether it will suffice to pay us? France has suffered too much to allow this question to go by the board.."

The objection was so sound that President Wilson is "brought around by it. He declares:

"I must remind you that the United States has not the slightest intention of proposing concessions to Germany. We have simply endeavoured to do our share of the common work and to hasten the signing. If the proposals made displease you, they will be withdrawn."

From that moment the case is won. Mr. Lloyd George himself loyally admits the manifest inadequacy of the lump sums proposed and fearing that a higher figure in the Treaty would prevent Germany from signing returns willingly to the original wording which at first he had regretted and shows less alarm at its lack of precision. It is decided to retain it. The only amendment introduced, not in the Treaty but in the answer to the Germans, consists in authorizing them to make proposals within two months after the Treaty comes in force, that without changing anything in the principle or in the consequences of Article 232, would tend to accelerate the settlement either of the amount due or the manner of its payment. On June 9, Mr. Keynes resigns as financial counsellor of the British delegation, which loses in him an abundant advocate of all the German contentions. On June 10, agreement is reached. On June 16, the Allies' answer is handed to Count von Brockdorff-Rantzau.

It is important, now that risky and improvised suggestions are being made for the revision of the Treaty, to read over this document drawn up by an Englishman, approved by all the Governments and signed by M. Clemenceau. The justification of the course decided upon is written all over it.

The Allies' proposals confine the amount payable by Germany to what is clearly justifiable under the terms of Armistice in respect of damage caused to the civilian population of the Allies by German aggression.

It is not possible to fix this sum to-day for the extent of damage and the cost of repair has not yet been ascertained.

The Allied and Associated Governments, consistently with their policy already expressed, decline to enter into a discussion of the principles underlying the reparation clauses.

The categories of damages and the reparation clauses must be accepted by the German authorities as matters settled beyond discussion.

So far as the substance of the German counter-proposals is concerned, the answer was no less clear, no less firm:

A sum of one hundred billion gold marks is indeed mentioned, and this is calculated to give the impression of an extensive offer, which upon examination it proves not to be.

No interest is to be paid at all.

The present value of this distant prospect is small, but it is all that Germany tenders to the victims of her aggression in satisfaction for their part suffering and their permanent burdens.

Germany, unquestionably, will have a heavy burden to bear. But why? The Allied and Associated Governments wish Germany to be able to enjoy the prosperity like the rest of the world, though much of the fruit of it must necessarily go, for many years to come, in making reparation to her neighbors for the damage she has done.

If the Treaty were different, if it were based upon a general condonation of the events of 1914-1918, it would not be a peace of justice.

Repeated assertion of Germany's full and complete obligation with regard to all categories of damages enumerated in Article 232 and Annex 1; fixation of the total amount of the German debt on May 1, 1921, at the latest; maintenance of all the principles and of all the methods urged by the French delegation from the beginning of January until the end of June---such was the final decision, the strict justice of which cannot be disputed if reference be had to the principles which inspired the peace. It is indeed objected that, if the solution is just, it is also unrealizable. It is said that Germany will not pay, and the Conference has been accused of never having concerned itself with Germany's capacity for payment. This is the second position taken up by Count von Brockdorff-Rantzau and is no better than the first.


The Peace Conference did not merely make generous allowance for Germany's situation and her capacity of payment by letting her off repayment of war costs at the suggestion of the American delegation, thus reducing her debt by 700 thousand millions, more than two-thirds of the total. It also made a careful study of the resources with which Germany could pay.

At its first meeting, on February 3, 1919, the Commission appointed by the Supreme Council to study the problem of reparations, created three sub-commissions. One was to take up the amount of the damages; another, the financial guarantees of execution; the third, capacity and means of payment. The latter sub-commission held thirty-two meetings and minutely analyzed Germany's actual and potential resources. Its president, Lord Cunliffe, never ceased to express the opinion, shared by all who know and think that, for a payment distributed over a sufficient period---fifty years for instance---Germany will have resources infinitely superior to those that any examination of her situation immediately after the war would make it possible to declare or to anticipate. The war itself furnished the proof. Who would have foreseen that, either in the Allied camp or in the other, it would be possible for fifty-two long months to meet expenses exceeding 1,000 thousand millions? M. Loucheur, agreeing with Lord Cunliffe, confirmed this proof by recalling Germany's prodigious development from 1871 to 1914---her population increasing by fifty-two per cent., her production of coal increasing from forty million tons to 280 million. Other delegates showed that Germany, on the eve of war, was less burdened with taxes than any other country; Austria-Hungary paying 106 francs per head of her inhabitants; France, 100; England, 79; Italy, 62.50; Germany, only 54. Others again recalled that immediately after the Treaty of Frankfort, France in a few weeks had increased her taxes by nearly one billion and Lord Cunliffe, after a long discussion, summed up the general opinion by saying:

"Germany's ability to pay exceeds anything shown by our study. What Germany does not pay, the Allies, attacked by her, will have to pay."

These principles once laid down, the means of payment were examined. Everyone was agreed that the medium should be gold marks. Every one agreed also with M. Loucheur that the only way of finding gold marks was, by means of the Treaty, to impose upon Germany the obligation to export. Coal exports were naturally put in first place and it was estimated that they might attain sixty million tons a year. After a long discussion, the following means of payment were adopted by the sub-commission: gold and silver on hand, German investments in foreign countries, coal, potash, wood, colouring matters, ships already launched and those under construction, machinery, furniture, cattle, chemical products, submarine cables. Increased taxation and the creation of monopolies were also studied---a Frenchman, M. Raphael Georges Levy, anticipating from the former an increase of revenue amounting to five thousand million marks, while a Serbian expert thought the latter would give more than four billion. The sub-commission was of opinion, however, that it ought to enter upon this course with extreme prudence for two reasons: the first was that, if the Allies attempted to impose fiscal reforms upon Germany, the latter would always answer that these reforms were badly conceived; the second, that the increased revenues thus obtained would be in paper marks; of greatly depreciated value as compared to gold marks.

The report of the sub-commission, handed in on April 18, was divided into two parts. The first presented figures. The second did not. The sub-commission declared that within eighteen months of the conclusion of peace Germany could pay twenty thousand million gold marks in money or in kind. For the rest, the sub-commission confined itself to formulating the means of payment it proposed to adopt especially exports to be imposed upon Germany in order to provide the gold payments which it thought "ought to be very considerable and increase progressively." It recommended that, once the amount of the debt was fixed, an Inter-allied Commission should determine each year the payments for that year, as annuities fixed in advance for a period of fifty years could only be arbitrary. Germany to meet these obligations would have to increase her prewar exports, and for that to practise a policy of restriction, transforming herself into "an exporting nation with a view to paying her debts of reparation." The sub-commission concluded:

The sub-Commission deems it wiser to fix a figure which may appear somewhat excessive compared to the resources of the enemy countries rather than to run the risk of indicating a sum clearly inferior to what these countries can pay without any extraordinary effort.

It is important to recall that the productive forces of a nation may, thanks to scientific progress, increase much more rapidly than can be thought possible.

Figures which, to-day, may appear out of all proportion, will perhaps seem quite moderate in twenty or thirty years. During the last fifty years in Germany, the production of steel increased twelvefold; the number of workmen employed in mechanical industries has increased fivefold, the number of miles of railway has tripled, and exports have increased fivefold.

It may not be amiss to add that the above report was drawn up by the late Lord Cunliffe, the British representative and Governor of the Bank of England.

The special committee appointed at the end of March to draft the reparation clauses tried first to do what the sub-commission had not done and to reduce Germany's payments to figures. But it did not succeed, first because the matter itself precluded mathematical certainties, and conflicting opinions were backed by no decisive proofs; because also whatever the results, some feared a figure so stupendous that it would encourage Germany not to sign; others one so moderate that it would rouse the indignation of the ruined populations. Everyone agreed that immediately after the coming into force of the Treaty Germany could pay twenty-five thousand million gold francs. But unanimity ended there.

As an instance, I will recall that the American experts considered the following as the maximum payments possible:

Payments before 1921 20 thousand million gold marks
Payments from 1922 to 1931 60 " " " "
Payments from 1932 to 1941 80 " " " "
Payments from 1942 to 1951 100 " " " "


260 " " " "

The total of these payments, allowing for interest, represented at current rates, a present value of 140 thousand million gold marks.(33) France and Great Britain deemed it impossible to go below 180 thousand million marks gold of the value mentioned, and this would require total installments of 367 thousand million marks gold, or, in fifty years, eighty-seven thousand million marks gold more than the American proposal contemplated. This was how the problem stood when it came before the Council of Four.

The state of mind of our Allies was anxious and contradictory. Mr. Lloyd George declared:

"We are going to throw Germany into the arms of the Bolsheviks. Besides, for her to pay the sum which we have in mind, and which it is just she should pay, she would have to occupy a still greater place in the markets than before the war. Is that to our interest?"

President Wilson wanted Germany to pay all she owed. But he also felt an apprehension which was very widespread at that time and which retrospective criticism takes sufficiently into account. This was that the German Government might fall and when the time came to sign there might be nobody in Germany to do so. Besides the American experts, having been unable to obtain from the European Allies who had not yet estimated it , the total amount of damages, had reversed their efforts and sought to form an estimate of Germany's capacity for payment. Mr. Keynes encouraged them with his habitual spite and as, in March, 1919, this capacity naturally presented itself under the most sombre aspect, their conclusions tended to diverge from ours.

M. Clemenceau protested vehemently. On no account would he allow---under pretext of estimating without any real basis whatsoever Germany's power of contribution for the next fifty years---France again to be deprived,---as she would have been in the case of a lump sum---of that absolute minimum reparation of damages to persons and property. M. Clemenceau protested and stated in these terms:

"All is all very well, but we have made formal promises to our people about reparations. We must keep our word unless it is clearly proved that we cannot do so. But such is not the case. It is said that Germany will find the price high. But it has not been proved and it cannot be proved that she cannot pay if enough time is given her. What we must avoid is going from one extreme to the other, and through fear of asking too much, not asking enough."

M. Loucheur, again urging our contention against an immediate and therefore inevitably too low evaluation of the German debt, called Helfferich's book to witness,---the thirteen thousand million annual excess of German production; the reduction in this production resulting from the war and the Treaty offset by a corresponding reduction in consumption; the price of products to be exported by Germany rising higher in proportion than that of food supplies to be imported by her; her coal production increasing before the war eight million tons a year; her exports in 1914: amounting in this respect to forty million tons and capable by a policy of extraction and restriction of being further raised to sixty, since also the Treaty deprived her taking lignite into account of only a small part of her combustibles;(34) this exportation of sixty million tons, at one hundred francs per ton---a price which would be maintained for a long time---alone representing six thousand millions gold a year. Notwithstanding the force of these arguments, no agreement was reached.

It was in these circumstances that the French Government, wishing above all to avoid an arbitrary sum which might in thirty years raise a Germany free from debt and prosperous at the doors of a France deeply involved, proposed the solution embodied in the Treaty which I have given above. From that time on agreement despite certain resistances, was definitely reached. Mr. Keynes, although acquiescing, asked finally that before a decision was reached, the question of their capacity for payment should be discussed with the Germans. The French representatives refused to be involved in this fool's game, and Mr. Lloyd George agreed with them. As for President Wilson, he did not follow his advisers. The dangerous sophism of "capacity for payment" was finally discarded. Germany would pay what she had to pay; twenty thousand million marks gold before May 1, 1921; the remainder in thirty years if that were possible, or in a longer period if thirty years did not suffice.

The Germans may declare and repeat as often as they like that the Peace Conference never gave a thought to their capacity for payment. What has just been read answers this. The truth is that the Conference, under the stubborn guidance of M. Clemenceau, M. Klotz and M. Loucheur, understood the peril involved in a method which consisted in first declaring not "Germany will pay what she owes," but "Germany can pay only a certain sum." Capacity for payment? On what date? Certainly not on that of the signing of the Treaty, after fifty-two months of war and six months of revolution, the immediate effect of which was only too easy to exploit. Capacity for payment over a fixed number of years? Based upon what? Limited by what? Here again the risk was too great of liberating vanquished Germany before the victims of her aggression. France would have none of this risk and in accord with her Allies she rejected all solutions which directly or indirectly would have led to this result. France's well justified determination to found the Treaty, not upon the arbitrary presumption of German capacity, opening the door to only too likely duplicity, but upon the definition of a positive obligation, never wavered for a single instant . For the adjustment of the annual payments, the Reparations Commission will take into fair account Germany's resources. But it will do so within the limits of a debt fixed at the latest by May 1, 1921, once and for all by the extent of the damages.

That Germany is not able to pay all that she in justice owes is recognized by Article 232, dispensing Germany from the reimbursement of war costs. For the rest---damage to persons and property and pensions---her obligation will be absolute and her capacity for payment will be taken into consideration only in order to fix the number of annuities, the total amount having in any event to be fully and completely paid whether in thirty years or in a longer period. Nothing could be clearer; nothing more just. For in this matter the question between the Allies and Germany presents itself clearly. It is "Germany or the Allies.?" We do not demand that Germany should pay in full by a fixed date. We demand of her, once the damages for which she is liable have been computed, to arrange to pay for as long as may be necessary, the yearly installments for the acquittal of her debt. Under this system---what alone is fair---Germany's capacity for payment is not gauged by her wealth at the time of the peace, but by her capacity for production and her will to work for a long period during which her renascent forces may expand. Time here is the essential factor and this is what destroys at their very base Germany's mendacious objections.


There still remained a grave difficulty for the Allies. They had just seen that Germany by reason of the size of her debt could only pay it by annual installments. Yet they knew only too well that Germany's creditors by reason of the extent of their ruins needed prompt payment. There was but one method of reconciling these two conflicting needs:---the conversion of the debt by means of credits. With this in view, the lump sum had been proposed. I have shown why France rejected it. So it became necessary to find for the beneficiaries another way of negotiating the deed drawn up in their favour.

I did not take part in the discussion of the financial clauses of the peace. But the close unity between M. Clemenceau and his co-workers kept each of them informed as to the negotiations as a whole and enabled him to formulate suggestions concerning matters for which he was not directly responsible. It was under such conditions that, on April 5, 1919, I handed to the French Premier and to M. Klotz and M. Loucheur, a Note in which after dealing with the question of the sum total of the debt, the manner of its payment and the guarantees---I approached the question which I called the "materialization" of the debt due the Allies:

The better to figure the debt due the Allies and at the same time to permit the combination set out below , the preliminaries might impose upon the Germans the delivery of a single Treasury bond of "X" billion gold marks, payable on July 1, 1921, under agreement on the part of the Allies to exchange this bond on above date for a series of bonds of the same nature, payable at various dates determinable by the Inter-allied Commission entrusted with fixing the manner of payment.

These bonds would serve to pay for German merchandise. Each year an inter-allied organization would fix the rate at which these bonds would be convertible into francs, pounds sterling, dollars, etc.

These bonds would take precedence over all the German interior indebtedness.

The Allies would have the right to sell them, even to Germans. They could be quoted, on the principal markets of the world, as commercial paper.

It would be stipulated that they should never lapse and that in case of non-payment they should bear compound interest.

On the other hand, it would be well to allow the Germans to liberate themselves at any time by anticipation at a favourable rate.

In this way, the Allies would have in their hands international money as a medium of exchange between themselves, or with neutrals.

When they would no longer buy German merchandise in the same quantities, they would sell these bonds to other purchasers. The Germans also under certain circumstances would have an interest in redeeming these bonds.

Finally in case at the end of the thirtieth year the Germans had not redeemed the whole of their debt the Allies would still have in hand a medium of exchange which would always be valid and which could be sold to buyers of German merchandise in any country of the world.

This brief and imperfect outline was adopted by my colleagues. About the same time one of the English financial experts, Lord Sumner, had hit upon the same idea and in the days following it was subjected to a minute examination by the special committee which. at the end of March had been appointed to deal with the financial solutions. The immediate issue of a single bond did not appear feasible and as a beginning a lower figure was taken to stand on account of the total amount of the debt. On April 7, the matter was taken up by the Council of Four. There was really no discussion as to the principle which was accepted by all. It was necessary, as M. Klotz pointed out, to obtain without delay from the enemy, so as to pave the way for the execution of 'the Treaty, some pledge which might well be in the shape of bonds. M. Klotz added:

"These bonds to be at once exacted from Germany would be equivalent to the written acknowledgment which a creditor demands from a debtor who cannot pay cash. If the debtor is not insolvent, the paper is negotiable. It is by such means that we shall enable our countries to live while awaiting the final settlement.

"Besides Germany must fully understand this obligation when she signs the Treaty. We shall settle the amount of the bond issue. This must be submitted to the enemy and embodied in the Treaty."

The question of the amount led to some discussion. Mr. Lloyd George seemed to fear that the announcement of the amount might mislead public opinion. The so-called "lump sum" plan had been rejected. It had been decided to define Germany's debt by the list of specific damages for which she was responsible. If the Treaty without stipulating the amount of the debt contained that of the bonds would there not be confusion in the public mind which might mistake it for the sum total of the German obligation? M. Klotz answered immediately:

"It is easy to avert this misunderstanding. This is merely a payment in bonds on account of the total amount of an outstanding indebtedness payable to the full in annual installments. Between private individuals when there are no mortgages the creditor asks his debtor to give him in acknowledgment of his debt a negotiable paper bearing his signature."

And M. Clemenceau added:

"I don't understand what difficulty there is in fixing the amount of a payment on account. My watch is stolen, my pictures, my furniture. The thief is caught. It is not difficult to make a preliminary estimate before the valuation of my total loss. This is done every day. It is the custom of our courts."

An agreement was easily reached. But then President Wilson, analyzing the practical application of the plan, made certain very sound observations which threw an interesting light on the operation.

"The important thing," he declared, "in fixing the amount, is to bear clearly in mind what we intend to do with the bonds once they are issued.

"The object of this bond issue is to supply collateral for loans. An effort will doubtless be made to place a great substantial part of them in the United States. Suppose the amount of the bond issue is excessive; it will reduce the value of the collateral and produce a bad impression upon the prospective lenders. The amount of the issue will have an influence on world credit.

"If the banks refuse to take an over-issue as collateral, the credit of your countries will fall. Therefore it is of capital importance that the issue be for a definite amount and it must not be excessive."

The American expert, Mr. Norman Davis, betrayed the same concern by saying:

"I do not dispute that Germany can within a very short time pay the interest of these bonds in gold. But if the bond issue is too large, she will be unable to do so and the bonds will be useless."

This matter was of capital interest for France. It was obvious that the American Government had a perfectly clear conception of the financial aid that the United States would have to furnish their associates for the negotiation and the realization of the amount owing to them. At the same time as he showed anxiety that the call upon American credit should be neither too sudden nor too heavy, the President acknowledged it to be both indispensable and justified. The British as well as the French immediately gave assurances which satisfied the United States representatives.

"The Reparations Commission," said M. Klotz, "will begin by keeping these bonds in its treasury. It would be very dangerous to put too large an amount of bonds upon the market in a limited length of time."

And Mr. Lloyd George made the following point:

"It is evident that if there are too many bonds on the market they will fall in value. But it is the country depending upon them as collateral that will be the first to suffer. If France, Belgium, or Great Britain throw too great an amount of bonds upon the market it is these Powers themselves that will suffer. You can therefore rely upon their common sense."

A draft presented by Lord Sumner met with unanimous approval. It fixed at 100 thousand million marks gold on account the amount of the bond issue to be embodied in the Treaty, and divided it into three parts under the effective control of the Reparations Commission, as follows:

(1) An immediate issue (as of January, 1920) of twenty thousand million marks gold in bearer bonds, payable on May 1, 1921, at the latest.

(2) An issue, also immediate, of forty thousand million gold marks in bearer bonds.

(3) A written undertaking to issue, whenever called for by the Reparations Commission, a third series of bearer bonds of forty thousand million marks gold.

This system was during the debates on ratification the subject of erroneous interpretations which, I need hardly say, were not always involuntary. Mr. Lloyd George, who knows Parliaments well, feared that some would feign to believe that the total figure of these three series of bonds---100 thousand million gold marks---represented the whole amount of what Germany had to pay. I do not insist upon this misconception which does not even bear examination. Others mistook the bonds which are an acknowledgment and an instrument of credit for a means of payment and confused them with the one and only means of payment which the Treaty provides, namely annual payments in money and in kind that Germany must make until the settlement of her debt, to which interest on the deficit balance will be added each year. Here again the account I have just given re-establishes the truth and defines the nature of the bonds which represent neither the total of the debt nor a discharge, but a negotiable acknowledgment to be used when the Reparations Commission deems negotiation possible and proper.

M. Loucheur and M. Klotz furnished in the course of the parliamentary debates, explanation which may well be repeated:

"These bonds," explained the former, "are not a means of payment. They are embodied in the Treaty as an acknowledgment and a guarantee of the debt.

"Germany's account will be made up every year like any ordinary debit and credit account. The sum total which Germany owes will be registered on May 1, 1921. As an hypothesis, I take three hundred thousand million. On May, 1, 1922, a year later, Germany will be charged in addition to the three hundred thousand million with interest for the year 1921 at the rate of five per cent., that is with three hundred thousand millions plus fifteen thousand minions and she will be credited with the payments she has actually made. The bonds will play no part in the making up of this account.

"But we needed to be able under certain conditions to discount Germany's debt. We needed a certain number of securities which we could eventually negotiate, if we so desired, and which at our option we could eventually use to discount in whole or in a part the annual installment that Germany must pay.

"After admitting that the only practical means of payment was by means of yearly installments, we could not do otherwise, if we intended eventually to discount these annuities, than to take a certain number of securities negotiable at our pleasure but which we are in no way obliged to accept in payment."

And then M. Klotz showed how these bonds would be employed and the manner in which they would be secured.

"As a result," he said,---of the terms of the Treaty the action of the Reparations Commission will really give these bonds a real moral guarantee.

"First, over and above the two first bond issues (twenty thousand minion and forty thousand million marks gold) to be delivered by Germany, the Commission will call for other issues only when it is satisfied that Germany can pay the interest and sinking fund of the bonds.

"Second guarantee: the sale and negotiation of the bonds delivered by Germany will be subject to the unanimous decision of the Commission. In the spirit of the Treaty this very clearly means that such authorization will be given only when Germany's credit and the condition of the market permit their easy negotiation.

"To this twofold moral guarantee, it may be necessary on occasion to add that which each country receiving bonds may wish to give, and also the very important guarantee implied in the sale of bonds in neutral countries after appropriate negotiations."

The purpose of these bonds to be issued by Germany is thus clear. The Allies did not imagine when they included this obligation in the Treaty that they could negotiate these securities immediately. They nevertheless imposed the issue and the delivery of these bonds because in dealing with a reluctant debtor it is of no small importance to hold an acknowledgment of his debt, negotiable at pleasure and bearing interest, and because in view of Germany's all too probable duplicity it was well that securities covering an appreciable part of the debt should be in the hands of the creditors.

Let us not in fact be deceived. Germany's game as played by Mr. Hugo Stinnes is to revive her economic activity by freeing it from the mortgage of the Treaty of Versailles. Do I need to insist on the absolute fairness of these safeguards without which an untouched Germany would in a few years gain an advantage over her devastated conquerors which it would be impossible to overcome? The bond system was the best of guarantees against such a plan.

For as soon as German revival, of which all the essentials are undestroyed, makes itself felt in the world markets, the Reparations Commission by placing these bonds in circulation will associate Germany's creditors with her revival, and Germany to safeguard the progress made as well as not to compromise the future will, whether she wishes it or not, be obliged to honour her signature. In fact it will be in the very markets where she needs to develop her credit that she will meet the paper delivered to the Allies for negotiation and placed in circulation by the Reparations Commission. The bonds, in other words, are an elastic and safe-guaranteed security which can be made use of at once and to an ever-increasing extent as German resources grow.


Such, in its general lines, is the system the Treaty of Versailles imposes on Germany for the settlement of her debt. The account of the discussion which led to its adoption shows how conscientiously it was studied and how its principle was arrived at:

(1) Germany is responsible, as having caused them, for the total amount of the loss and damage suffered by the victors from the fact of her aggression.

(2) Germany in view of the permanent diminution of her resources resulting from the Treaty is only bound---but bound without restrictions or reserves---to reimburse the sum total of damages and pensions as defined and specified in Annex I, Part 8, of the Treaty.

(3) Germany is to pay, before May 1, 1921, 20,000 million marks gold in money and in kind.

(4) On May 1, 1921, at the latest, the Reparations Commission is to fix the total amount of Germany's debt.

(5) This debt will be liquidated by annual installments, the amount of which will be fixed each year by the Reparations Commission.

(6) The payments will continue for thirty years, and longer if at the end of thirty years the debt is not paid in full.

(7) Germany will issue 100,000 million marks gold in bearer bonds and later all bonds that the Reparations Commission calls for up to the total amount of the debt, this to permit its mobilization at the Allies' pleasure.

(8) These payments will be effected in money and in kind. The payments in kind will be made in coal, cattle, chemical product, ships already launched or under construction, machines, implements and furnishings. The payments in money will be made in bullion, in German credits both public and private in foreign countries, and by first lien on all the property and revenues of the Empire and of the German States.,

(9) The Reparations Commission entrusted with the execution of these clauses, will have a right of supervision and decision. Called upon to decide "and without being bound by any particular code or rules of law or by any particular rule of evidence or procedure, but guided by justice, equity and good faith" it obtained from Germany by the terms of the Treaty "the irrevocable recognition of its power and authority." Enjoying all diplomatic rights and immunities it will have until full payment of the debt to supervise Germany's situation, her "financial situation and operations, her property, productive capacity, and stocks and current production," and, at the same time, to investigate what she can pay annually, and also to see to it that these payments, added to her budgets, make her tax-payers liable for at least as much as those of the most heavily taxed of the Allied countries. Its decisions will be immediately enforceable and "will receive immediate application without other formalities." It will have to initiate by its proposals all changes recognized as necessary in German laws and regulations, as well as all financial, economic or military penalties for violations of the clauses it has power to enforce. Germany pledges herself beforehand not to consider these penalties, no matter what they may be, as acts of hostility.

These clauses are severe. If they were not, they would not be just. However, all the financial clauses of the Treaty are marked by an unquestionable spirit of moderation. Part of the payments made before May 1, 1921, is earmarked to pay for German purchases abroad. The Reparations Commission, in fixing the debtor's annual payments, is to take into consideration Germany's internal needs with a view to maintaining its social and economic life. It will exact from Germany delivery of machinery, equipment, tools and the like only if no stock of these articles is for sale in the open market, and in no case in excess of thirty per cent. of the stocks of each article in any German establishment. The coal deliveries, which are imposed for a short period only and the annual maximum of which is below forty million tons, represent fourteen per cent. of the German coal and lignite production in 1913 and eighteen per cent. of this production minus that of Alsace-Lorraine, the Sarre and Upper Silesia. None of these clauses resembles the Draconian(35) conditions which Germany imposed in 1918 on Russia by the Treaty of Brest-Litovsk; on Roumania by the Peace of Bucharest---conditions which their authors publicity declared were nothing compared to those that Germany intended to impose upon the Western Powers.

Mr. Keynes was able, by criticizing certain articles of the peace separately and by means of misleading statistics, to argue that the problem of reparation was dealt with in an abusive manner. I have replaced the matter in its true light. I have shown how the question presented itself, and how it was solved. It could not in justice have been solved otherwise. The Allies, to whom the war has cost more than 1,000,000 millions demand from Germany only about 350,000 millions. These two figures tell the whole story. They prove that the financial bases of the Treaty of Versailles are fair and moderate. As for the assertion that they constitute a violation of the bases of the peace, or in Mr. Keynes' words, "an act comparable to the invasion of Belgium," it only shows a curious inability to distinguish between right and wrong combined with absolute ignorance of the facts. As President Wilson declared on June 6, 1919, "the Treaty is in entire conformity with the Fourteen Points." The Germans are to make good the total amount of the damages suffered by the population. Surely death and the mutilation are the most obvious of these damages. The Germans, after thinking it over for seventy-two hours, signed the Armistice, which reads: "With the reservation that any subsequent claims of the Allies and the United States remain unaffected, reparation for damage done." Mr. Keynes answers, it is true, that this is a "casual protective phrase." The weakness of his argument calls for no comment.

Germany had premeditated not only the complete military defeat, but also the economical and financial ruin of her adversaries. The victorious Powers compel her to repay about thirty per cent. of the damage done by her. Such an obligation after such an aggression is neither abusive nor cruel. I add, passing from equity to facts, that it is far from unenforceable.

Chapter X

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