Notes to Part VIII, Articles 231 to 247-Continued The World War Foreign Debt Commission concluded with the Government of the United Kingdom a draft funding agreement covering a principal sum of $4,600,000,000, representing the face value of demand notes and accrued interest thereon at 5 per cent, repayable ir. 62 years by a sinking fund, with the outstanding principal bearing an average of 3.306 per cent interest. As this agreement did not meet the conditions of the provisos of section 2 and section 3 of the act of February 9, 1922 as to maturity and interest, it was submitted to Congress, which adopted it as an amendment to that law by an act approved February 28, 1923 (42 Stat. 1325). A funding agreement followed. Subsequent funding agreements of its general character were submitted to the Congress as Senate documents, and separate acts embodied the terms reached. With respect to the debts to the United States affected by the contention of the debtors that they were part of a total war obligation, settlements were made as follows: From the point of view of the creditors of Germany, the rigidity of their agreements with the United States imposed upon them the burden of providing much larger and more complicated exchange payments than they regarded as otherwise necessary. Being creditors of Germany they were desirous of using their receipts from that government to pay their other indebtedness. With these considerations in mind, and taking into account the insistence of the creditors that their requirements from Germany were dependent upon their own obligations to make out-payments, the Committee of Experts incorporated in the New Plan an annuity 4 Notes to Part VIII, Articles 231 to 247—Continued system designed to meet the situation. The fixed condition which they faced was the requirement in the agreements made by the United States Government with its debtors that payments should extend over a period of 62 years from 1923 or thereabouts. The annuities that Germany was to meet were, therefore, to continue from September 1, 1929 until March 31, 1988, a period of 59 years. This period was divided into two parts. The first period of 37 years, extending until March 31, 1966, during which Germany was to pay on both reparation and out-payments accounts, was determined by the time required for amortization at one percent per annum. The further period of 22 years from April 3, 1966 to March 31, 1988, during which Germany's obligations were for out-payments only, was determined by the life of the United States debt agreements. The out-payments annuities, which excluded Germany's obligations under its separate agreement with the United States, constituted the bulk of the requirements in the first 37 years. Up to March 31, 1966 Germany was obligated to pay 79,483,300,000 Reichsmarks of which 50,738,100,000 Reichsmarks was to be devoted to out-payments and only 28,745,200,000 Reichsmarks (32.9 percent) to reparation. In the subsequent period until March 31, 1988 out-payments were to amount to 34,422,600,000 Reichsmarks, with no payments on reparation account. Of the total of 113,907,700,000 Reichsmarks payable in 62 years, 84,548,700,000 Reichsmarks (74.2 percent) was assigned to out-payments. The arrangement of January 20, 1930 made the amount of the stipulated out-payments contingent upon any modification of obligations from which the creditors might effectively benefit. In the first 37 years Germany was to benefit from any remission to the extent of two thirds of the net relief available, the other one third to be retained by the creditors of Germany as an advance payment on Germany's outstanding obligations. In the last 22 years the whole of any remission was to be applied to the reduction of Germany's liabilities. The inter-Allied debts which were taken into consideration in calculating out-payment annuities were stated in the arrangement of January 20, 1930 to be the following: 1. To the United States of America Great Britain: Agreement of June 19, 1923 Notes to Part VIII, Articles 231 to 247—Continued Belgium: Agreement of August 18, 1925 France: Agreement of July 12, 1926 3. To France Rumania: Agreement of January 17, 1930 Yugoslavia: Agreement of January 20, 1930 Greece: Agreement of January 20, 1930 dealing with the war debt (provisions relating to the pre-armistice debt-tranche A). THE "HOOVER MORATORIUM” After a period of severe world-wide depression, on June 20, 1931 the President of the United States issued a statement in which he said: "The American Government proposes the postponement during one year of all payments on intergovernmental debts, reparations and relief debts, both principal and interest, of course, not including obligations of Governments held by private parties. Subject to confirmation by Congress, the American Government will postpone all payments upon the debts of foreign governments to the American Government payable through the fiscal year beginning July 1 next, conditional on a like postponement for one year of all payments of intergovernmental debts owing the important creditor powers" (Department of State, Press Releases, June 20, 1931, p. 482). The proposal of this "Hoover moratorium" that the payment of intergovermental debts should be suspended for the year ending on June 30, 1932 affected the pattern of international indebtedness in several respects: 1. It would suspend payments on the funded debts owing to the United States on account both of wartime (pre-armistice) and of supply and relief (post-armistice) loans. Nine tenths of the value of the 15 funded debts was in the pre-armistice obligations of four states, Great Britain, France, Greece, and Italy. War and supply Notes to Part VIII, Articles 231 to 247-Continued debts were funded with Belgium, Czechoslovakia, France, Rumania, and Yugoslavia, while supply and relief accounts existed with Austria, Estonia, Finland, Latvia, Lithuania, and Poland. 2. Suspension of payments under the New (Young) Plan would involve adjustments with regard to (a) the out-payments which constituted the bulk of the annuity and which were ear-marked for servicing, among others, the pre-armistice debts to the United States of Great Britain, France, Italy, Belgium, Greece, Rumania, and Yugoslavia; and (b) the suspension of the non-postponable portion of the annuity, amounting to 673,800,000 gold marks. 3. Suspension of other debts, those included in the "out-payments" as defined by the arrangement of January 20, 1930 relating to the "concurrent memorandum", and those not so linked with German obligations, as well as non-German obligations. The concern of France in preserving the continuance in principle of the non-postponable (or unconditional) annuity under the New (Young) Plan and in adjusting arrangements with respect to deliveries in kind was relieved by the conclusion at Paris on July 6, 1931 of an agreement between the French and United States Governments (Department of State, Press Releases, July 6, 1931, p. 41; file 462.00 R 296/4524). This agreement embodied observations by France on a number of points which did not directly concern the United States. One of these was provision for convening a committee of experts of the interested states which should "reconcile the material necessities with the spirit of President Hoover's proposal". This International Committee of Experts was appointed by Germany, Belgium, the United Kingdom, France, Italy, and Japan. Its report of August 11, 1931 was accompanied by a protocol concerning Germany signed, in addition to the governments named, on behalf of Canada, Australia, New Zealand, the Union of South Africa, India, Greece, Poland, Portugal, Rumania, Czechoslovakia, and Yugoslavia. Annexes provided in detail (a) for continued payment of the unconditional annuity under the New (Young) Plan in monthly instalments, which were to be immediately loaned to the German Railway Company after deduction of service of the German Government International 52 percent Loan, 1930, and (b) for limited continuance of deliveries in kind. Further protocols concerned Czechoslovakia and the French, Belgian, Rumanian, Portuguese, Greek, and Italian war debts and Hague annuities due to Notes to Part VIII, Articles 231 to 247-Continued the United Kingdom (Report of the International Committee of Experts, Misc. No. 19 (1931), Cmd. 3947). These arrangements for carrying out the Hoover moratorium did not effect a fundamental improvement in the economic situation. German banks had been closed from July 13 to 15 and foreignexchange restrictions multiplied thereafter. The London experts on July 23 asked the Bank for International Settlements "to set up without delay a committee of representatives nominated by the governors of the central banks interested to inquire into the immediate further credit needs of Germany and to study the possibilities of converting a portion of the short term credits into long term credits". This committee, which was nominated by the governors of the nine principal central banks and the Federal Reserve Bank of New York, met at Basel August 8 and concluded its report on August 18. (Bank for International Settlements, Report of the Committee appointed on the Recommendation of the London Conference, 1931.) The committee, of which Albert H. Wiggin of New York was chairman, urged "most earnestly upon all governments concerned that they lose no time in taking the necessary measures for bringing about such conditions as will allow financial operations to bring to Germany-and thereby to the world-sorely-needed assistance." It found that during the seven years 1924-30 Germany's foreign indebtedness grew faster than its foreign assets by 18,200,000,000 Reichsmarks. The total of foreign investments in Germany was given at 25,500,000,000 Reichsmarks, with German investments abroad of 9,700,000,000 Reichsmarks, leaving the net debt to foreigners at 15,800,000,000 Reichsmarks. The influx of capital and receipts for services amounting to 21,200,000,000 Reichsmarks during 1924-30 enabled Germany to pay 10,300,000,000 Reichsmarks as reparation and to pay for 6,300,000,000 Reichsmarks of imports over and above exports which included deliveries in kind, with 4,600,000,000 Reichsmarks for interest and foreign devisen. The Standstill Agreement, which provided for the delayed realization of private foreign accounts, was first concluded on September 17. On September 21 the United Kingdom suspended the gold standard, and 14 other countries had followed that example or introduced exchange restrictions by the end of October. On November 19, 1931 the German Government made the request provided for in the second sentence of section 119 of the New (Young) Plan, which reads: |