"Mais Certainement^

COMMONWEALTH (British Commonwealth of Nations)

"Mais Certainement"

A Visit. It was about 11:30 one fine morning when the Chancellor of the Exchequer, Mr. Winston Churchill, wandered into No. 11 Downing St., back from a weekend at his country place in Kent. He had not been there long when an acquaintance from across the Channel arrived to keep an engagement. Mr. Churchill was in good humor. Apparently he had not let the impending visit of his acquaintance spoil his weekend.

The visitor was a little late, so the Chancellor had had time to glance at his mail before the door of the reception room opened and an official person announced: M. Joseph Caillaux and M. de Fleurian. In walked a strange creature, a bald-headed man with a trimmed mustache, the ends of which it seemed he ought to twirl. He was smiling and his luminous eyes gave no hint of the fact that he was the husband of a woman who had been tried for murder and he himself had been tried for treason and both had survived their tribulations. Nor did those fascinating eyes of his betray that he had come to London desperately intent on speaking the English language with which he was none too familiar, and on negotiating a delicate diplomatic matter of the first importance. Bowing behind this strange figure appeared the diplomatic corpus of M. de Fleurian, the French Ambassador.

On the evening of the second day following, M. Caillaux rushed into a room in the French Embassy at London, in which he had been receiving reporters. He waved a piece of paper in his hand.

"Gentlemen, I again apologize for keeping you so long, but this time I have something."

An aide read a translation of the document which M. Caillaux was waving about. When the reading was finished a reporter asked:

"Does this British exception about equal treatment mean America?"

"Mais certainement!" exclaimed M. Caillaux.

"Are you quite happy over the sudden change?" another inquired.

What could he say? M. Caillaux smiled gallantly:

"Eh bien, je suis toujours gai!"

That night M. Caillaux slept well, in the morning sailed for France and the next evening his accomplishment was approved by the French Cabinet.

The Negotiations. It was not until the final communiques (one French, one British) were issued, that the course of the negotiations for the Franco-British debt settlement could be traced with any degree of accuracy.

The way the British figured out what they wanted under the Balfour policy was about as follows: Our annual payments to the U. S. plus enough to reimburse us over 20 years for two years installments that we have already paid, should mean that we should be paid about -L-40,000,000 a year by our debtors. We cannot count on more than -L-10,000,000 a year from German reparations. That leaves -L-30,000-000 we want to be paid by France and Italy. Considering capacity to pay, we feel that France should pay -L-20,000,000 a year, and Italy -L-10,000,000 of that amount.

France had made an offer several weeks previously for an annual allotment of 120,000,000 gold marks of France's share of German reparations, calculated to be worth -L-6,000,000 and -L-4,000,000 additional annual payment---L-10,000,000 a year all told.

All reports of the negotiations before the close were based on the assumption that an attempt was being made to compromise between the British figure of -L-20,000,000 a year and the French offer of -L-10,000,000, partly in reparations.

What was disclosed after a tentative agreement was reached was that all last week's negotiations had been conducted on the basis of a reduction of terms by Winston Churchill--an offer to accept -L-16,000,000 a year for 62 years instead of -L-20,000,000 a year in annual payments from France, and a counter offer by Joseph Caillaux of -L-10,000,000 a year for 62 years, no part of which was conditioned on German reparations payments, all being guaranteed by France.

The Tentative Settlement. The actual terms agreed on called for payment of -L-12,500,000 a year for 62 years guaranteed in whole by France and not conditioned on reparations payments. There were however, a number of other conditions :

1) A partial moratorium until 1930-.

2) Proportionately equal treatment by France of all her creditors. In other words if France pays any other nation more proportionately on her debt, then Britain also will receive more. It was in reply to a question whether this condition referred to America that M. Caillaux replied pregnantly: "Mais certainement!"

The Reaction. In British circles, feeling was bitter. It was said that Mr. Churchill had been outwitted by the luminous-eyed Caillaux, that the sum agreed on was altogether too low. The only consolation found was that the agreement was not final, the U. S. would undoubtedly demand better treatment, and French payments would undoubtedly be revised upward.

French opinion was more inclined to be pleased, but there were those of course who considered the settlement too high.

In the U. S. the feeling was that Messrs. Churchill and Caillaux had passed the buck to America, that the U. S. was to be made to appear the Shylock while England would profit equally by U. S. insistance on better terms, that the U. S. was to be placed in a position of holding up the world's debt settlement, that M. Caillaux could say to Mr. Mellon: "For every dollar extra you make us pay, it will cost us two--one to you and one to Great Britain, and we can't afford it." It was pointed out that the British settlement amounted to 2% interest for 62 years and then forgiving of the entire principal amount whereas the U. S. was insisting on 3 1/2% interest and repayment of the entire principal. It was calculated that if the U. S. granted terms like British's, she would receive only $90,000,000 from France instead of some $150,000,000 which is in proportion to what the U. S. has asked of other nations.

The Significance. As a settlement the London agreement last week amounts to nothing. It is almost sure to be upset by the U. S. negotiations at Washington late this month. But as a preliminary step to debt settlement it is important, chiefly because of its effect on the public in France and England. Having seen the -L-12,500,000 arrangement dangling before them, the English people will be more inclined to look with equanimity on any final agreement larger than that sum, but less than the -L-20,000,000 they expected. Similarly the French have learned that even to get a tentative agreement, they must better the terms they planned to offer.

Winston Churchill was perhaps not as much outdone by Caillaux as the figures of the settlement might make it appear. He secured a temporary offer unconditioned by reparations payments. In this he followed the example set by the U. S. in the Belgian debt funding agreement--making the debtor nation responsible for its borrowings regardless of Germany's capacity to pay under the Dawes Plan. In doing so he prepared the French for the same kind of an arrangement with the U. S.

The condition that Great Britain should receive as much proportionately from France as the U. S. may receive from the same source was inevitably forced on Mr. Churchill. If he made any fixed settlement with France, and the U. S. had afterwards made a better, his Government would have been instantly retired by the wrath of the British people.

The Future. If France can come to an agreement with the U. S., the road is paved for a Franco-British debt settlement. Two prospects open up dependent on the result of the Washington negotiations next month.

If Washington holds out for interest and full payment on the principal of its loans to France, there will probably be a deadlock, and last week's negotiations at London will come to naught.

The question will be: How large a concession will the U. S. make to France's capacity to pay? The British terms to France are not quite as unthinkable from the U. S. standpoint as the press has made them appear. Of course the U. S. will demand repayment of principal. But by a neat table it might be made to appear that the London agreement last week would provide for repayment of the French loans from England with interest at the rate of 1/2%. And similarly without the neat tables that were appended to the U. S.-Belgian debt agreement it might appear that the U. S. had agreed to accept 2.8% interest from Belgium and no principal. In brief, fixed payments over a given period of years may be considered as repayment of principal with lower interest, or as higher interest with no repayment of principal.

Bargaining is the thing. Principal and principal can be tucked into that capacious phrase "capacity to pay." The London bargain last, week is tailored to fit the Washington bargain--if it comes.

"The French have a commercial debt of -L-130,000,000 to Great Britain, already funded, payments on which will be made until 1930. The object of the partial moratorium is to defer the full body of War debt payments until after this commercial settlement has been completed.