Lausanne Peace on Earth

Most credit for inducing the Lausanne Conference to come to some sort of an agreement last week belonged to snowy-haired, silver-tongued James Ramsay MacDonald who suffered agonizing headaches from overworking his weak eyes. When the long grind of 24 days ended, climaxed by 60 hours of almost ceaseless negotiation, statesmen and correspondents gave way completely to their emotions.

"C'est fait! C'est fait! C'est fait!" cried Premier Herriot of France groggily. "It's done! It's done! It's done!" Espying a blonde German newspaper woman and a brunette French one, he hugged them both at once, then kissed each on both cheeks. Seasoned correspondents threw facts to the winds, wrote into the leads of their dispatches that "Europe's Reparations problems were settled finally and completely today" (United Press); "France and Germany have reached a complete agreement" (Associated Press) ; "Europe settled her Reparations dispute today" (Universal Service).

Such was not the case. The published agreement reached and signed at Lausanne is tentative. Moreover the signatories made a "gentlemen's agreement," the text of which was kept secret for 24 hours. In effect these two agreements: 1) Provide publicly a moratorium on the Reparations which Germany owes the Allies until after the coming U. S. elections and 2) create quietly a European "United Front" to force cancellation by the U. S. of most of what the Allies owe in War Debts, after which they will proportionately cancel Germany's Reparations debt to them.

The cost of cancellation to each U. S. man, woman & child would be about $78 if paid today in taxes.

One of the few newspapers in the world to state the facts squarely and at once was London's Financial News which declared, "There is reason to fear America may not take too kindly to an arrangement which so blatantly passes the buck to her and which she may regard as little short of a conspiracy to defraud."

"Peace on Earth. . . ." Such are the facts, but the motives and emotions of the statesmen at Lausanne last week did them credit. So many conferences since the War have ended in nothing at all. It was an historic moment when the Chancellor of Germany, having battled the whole night for a clause wiping out what his people call the "War guilt lie," finally gave in at 3 p. m. saying:

"You have won a great victory, my French friend."

It was an inspiring moment when Premier Herriot, warmly clasping Chancellor von Papen's hand exclaimed:

"We French have listened with emotion to the story of the sufferings of the Ger man people. . . . The Frenchman who is speaking to you desires that we be united in a common thought, in those noblest of words, Peace on Earth, good will to men!"

It was a great moment when the rich and moving voice of Scot MacDonald solemnly proclaimed: "We have reached, I believe, the best conclusion that could be reached for world peace, especially for European peace!"

Outstanding Achievement, If the Lausanne agreement is ratified by Great Britain, France, Germany, Japan, Italy and Belgium--a very big IF--the outstanding achievement will be to reduce German Reparations by 99%, to a payment of 1-c- to $1.

Naturally not all this scaling down was done by the Lausanne Conference. The process began soon after the late Baron Cunliffe, onetime Governor of the Bank of England (1913-18), officially informed Prime Minister David Lloyd George in 1919 that Germany could pay 116 billion dollars. This was a statement so obviously absurd that a year later the Boulogne Conference tentatively set 64 billions as what is usually considered the "original sum" of Germany's debt in Reparations.

One year later the Germans, through President Harding, offered to pay 48 billions on condition that some of their surrendered territories be returned. This offer the Allies spurned. A few days later, in April 1921, the Reparations Commission decided that 32 billions would be "fair."

This was followed by the Dawes Plan that Germany pay 595 millions per annum for an indefinite number of years (1924). Great feature of the ensuing Young Plan was that it purported to fix 58 1/2 years definitely as the time over which Germany would be required to pay a total of some 27 billions (TIME, June 10, 1929).

Soon afterward The Hague Conference made Philip Snowden a world figure (TIME, April 19, 1929, et seq.) and "the final settlement of Reparations on a business basis at The Hague" made it possible to sell 96 millions of Germany's obligation to the U. S. public in bonds enthusiastically subscribed above par. This year these so-called "Young Plan Bonds" (German Government 5 1/2s) have sold as low as 24 1/4 but climbed little by little to 39 fortnight ago and to 49 last week.

The Lausanne settlement is supposed to provide for repayment of these bonds and scales down Reparations to a final total of only 714 millions--1-c- each on the original 64 billion dollars of 1920 which was in itself a cut of nearly 50% from the Governor of the Bank of England's first fantastic figure of 116 billions. In 1918 Mr. Lloyd George won Britain's election with the slogans "Make Germany Pay The Whole Cost Of The War!" and "Hang The Kaiser!"

Minor Achievements of the Lausanne agreement last week were to provide: 1) A total moratorium on Reparations and inter-allied debts until the settlement is ratified by the signatories or until one signatory gives formal notice of intention not to ratify. 2) Final payment by Germany not in cash or in kind but in 5% bonds, to be sold to the world public after July 8, 1935, all bonds remaining unsold in 1947 to be destroyed. 3) Security already given to the Allies by Germany in the form of stock certificates of the German State Railways to be returned to the German Government "with the coupons attached."

This interesting concession to Germany enabled Chancellor von Papen to exult: "Germany has regained her economic independence, thus bringing a New Era to Germany, Europe and the World!" That is, the so-called "mortgage" on the German State Railways is to be lifted IF. ...

The IF in the Lausanne settlement is the gentlemen's agreement, announced at first to be a dead secret. It was forced into the open by world curiosity. Full gentlemanly text:

"The Lausanne agreement will have final effect only after ratification by the creditor powers as provided in the agreement. This ratification will not be effected until a satisfactory settlement has been reached between them and their own creditors. The creditor powers will have an opportunity to explain the situation to their respective Parliaments but no reference to that must be made in the agreement with Germany.

"Consequently, if a satisfactory settlement is reached for debts, the creditor governments will ratify, and the agreement with Germany will then have its full effect. But if such a settlement is not obtained, the agreement with Germany will not be ratified and a new situation will arise and the interested governments will confer on what is to be done. In such an event, the legal position is that which existed before the Hoover Moratorium.

"The German Government will be notified of this agreement."

Give up Colonies? Assistant U. S. Secretary of State William Richards Castle Jr. officially stated that ''the American Government is pleased," but Congressmen & Senators who spoke out on the Lausanne settlement last week mostly spoke against cancelling another cent of the nine billions which Europe owes the U. S. in War Debts. Such potent voices as those of Senator Borah (Rep.) and Senator Glass (Dem.) were not heard last week. The Senate tabled and ignored a resolution by Oklahoma's Thomas Pryor Gore (Dem.) demanding whether "the European Powers which are indebted to the United States and which received, as a result of the War, an allotment of Germany's colonial possessions would prefer to transfer such territory ... to the United States in payment ... in lieu of ... cash."

The British answer to all such proposals was long ago enshrined in that ringing Imperial formula: "The King's subjects are not for sale!"

"The Great Achievement." President Hoover, who eschews the word "cancellation" but openly favors scaling down what Europe owes "on a basis of capacity to pay" must have read with satisfaction the New York Herald Tribune's leading Lausanne conference editorial last week entitled "The Great Achievement." "Already," cried the Herald Tribune, "a sense of enormous relief, of hope and of confidence has swept around the world."

This did not square with the fact that Manhattan's Stock Exchange -- which boomed at news of the Hoover Moratorium last year -- drifted fractionally lower last week. In Germany, with a General Election set for July 31 and with Hitlerites slated to make heaviest gains, the Hitlerites blatantly repudiated the Lausanne settlement last week, perhaps for electioneering purposes.

In Berlin 25,000 brownshirts jeered what fascist orators called "von Papen's incomprehensible weakness." "This treaty," summed up Adolf Hitler, "will not be worth more than three marks (71-c-) inside of six months."

The Hearst of Germany, her famed "Little Man In Blue," Dr. Alfred Hugenberg, turned his Nationalist press, which originally supported Chancellor von Papen, against him. Only the German Socialists, and they only because they are Internationalists, wholeheartedly supported von Papen. The Chancellor who recently suppressed the Socialist Vorwaerts for five days for publishing a scurrilous cartoon (TIME, July 11), was praised for his work at Lausanne in the first issue of Vorwaerts to appear last week.

Naturally leading bankers and financiers, in both Germany and the U. S., threw their influence behind the Lausanne settlement, hoping for cancellation all round and a fresh start. Thus Dr. Hans Luther, President of the German Reichsbank, telegraphed congratulations to Chancellor von Papen, and former President of the Reichsbank Dr. Hjalmar Schacht telegraphed the single word, "Bravo!"

The German masses, on the other hand, have so often heard their leaders tell the world that Germany can pay nothing that Chancellor von Papen's consent to pay something was sullenly received. In Paris vehement Deputies and Senators vied with each other in telling correspondents that the U. S. can expect to receive from France payments proportional to what France receives from Germany and not one sou more. In Rome the official Giornale d'Italia said: "Lausanne was the beginning, not the end. . . . The fate of the Lausanne agreement depends on the attitude of the United States, from whom European debtors await an equivalent revision of their financial position."

Prevaricating like a gentleman and a sportsman, British Chancellor of the Exchequer Neville Chamberlain said on his return from Lausanne to London: "Reparations have been swept away and we have begun now a new era!"

Seal of 1525. The final session at Lausanne was held with all bulbs blazing in the white & gold ballroom of the Hotel Beau-Rivage. The Lausanne agreement was signed and then impressed.with the Great Seal of the City of Lausanne, dating from 1525.

Annex V of the agreement provides that the League of Nations shall invite the signatories and the U. S. to a "conference on monetary and economic questions" (i. e. War Debts) to be held "at a convenient date and at a place to be fixed [not necessarily Geneva]."

This arrangement plays into the hands of U. S. foes of the League of Nations and of cancellation. In Congress and out they can be counted on to raise the alarm that the League, of which the U. S. is no member, will stage and supervise the conference at which World pressure will be put on the U. S. virtually to cancel War Debts.

Still wracked by a terrible headache Scot MacDonald was unable to write or dictate his final speech as Chairman of the Lausanne Conference. At the last moment he rose from bed, signed for Great Britain and declared ex tempore, "Our agreements must have response elsewhere. [They] must be placed within a world framework!"

"Inconceivable!" Belief that the published text of the "gentlemen's agreement" is a red herring to distract attention from some understanding still more devious was voiced cautiously in London by former Chancellor of the Exchequer Winston Churchill and bluntly in Washington by Senator Kenneth McKellar (Dem.) who said:

"It is inconceivable that our former European allies would have made this tentative agreement among themselves and with Germany largely cancelling German reparations unless they had assurances from Mr. Hoover himself that the debts due the United States would be cancelled. . . . The facts call for an immediate explanation from the President himself.

The President remained silent. At Washington, Secretary Stimson emphatically denied that U. S. representatives had taken any part whatever in the negotiations leading up to the "gentlemen's agreement." (The House of Commons presently heard exactly the opposite from Chancellor of the Exchequer Chamberlain who said "we have been in touch at Lausanne not only with European representatives but with representatives of the United States. . . .") Twenty-four hours after the Lausanne settlement and gentlemen's agreement had been published in full. Chairman Borah of the Senate's Foreign Relations Committee said: "We have something yet to learn. I am going to wait a while to get the facts." The Senate's lone Farmer-Laborite Minnesota's Shipstead exploded: "If any official of the United States Government has led agents of foreign governments to believe we will cancel debts owed to us for cancellation of Reparations he is very nearly guilty of treason to the United States! He certainly is guilty of swindling foreign governments."

London throngs cheered returning Scot MacDonald who went first to his oculist, second to Buckingham Palace for an audience of 70 minutes. Premier Herriot declared emphatically on reaching Paris: "In case the United States does not agree to debt reduction, France will remain in her previous position. That means that the entire reparations problem would have to be gone over again. That was the extent of our engagement at Lausanne."

* This was later repeated by Premier Herriot in a world-wide radiocast.

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