3. Germany to pay interest on the balance at 4 per cent for the present.
4. The sinking fund on the balance to vary with the rate of Germanyʼs recovery.
5. Germany, in part discharge of the above, to take upon herself the actual reconstruction of the devastated areas on any lines agreeable to the Allies, and in addition to make deliveries in kind on commercial lines.
6. Germany is prepared, “up to her powers of performance,” to assume the obligations of the Allies to America.
7. As an earnest of her good intentions, she offers $250,000,000 in cash immediately.
If this is compared with Dr. Simonsʼs first offer, it will be seen that it is at least 50 per cent better, because there is no longer any talk of deducting from the total of $12,500,000,000 an alleged (and in fact imaginary) sum of $5,000,000,000 in respect of deliveries prior to May 1, 1921. If we assume an international loan of $1,250,000,000, costing 8 per cent for interest and sinking fund,[15] the German offer amounted to an immediate payment of $550,000,000 per annum, with a possibility of an increase later in proportion to the rate of Germanyʼs economic recovery.
The United States Government, having first ascertained privately that this offer would not be acceptable to the Allies, refrained from its formal transmission.[16] On this account, and also because it was overshadowed shortly afterwards by the Second Conference of London, this very straightforward proposal has never received the attention it deserves. It was carefully and precisely drawn up, and probably represented the full maximum that Germany could have performed, if not more.
But the offer, as I have said, made very little impression; it was largely ignored in the press, and scarcely commented on anywhere. For in the two months which elapsed between the First and Second Conferences of London there were two events of great importance, which modified the situation materially.[17]
The first of these was the result of the Silesian plebiscite held in March 1921. The earlier German Reparation offers had all been contingent on her retention of Upper Silesia; and this condition was one which, in advance of the plebiscite, the Allies were unable to accept. But it now appeared that Germany was in fact entitled to most of the country, and, possibly, to the greater part of the industrial area. But this result also brought to a head the acute divergence between the policy of France and the policy of the other Allies towards this question.
The second event was the decision of the Reparation Commission, communicated to Germany on April 27, 1921, as to her aggregate liabilities under the Treaty. Allied Finance Ministers had foreshadowed 300 milliard gold marks; at the time of the Decisions of Paris, responsible opinion expected 160–200 milliards;[18] and the author of The Economic Consequences of the Peace had suffered widespread calumny for fixing on the figure of 137 milliards,[19] as being the nearest estimate he could make. The public, and the Government also, were, therefore, taken by surprise when the Reparation Commission announced that they unanimously assessed the figure at 132 milliards (i.e., $33,000,000,000).[20] It now turned out that the Decisions of Paris, which had been represented as a material amelioration of the Treaty which Germany was ungrateful not to accept, were no such thing; and that Germany was at that moment suffering from an invasion of her territory for a refusal to subscribe to terms which were severer in some respects than the Treaty itself. I shall examine the decision of the Reparation Commission in detail in Chapter IV. It put the question on a new basis and the Decisions of London could hardly have been possible otherwise.