We are strictly entitled under the Armistice Terms to these 36 milliards; and if prudence recommends an abatement below that figure, such abatement can properly be made, on terms, by those and those only who are entitled to the claims. I estimate with some confidence that this sum of 36 milliards is divisible between the Allies about in the proportions shown in the table below.
The payment by Germany of 5 per cent interest and 1 per cent sinking fund on this total sum is not, in my judgment, theoretically impossible. But it could only be done by stimulating her export industries in a manner injurious and irritating to Great Britain, and by imposing on her Treasury a financial problem of such difficulty that it would tend to unsound finance and to weak, unstable Governments. Even though this payment is theoretically possible, I do not think that it is practically obtainable over a period of thirty years.
| Damage. | Belgian Debt. | Total. | |||||||
| British Empire | 9 | 2 | 11 | ||||||
| France | 16 | 2 | 18 | ||||||
| Belgium | 3 | . . | 3 | ||||||
| Italy | 1 | . . | 1 | ||||||
| United States | . . | 2 | 2 | ||||||
| Others | 1 | . . | 1 | ||||||
| 30 | 6 | 36 | |||||||
I recommend, therefore, that, as a separate arrangement from the Revision of the Treaty as above, the British Empire should waive the whole of their claims, with the exception of 1 milliard gold marks reserved for a special purpose explained below, and should undertake to square the claims of Italy and the minor claimants by cancelation of debt owing from them; thus leaving Germany to pay 18 milliards to France and 3 milliards to Belgium (on the assumption that the United States also would forego the trifle due to her). This sum should be discharged by an annual payment of 6 per cent of the sum due (being 5 per cent interest and 1 per cent sinking fund) over a period of thirty years. With the assistance of minor measures to ease the opening period, it is reasonable to suppose that this amount could be paid without serious injury to any one.
In so far as it proves convenient to discharge this liability in goods, and not in cash, so much the better. But I see no advantage in laying stress on this. It would be wiser to leave Germany to find the money as best she can, any payment in goods being by mutual agreement, as in the Wiesbaden plan.
It may lead, however, to great anomalies to fix the annual payments in terms of gold over so long a period as thirty years. If gold prices fall, the burden may become intolerable. If gold prices rise, the claimants may be cheated of their expectations. The annual payment should be adjusted, therefore, by some impartial authority, with reference to an index number of the commodity–value of gold.
The other Treaty change relates to the Occupation. It would promote peaceable relations in Europe if, as a part of the new settlement, the Allied troops were withdrawn altogether from German territory, and all rights of invasion for whatever purpose waived, except by leave of a majority vote of the League of Nations. But in return, the British Empire and the United States should guarantee to France and Belgium all reasonable assistance, short of warfare, in securing satisfaction for their reduced claims; whilst Germany should guarantee the complete de–militarization of her territory west of the Rhine.
II. The Satisfaction of the Allies
France.—Is it in the interest of France to accept this settlement? If it is combined with further concessions from Great Britain and the United States by the cancelation of her debts to them, it is overwhelmingly in her interest.
What is her present balance–sheet of claims and liabilities? She is entitled to 52 per cent of what Germany pays. On p. 75 I have calculated what this will be under the London Settlement, (a) on the basis of German exports at the rate of 6 milliards, namely 3.56 milliard gold marks; and (b) on the basis of exports at the rate of 10 milliards, namely 4.60 milliard gold marks. Franceʼs share, therefore, is 1.85 milliards per annum on assumption (a), and 2.39 milliards on assumption (b). On the other hand, she owes the United States $3634 million and the United Kingdom £557 million. If these sums be converted into gold marks at par, and the annual charge on them is calculated at 5 per cent for interest and 1 per cent for sinking fund, her liability is 1.48 milliards per annum. That is to say, if Germany pays in full and if the more favorable assumption (b) is adopted as to the growth of her exports, the most for which France can hope under existing arrangements is a net sum of .91 milliard gold marks (£45,500,000 gold) per annum. Whereas under the revised scheme she will not only be entitled to a greater sum, namely 1.08 milliard gold marks (£54,000,000 gold) per annum; but, inasmuch as she will be accorded a priority on Germanyʼs available resources, and as the total charge is within Germanyʼs capacity, she may reasonably expect to be paid.