REPORT OF THE AGENT GENERAL
FOR REPARATION PAYMENTS
BERLIN, June 10, 1927
.
X. Conclusion
The events of the last six months, taken by themselves, have
little ground for general conclusions as to the working of he
Experts' Plan. These months, however, have provided an unusually
active record of the play and counter-play of various forces,
and in that sense they have been rich in experience. The observation
of these forces, and their detailed examination in the foregoing
pages will, it is hoped, throw light on the development of the
Plan and perhaps teach some lessons of importance for the future.
The Plan of the Experts sought above all to reduce the problem
of reparations to a practical and business-like programme under
which, instead of unsettling and retarding the reconstruction
of Germany and of Europe, reparation payments might become a positive
influence for stability and economic recovery. The Plan aimed
to re-establish Germany as a going concern and to provide a fair
trial, under conditions of security and mutual confidence, of
the ability of Germany to pay and of the capacity of the creditor
Powers to receive reparations. Experience, and experience alone,
would prove what was practicable.
Previous Reports have summarized the results of the first two
years of the Plan, which may be described as years of stabilization
and of reconstruction and of encouraging recovery. The present
Report records the further progress that has been made since the
beginning of the third Annuity year, both in the field of reparation
payments and in the economic recovery of Germany. The third Annuity
year itself takes the Plan into what the Experts termed the transition
period, following after the so-called preliminary period of economic
rehabilitation. In this transition period reparation payments
increase materially. and Germany begins to make more substantial
contributions from the budget, in accordance with what the Experts
believed would be her progress in recuperation.
The operation of the Plan itself has proceeded normally throughout
the period covered by this Report. Germany has continued loyally
and punctually to make the agreed gold mark payments to the Agent
General for Reparation Payments, and transfers have gone forward
regularly and currently under the auspices of the Transfer Committee,
without interfering with the stability of the German exchange.
The amounts involved have risen gradually, in accordance with
the agreed schedule of payments, and the transfers to the Powers,
while distributed among deliveries in kind, Reparation Recovery
Act payments, and transfers in cash, have been made in increasing
proportions in foreign currency payments.
The Report also reviews the course of the German economy and
describes in detail the changes that have taken place in the last
six months. In general, the progress has been steadily upward,
though not uniform in all industries or all sections and by no
means free from difficulty. Heavy unemployment still continues
notwithstanding substantial reductions in recent months, but all
the evidence available points to increased production and consumption
and to some improvement in the standard of living. Savings also
continue to grow. But the great volume of imports from abroad,
with no corresponding growth of exports, nevertheless suggests
the question whether Germany may not recently have been over-
developing internally, without making the progress in ability
to compete effectively in the markets of the world which is so
necessary to the development and expansion of her foreign trade.
The large excess of imports over exports in the past six months
has been one of the principal causes of the recent drain on the
Reichsbank's resources and of the approach of the German exchange
toward the gold export point. The whole period, moreover, has
been under the influence of the Reichsbank's credit policy, which
has had to be determined under conflicting influences and has
not been directed primarily toward the protection of its foreign
balances. The Reichsbank as the guardian of the German exchange
has ample resources and authority and the stability of the German
currency remains fully assured.
In the sphere of the German budget, the expectations of the
Experts regarding revenues have been fully justified, and notwithstanding
the reductions of taxation the budgets for the financial years
1926-27 and 1927-28 show increases in the revenues exceeding the
increases in the budgetary contribution under the Experts' Plan.
But expenditures generally, including payments to the States and
communes, have risen sharply until expenditures now exceed revenues,
and for the first time since the Experts' Plan came into operation
borrowing has been necessary to balance the budget of the Reich.
The surplus funds of former years have thus given way to that
more usual condition of budgets, in which economy and rigid scrutiny
of new undertakings, on the one hand, and close study of tax yields,
on the other, are necessary to preserve a balance. At the same
time, the essential stability of the budget remains unimpaired,
and there is no reason to doubt that it can be successfully maintained,
if the German Government will take the normal precautions that
are necessary in its own interest.
The experience of these months, in which the German economy
has undergone so many changes and on the whole improved, serves
to emphasize again the underlying conception of the Plan itself,
that what is in the interest of the German economy is also in
the interest of the execution of the Plan. The Experts in their
original recommendations pointed out that their Plan must find
its own guaranty "in the fact that it is to the interest
of all the parties to carry it out in good faith." The. relations
of good faith and mutual understanding that have prevailed since
the beginning of the Plan, and the continuing interest of the
German Government and the creditor Governments in its regular
progress, provide the strongest foundation for its further development.
Respectfully.
S. PARKER GILBERT.
Agent General for Reparation Payments.
Exhibits
I. Composition of the German Annuity under the
Experts' Plan
II. Revised Distribution of Second Annuity, showing
Shares of the Respective Powers
III. Revised Distribution of Third Annuity, showing
Shares of the Respective Powers
IV. Balance Sheet of the Agent General for Reparation
Payments, as of May 31, 1927
V. Statement showing Receipts and Payments of
the Agent General for Reparation Payments during the Period September
1, 1926-May 31, 1927
VI. Distribution among the Powers of Amounts
Available for Expenditure during the Period September 1, 1926-May
31, 1927
VII. Analysis of Payments and Accounts Payable
for the Period September 1, 1926-May 31, 1927, according to Category
of Expenditure
VIII. Summary of Personnel, as of May 31, 1927
IX. Statement of Condition of German External
Loan, 1924, as of April 15, 1927
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