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We were taxed at 17 guineas a head as compared with 97. a head in France. Taxation was twice as heavy here as in the United States.

In these circumstances it was impossible to ask the British taxpayer alone to shoulder the burden of the payment of war debts. We must turn our back with regret upon things which perhaps all the world was waiting for, reflecting if only it had been possible that the nations who fought in the war side by side, who shared the same privations, faced the same trials, endured the same agonies, had the same losses-if only they had been willing to regard their subscriptions to the cause of the war as contributions to our common success, we might have been able to rid the world of many causes of irritation and planted in the heart of humanity a new and inspiring hope.

Mr. Asquith then expressed grave misgiving as to the issue of the Balfour Note, doubting whether it was politic or opportune. He earnestly hoped that those misgivings might be falsified by the result. Reparations, he said, must be scaled down to what was really payable. We ought to be ready to forego our share and to remit what was due to us.

The Prime Minister then announced the attitude of the Government on the question of reparations. While realising that it was possible to press Germany too hard and drive her to despair, he uttered a warning as to under-estimating her capacity to pay. World recovery would come sooner or later, and he emphasised the folly of permitting Germany to be in a better position under the new conditions than this country or our Allies. He announced that, at the forthcoming International Conference on the subject, he would resist any proposals which would simply have the effect of increasing the disintegration of Europe without securing anything for ourselves. He expressed

a doubt as to whether the matter could be settled at the Conference since there were too many difficulties and complications. They had to judge the capacity of Germany to transmit wealth across her frontier, but whatever was done he trusted that we should be able to march together, France, Belgium, and ourselves, and he undertook that the British Government would give reasonable and sympathetic consideration to every claim put forward by devastated France. But, he added, when the taxpayers of this country were bearing such a crushing burden we could not go there and say we would look after the interests of everybody, and see that everybody got fair play except the people of our own land. Dealing with the possibility of driving Germany to despair, the Prime Minister said that, whether she threw herself into the hands of the reactionaries or the communists there was little to choose. There would be lots of trouble but no cash. A revolutionary Germany right in the centre of Europe was a very different thing from a revolutionary Russia. It had been a blessing to Europe that the first outburst of communism had taken place in Russia. In that respect

1922.]

International Conference on Reparations.

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Lenin and Trotsky had been the saviours of society. In the case of Germany it would be a revolution in a well-organised country, with a highly trained intelligent population, and would constitute a real peril to the world.

The International Conference on reparations referred to above opened on August 8 at No. 10 Downing Street. After the usual welcome the Prime Minister said he thought there would have been some advantage in awaiting the report of the Reparation Commission on the present situation in Germany, and that the British Government would, in some respects, have preferred to do so, but inasmuch as other Governments had thought an immediate meeting necessary they had complied.

M. Poincaré, the French Prime Minister, said he thought the meeting important on account of two new facts, namely, the German demand for a complete moratorium and the Balfour Note. He gave a general review of the position from the point of view of France. He said that the Treaty of Versailles was being less and less executed. With regard, for instance, to trials of war criminals, France felt that the measures taken by Germany were most inadequate. With regard to disarmament, they had reports of a very unsatisfactory character, and with regard to reparations they were having difficulties of many kinds owing to the fact that Germany-who was called upon under the Treaty to pay war pensions and reparations for material damage was not actually paying anything. The assessment of Germany had been constantly reduced by the Reparation Commission, a partial moratorium had already been granted to her, and she was now asking for a complete moratorium to the end of 1924. The position of France, said M. Poincaré, was that she was getting nothing at all. She had actually spent eighty milliards of francs upon reparations which should have been paid by Germany, the interest on this huge sum creating a deficit on the ordinary French Budget, and the result was a critical financial situation for France. He defended France from the charge of being imperialist or desiring to deal unfairly with Germany. Replying to the question as to why France did not reduce her armaments, he said that she was not yet satisfied regarding her security, and the guarantees originally given to her were lacking. Taxation could not be increased since the ten devastated Departments were unable to pay anything, and as regards direct taxation there was not a large number of very great fortunes to draw upon. He insisted that Germany's position was due to her own fault. She had gone in for reckless expenditure on waterways, railways, and subsidies, and had inflated her currency without scruple. The French view was that a moratorium should not be accorded to Germany unless productive guarantees were given to the Allies.

Mr. Lloyd George, who spoke next, said that the question could not be dealt with fairly if it were regarded as affecting only one or two Allies and not the whole of them in almost

equal measure. He admitted that France had suffered more grievously than any of the original Allies except Russia, but they had all suffered greatly, and he gave figures to show that the cost of the war had been heavier to Great Britain than to any other belligerent. As to devastation, no one underestimated the injuries done to France, but our trade had also been completely devastated. Our burden, continued Mr. Lloyd George, had been very great unemployment, the total population affected by it in this country being four or five millions, who had to be supported by the Exchequer and by local grants. The failure of Germany, therefore, did not concern one or two Allies alone. We had the heaviest taxation, the heaviest debt, and our burden was at least equal to that of the most heavily burdened of our Allies.

The next two or three days were spent in a detailed examination of the proposals of M. Poincaré, the terms of which, however, were not made public. A committee of experts studied them from the point of view of deciding whether they would produce cash, and a majority of the committee calculated that they would produce no extra cash from Germany at all. With regard to the suggestion that the Allies should establish a control over State coal mines and forests, the Italians and Japanese agreed with the British that such measures would produce no cash and would be useless except as sanctions. The suggestion to establish a Customs line between the occupied area and the rest of Germany was regarded by all the Allies, except France, as undesirable. This was the case also with a suggestion that the Allies should take a 60 per cent. share in factories. It was considered that such a guarantee would produce no cash at all, since the only manner of taking over a 60 per cent. share would be to compel the German Government to buy out the present proprietors, and that could only be done by printing fresh paper money, with a resulting aggravation of the currency situation in Germany.

Owing to the difference of opinion in the committee of experts as to the practicability of M. Poincaré's proposals, British counter-proposals were formulated and subsequently modified in the course of conversations between the Prime Ministers. These counter-proposals included a moratorium for Germany up to the end of 1922, and the fixing of the annual payments thereafter at such an amount not exceeding 26 per cent. of German exports as the Reparation Commission might think proper, with a view to an early loan by Germany. But the committee of experts were no more able to agree on the proposals of the British Government than they had been on those of the French.

When the Conference resumed on August 14, and it was clear that agreement could not be reached, M. Poincaré said. that he was prepared to accept a suggestion that the whole discussion should be adjourned until the various countries had

carried out their funding negotiations with the United States, and their delegations had returned, provided that no moratorium were granted to Germany in the meanwhile. Mr. Lloyd George thereupon said that he saw no necessity for them to decide whether there should be a moratorium or not. He was quite prepared to leave it to the Reparation Commission, and he repeated the proposals of the British Government as follows: (1) to adopt the Italian suggestion of an adjournment until the latter part of the year; (2) to leave the question of whether there should be a moratorium or not to be decided by the Reparation Commission; (3) to agree that the guarantees already demanded by the Committee of Guarantees, and accepted by the German Government, should be applied immediately; (4) Great Britain would undertake to make no claim of interest or capital on the Allied debtors pending the meeting at the end of the year.

These proposals were accepted and supported strongly by all the Allies except M. Poincaré. The position taken up by France was that there could not be any moratorium granted to Germany without fresh guarantees. Mr. Lloyd George said that he could not agree to an adjournment without a moratorium, which would mean giving the Reparation Commission instructions that no moratorium was to be granted. The whole reason of the meeting of the Allies at the present moment was the general belief that Germany could make no more immediate payments. They had been discussing fresh guarantees on the assumption that a moratorium was necessary, and it seemed quite idle to go back now and settle upon an adjournment with the moratorium absolutely barred. Great Britain disapproved of the fresh guarantees suggested, not out of any tenderness for Germany, but because she was convinced that these guarantees would defeat their own object. Failing agreement the British Government stood by the Treaty of Versailles, and had therefore suggested that the question of the moratorium should be referred to the Reparation Commission as laid down in Article 234 of that Treaty; or, failing any agreement as to that, the whole subject should be referred to the League of Nations. As all these proposals had failed to secure assent, he was afraid that they must agree to disagree. All the others present took the same view, and M. Poincaré said that he would have to consider the situation with his Government. After the discussion of one or two other matters the Conference then broke up. The immediate result of this disagreement was a sudden renewed collapse of the Exchange in Berlin; the mark, which stood at 862, rapidly went down to 920, and then fluctuated wildly between 1,000 and 1,100.

The subject was not again discussed by the House of Commons before the adjournment. The only remaining subject of political importance to be recorded was the announcement, on August 3, that the Government had decided to adopt a scheme

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submitted by the Air Ministry providing a force of 500 machines for home defence at an increased cost of 2,000,000l. per annum. The Prime Minister explained that 900,000l. of the 2,000,000l. would be found by economies in the estimates of the Air Ministry. He added that the inquiries of the Cabinet Committee on economy in the fighting Services had advanced sufficiently far to enable him to state that the addition to the Air estimates would not prevent a reduction in the total estimates of the three fighting Services for the year 1923-24. These decisions would not prejudice a further expansion of the Royal Air Force if later on this should be found to be necessary to our national security. The question would be considered in the light of the financial situation next year and of the air policy adopted by other

Powers.

On the motion for the adjournment of the House of Commons on August 4, Mr. Lloyd George surveyed the NearEastern situation, making a pronouncement strongly in favour of the Greeks. He claimed that Turkey had done the worst disservice any country could have done to the cause of the Allies in 1914. She had brought about the collapse of Russia and Rumania and had prolonged the war by about two years. He argued that the responsibility for the defeat of Turkey was ours, and therefore the supreme responsibility for peace must be ours. We had the right to say that we would make no peace that would place hundreds of thousands of poor helpless persons at the mercy of people who had been guilty of the outrages and deportations of Pontus. There must be some guarantee and an effective guarantee.

He took the line that Great Britain could not be accused of giving the Greeks preferential treatment because we were defending Constantinople, which otherwise could be taken by the Greeks in a few hours, and were therefore preventing an immediate decision which the Greeks could force if they were allowed to wage war at their full strength. He said that all this country wanted was a just peace, and that whatever happened there must be efficient and adequate protection of the minorities as an essential part of any settlement Great Britain could accept. Our business was to hold the balance justly and fairly between both parties. It was not a question of Mussulman and Christian. Supposing the Armenians had had control of that sector of Asia Minor, and had committed those atrocities, we should have been bound to intervene. It was our desire to bring about peace. About a year before the end of the war a definite offer to Turkey was made and it was refused, and now that she had been completely beaten she could not receive the same terms. The position was this: there was a war between Greece and Turkey and we were defending the capital of one of the parties which would otherwise be promptly captured by the other. The only way by which Greece could now arrive at a decision was by marching through

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