Lausanne Formula

Quashing their quarrels and quibbles, Prime Minister James Ramsay MacDonald and Premier Edouard Herriot stood shoulder to shoulder in Lausanne last week, entreating Germany to accept an ingenious formula.

To this formula the Briton and the Frenchman had won over Japan, Italy, Belgium. Terms:

1) Let the creditor powers accept, in lieu of Reparations, bonds to be issued by Germany with a face value of four billion marks ($952,000,000).

2) Let the Powers agree to hold these bonds for a minimum of three years before attempting to sell them to the world public, after which Germany would pay on the marketed bonds 5% interest.

3) Let the governments of Germany and her creditors sign an agreement to this effect at Lausanne but refrain from ratifying it by their several parliaments until after the U. S. elections and until it becomes clear whether the U. S. will cancel in War Debts an amount proportional to the relief afforded Germany by the formula.*

Von Papen's Dream. Exceedingly ingenious and in the trickiest tradition of European diplomacy, the MacDonald-Herriot formula appeared to settle everything while actually settling nothing. It fitted the U. S. State Department's demand that Europe must reach a final settlement of Reparations without reference to War Debts, yet if the next U. S. President and Congress prove reluctant to cancel all or part of what Europe owes, the Allies or any one of them can regain a completely free hand, merely by failing to ratify the MacDonald-Herriot formula.

Diplomatically speaking the formula was a masterpiece. But would Germany sign? The decision was not really up to Chancellor von Papen at Lausanne, but to his "Cabinet of Monocles" at Berlin, dominated by intriguing Lieut.-General Kurt von Schleicher, Minister of Defense. Last week the Government spokesman at Berlin made the Chancellor look like a figurehead, and a silly one at that, by flatly disclaiming von Papen's amazing proposal at Lausanne for a Franco-German military alliance (TIME, July 4). "The Chancellor," snapped the spokesman, "was only voicing a personal dream."

Under orders from Berlin, Chancellor von Papen presently called on Scot MacDonald in Lausanne. He demanded that the MacDonald-Herriot formula, if signed, should become binding immediately upon its ratification by a majority of the signatory powers. In other words France must not be permitted to keep everything in suspense until after the U. S. elections by delaying her ratification. Secondly the Chancellor declared that the German bond issue could not be for more than two billion marks, half what the Allies demanded and 1/57 of what Germany agreed to under the Young Plan. Finally von Papen demanded the writing into the formula of a declaration that the bond issue would be in no respect an expiation of German "War guilt."

Herriot's Troubles. By the time Chancellor von Papen had made his difficult demands Premier Herriot was already back in France, summoned by a budgetary crisis at Paris and by the necessity of interring the last remains of Aristide Briand at Cocherel in Normandy. On his train, dashing to & from Cocherel, harassed M. Herriot discussed with trusted advisers what amounted to a revolt in the Chamber of Deputies against his Government's bill to balance the French budget by cuts of 5% in all expenditures. Up in arms against cutting their pensions were the Association of French War Widows, and their protests were not the loudest.

Poor M. Herriot, standing beside the humble grave Briand had desired, feelingly addressed the coffin thus: "I have never felt more deeply the worth of your counsel and your example than at the present moment during negotiations which I want to believe will contribute to the pacification of Europe and the world."

That same evening in Paris the haggard Premier said to newshawks: "If I am overthrown now it will be a catastrophe."

Should the Lausanne Conference end disastrously, observers remarked, that would be due in large measure to Franz von Papen's insistence on the doctrine of Calvin Coolidge: that War debts are in no way connected with Reparations. In France the knotting together of these two issues is an article of national faith. Premier Herriot well knew that his Cabinet could scarcely survive should he permit the knot to be cut at Lausanne.

* In Berlin banking circles it was declared that the German bonds might never be sold, that issuing them would be a mere gesture, that the real purpose of the Lausanne formula is to break to the world gently the complete cancellation of what Germany owes in Reparations over the next 56 years (about 27 billion dollars).

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