D 649 
 .G3 S3 
 Copy 1 
 
LIBRARY OF CONGRESS 
 
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 020 913 724 
 
 Metal Edse. Inc. 2006 RA.T. 
 
D 649 
 .G3 S3 
 Copy 1 
 
 
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 REPARATIONS 
 
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 THE CONTRACT MADE 
 BY GERMANY AND HER 
 ABILITY TO FULFILL IT 
 
 1 
 
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 1 
 
 By }. A. M. de SANCHEZ 
 
 CHIEF, ECONOMIC DIVISION, 
 
 FRENCH COMMISSION IN THE 
 
 UNITED STATES 
 
 1 
 
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 SIXTY-FIVE BROADWAY 
 NEW YORK 
 
MtutumiiteauautKUSSH 
 
 LIBRARY Of C0N(^KE§§ 
 
 ftECEIVED 
 
 0CTni921 
 
 DOCUMENTS D.Vi3tON 
 

 Reparations 
 
 After more than two years of argument and recrimina- 
 tion, the gist of which it is unnecessary to pass in review 
 here, Germany signed early in May of this year an agree- 
 ment to Hquidate in full the Reparations bill presented her 
 by the Reparations Committee acting under the Authority 
 vested in it by the Treaty of Versailles. 
 
 The terrns of this contract are given in full at the end of 
 this pamphlet. 
 
 As this agreement indicates, Germany is obliged to de- 
 liver to the Reparations Commission bearer bonds for the 
 total amount of her debt of 132 billion gold marks. The 
 Reparations Commission, however, will only issue bonds to 
 the value of 50,000,000,000 marks gold in 1921. Germany 
 undertakes to meet an annual charge of 6 per cent or 
 3,000,000,000 gold marks on these bonds from the date of 
 their issue. Of this 6 per cent charge 5 per cent will be 
 devoted to the payment of interest on whatever bonds are 
 outstanding at any time, and 1 per cent to a sinking fund 
 for the redemption of the bonds by annual drawings at par. 
 
 The balance of the bonds, 82,000,000,000 marks gold, will 
 only be issued by the Reparations Commission when it is 
 convinced that Germany is able to provide for their interest 
 and sinking fund charges in addition to her annual liabilities 
 on the first series of bonds issued. In making this last pro- 
 vision the Reparations Commission obviously intended to 
 deprive Germany definitely of the contention that payments 
 were being required of her which she was incapable of 
 making. 
 
 Germany's ability to meet the payments demanded of 
 her in the present contract has been formally admitted by 
 both Chancellor Wirth and Herr Rathenau. These admis- 
 sions have but confirmed the contentions of those who have 
 studied Germany's present economic power and strangely 
 enough, it is the Germans themselves who have supplied the 
 facts on which these studies are based. 
 
 1 
 
One of the most authoritative sources of information on 
 Germany's economic power is Dr. Karl Helffrich, one time 
 managing director of the Deutsche Bank, later Minister of 
 Finance and Vice-Chancellor of the German Empire. In 
 1914 Dr. Helffrich read a paper to the directors of the 
 Deutsche Bank, analyzing with great care Germany's busi- 
 ness condition and its probable future development. His 
 conclusions are of great interest to us to-day, for, after 
 making due allowance for the territorial cessions Germany 
 was obliged to make under the Peace Treaties, cessions sur- 
 rounded with alleviating clauses, they are the basis upon 
 which an estimate of Germany's present economic strength 
 can be made. 
 
 Germany's Expansion as Shown by Helffrich 
 
 Dr. Helffrich traced with just pride the expansion of 
 Germany's population in thirty years. He stated that in 
 1914 it was 60 per cent larger than that of France and that 
 it was increasing twelve times as fast. He explained that 
 the greater density of population in Germany was not due 
 to the domestic virtues of the Germans, but to the vast 
 resources of the country, which allowed rapidly increasing 
 numbers to make a living. He made it obvious that Ger- 
 many was naturally the richest country in Europe, being en- 
 dowed with the most valuable and varied resources, not- 
 withstanding the absence of a genial climate. 
 
 It was these extraordinarily valuable material and human 
 resources which enabled the country rapidly to advance 
 from poverty to vast wealth. From 1882 to 1907 machinery 
 in use had increased its capacity from 2,000,000 to 8,000,000 
 H.P. In 1913, 36,000 industrial establishments, of which 
 400 alone employed 1 ,000,000 workmen, covered the country. 
 In 1913 there was a total of $6,000,000,000 invested in joint 
 stock companies. Deposits in banks, industrial concerns and 
 savings banks exceeded $7,400,000,000. In one-quarter of a 
 century these deposits had increased five and one-half times. 
 
 Agriculture had greatly progressed, due to the ever- 
 increasing use of fertilizers. German potash beds produced 
 
 2 
 
11,000,000 tons of raw potash in 1912. Germany's produc- 
 tion of wheat and rye was nearly double that of France. Her 
 production of barley was three times as great ; of oats twice 
 as great ; of potatoes four times as great. She produced 
 three times as much sugar, and her coal production was six 
 and one-half times as great. 
 
 Increases in Building and Public Utilities 
 
 The country's building industries employed 1,500,000 men. 
 Telegraphic, telephonic and postal communications had in- 
 creased five times in twelve years, and the railway systems 
 had progressed from 42,000 to 62,000 kilometers, while the 
 German merchant marine rose beyond 4,000,000 tons dead 
 weight. Dr. Helfifrich estimated the total revenue of the 
 German people at $12,200,000,000 in 1913. 
 
 Herr Steinmen Bucher, another noted German economist, 
 placed Germany's national wealth in the same year at 
 $87,500,000,000, basing this figure on a computation of the 
 value of movable property, of the value of land in cities 
 and country, of German wealth invested in foreign securities, 
 of railways belonging to different governments of the Em- 
 pire, state mines, public buildings, canals, ports, etc., of 
 ships and goods in transit, and of specie. 
 
 In this connection he wrote : "Formerly, we were told, 
 the wealth of Germany amounted to $50,000,000,000, that of 
 France to $50,000,000,000, and that of Great Britain to 
 $60,000,000,000. Today Germany's wealth comes to $87,- 
 500,000,000, France's to $60,000,000,000, and Great Britain's 
 to $90,000,000,000. In twenty years Germany will have a 
 national wealth of $150,000,000,000, which should compare 
 with a wealth of $80,000,000,000 in the case of France and 
 of $105,000,000,000 in the case of Great Britain." 
 
 The German group which most widely advertised these 
 favorable facts in 1913 and in 1914 to-day is the most in- 
 sistent in proclaiming Germany's economic ruin. To prove 
 its contention, it points to the clauses of the Treaty of Ver- 
 sailles which force Germany to make territorial cessions and 
 to turn over her merchant fleet to the Allies. It also seeks 
 
to draw the eyes of the world to the deplorable condition of 
 its country's finances. 
 
 War Has Not Crippled the Steel Industry 
 
 It is true that Germany has lost a portion of her wealth- 
 producing resources owing to the war. Alsace-Lorraine she 
 has lost permanently. The mines of these provinces fur- 
 nished her in 1913 with 50 per cent of her iron ore, but she 
 
 is now able to import whatever tonnage of ore she requires 
 from France at no crippling advance over the prices she 
 paid prior to 1914. 
 
 Further, Germany has already very nearly completed the 
 reorganization of her iron and steel industry. The steel 
 trust of 1913 has been replaced by the Eisenwirtschaftsbund 
 and other important mergers have either been carried out or 
 are in the discussion and negotiation stage. Since the return 
 of Alsace-Lorraine to France the German iron and steel 
 industry has turned more and more markedly to the produc- 
 tion of finished products as opposed to its former produc- 
 tion, which was largely of semi-finished and raw products. 
 
 The permanent cession of the coal fields of Alsace- 
 Lorraine and the temporary cession of the Saare Basin will 
 not in any way lessen Germany's ability to meet her coal re- 
 quirements, as these fields consumed slightly more than their 
 own production in 1913. The provinces in the East which 
 Germany lost to Poland are rich agriculturally and will 
 materially reduce Germany's agricultural power. However, 
 they were not densely populated and there can be no question 
 but that Poland will find it advantageous to export to Ger- 
 many the excess food products which these provinces pro- 
 duce ; in fact, this was the case in 1920. 
 
 Germany has not lost Upper Silesia, where important coal 
 fields and the numerous industrial establishments were situ- 
 ated. The plebiscite recently taken in this province showed 
 that a majority of its inhabitants favored remaining under 
 German rule, and while some compromise will probably be 
 made which will cede the southern section of the province 
 
 4 
 
to Poland, Germany's economic power will not be very ma- 
 terially reduced by such a loss of territory. 
 
 5,000,000 Population in Ceded Territory 
 
 The territorial cessions which Germany was obliged to 
 make deprived her of only about 5,000,000 population. Her 
 powerful and unique geographical position, together with 
 the configuration and favorable nature of her soil and her 
 climate, cannot be taken away, and she will still possess the 
 Ruhr coal field, which alone contains more coal than all the 
 deposits in the United Kingdom. At the International Geo- 
 graphical Congress held in Canada in 1913, Germany's total 
 coal resources, outside of Upper Silesia and the Saare Valley, 
 were shown to be 227,440,000,000 tons, as against the total 
 resources of the United Kingdom of 189,535,000,000 tons. 
 
 In Germany itself it is recognized that while the Peace 
 Treaty may have retarded her future economic development 
 somewhat, it will, in the long run, affect it but little. The 
 German Government lately voted 400,000,000 gold marks for 
 the construction of the Rhine-Elbe canal. Considerable 
 sums of money have been advanced for harnessing rivers 
 which at present run to waste. Within the last year huge 
 deposits of lignite have been discovered, and plans for their 
 working have been drawn up and the necessary capital sup- 
 plied. The Germans hope that by drainage and newly dis- 
 covered irrigation methods they will be soon able to put 
 under crop 2,500,000 more acres of land than are at present 
 under cultivation. 
 
 Further, it must not be forgotten that while practically all 
 of the Allied countries suffered material damage due to inva- 
 sion, Germany suffered not at all in this respect. If proof 
 of this fact were necessary, Germany's favorable trade 
 balance in 1920 would be sufficient. 
 
 Abolition of Conscription and Gain in Man Power 
 
 Germany points to her man-power loss as one of the causes 
 of her impoverishment, but she lost fewer men in proportion 
 than France, Russia and Poland. Further, before the war, 
 
 S 
 
her conscript armies deprived her of 1,000,000 workers be- 
 tween the ages of 19 and 40. The Treaty of Versailles re- 
 duces this force to a permanent army of 100,000 men. This 
 means a clear gain to Germany of over 800,000 workers. 
 
 The finances of the German Republic are in a deplorable 
 condition, but the German people, as distinguished from the 
 State, are in no distress, except that percentage which lives 
 on fixed incomes — which has suffered severely. The ma- 
 jority of Germans are living in as great comfort now as they 
 ever have. 
 
 In spite of much waste, the "Frankfurter Zeitung," in one 
 of its recent issues, stated that Germany's savings banks de- 
 posits increased in 1918 by 6,500,000,000 marks, by 4,500,- 
 000,000 marks in 1919, and by 6,259,000,000 marks in 1920. 
 During these three years the working people of Germany set 
 aside a sum which even at the present rate of exchange is 
 equal to over $400,000,000 gold. 
 
 The German State itself has until lately been fast ap- 
 proaching bankruptcy. It has squandered money in an 
 astounding manner. Since the armistice it has subsidized 
 every conceivable scheme. It has distributed funds to assist 
 unemployment and to cheapen food. It is running every 
 government department at a dead loss. In the last year the 
 State railways showed a deficit of earnings over operating 
 cost of 16,000,000,000 marks, at normal rates of exchange a 
 sum larger than it cost to construct them. The German 
 Post Office is faced with a deficit of 2,000,000,000 marks. 
 
 German Officials Numbered 2,000,000 
 In November of last year a German newspaper estimated 
 that the German Government maintained 2,000,000 officials, 
 who, with their families, totaled one-eighth of the popula- 
 tion of the country. In 1914 there were in the five Imperial 
 Civil Service Administrations a little less than 5,500 em- 
 ployes ; there are now 80,000. Before the war the German 
 postal telegraph service employed 168,000 persons ; to-day, for 
 a country which has been reduced in size and population, it 
 employs 205,000. In 1914 the State railroads employed 
 
 6 
 
slightly over 300,000 men and women either temporarily or 
 permanently; they now employ 480,000. 
 
 Germany loudly proclaims that she is disarming, yet in her 
 regular budget for 1920 she sets aside 2,500,000,000 marks 
 for the upkeep of 100,000 men, and in the extraordinary 
 budget she allocates a further 1,700,000,000 marks to the 
 Army. Even allowing for the rise in the cost of living, for 
 the loss in the value of the mark, and for the fact of a pro- 
 fessional army, it is difficult to explain this increase. 
 
 An instance of State extravagance which borders on the 
 ridiculous is the employment office established by the Ger- 
 man Ministry of Labor, which itself employs 7,000 officials 
 and clerks. 
 
 Of the vast sums provided for public expenditure by the 
 German budget of 1920, less than 35 per cent was to be de- 
 rived from taxation. According to the League of Nations, 
 Germany pays 12 per cent of her national income to the State 
 in the form of taxes ; the United States pay 8 per cent ; 
 Great Britain pays 27 per cent ; and France pays 18 per cent. 
 
 Tax Resources That Are Still Available 
 
 Whereas prices in Germany have increased fourteenfold 
 as compared with those of 1913, taxes have only increased 
 sixfold, in spite of the fact that taxes totaled the imposing 
 sum of about 47 billion marks in the twelve months March, 
 1920-1921. At a recent conference it was estimated by the 
 Allied experts — and in this point the German experts agreed 
 with them — that the Germans, by increasing their taxes on 
 wines, spiritous liquors and beers in equal proportion to 
 those paid in Great Britain on these products, would derive 
 additional income equal to 800,000,000 marks in gold. 
 
 The United States, Great Britain, France and Italy have 
 enormously increased the taxation their peoples must bear 
 since 1914. Germany has met her public expenditures by 
 printing paper marks. The circulation of the Reichsbank, 
 which was 26,700,000,000 marks on October 21, 1918, is now 
 in the neighborhood of 85,000,000,000 marks. Germany's 
 
 7 
 
floating debt, which was 48,000,000,000 marks on September 
 30, 1918, now totals nearly 190,000,000,000 marks. 
 
 The period of lax financial control outlined above seems 
 to have come definitely to an end. When Germany realized 
 that the Allies were not to be readily deceived as to her true 
 capacity to make reparations, the rehabilitation of govern- 
 mental finance was undertaken with characteristic energy. 
 Inflation of circulation has been at least temporarily arrested 
 and, with Chancellor Wirth in control, the collection of 
 existing taxes is at last being seriously carried out. The 
 imposition of new direct and indirect taxes is recognized by 
 the Wirth Cabinet as essential to Germany's industrial and 
 commercial future. Food subsidies are to be discontinued, 
 railroad rates are to be increased, government offices are to 
 be relieved of much of the deadweight they now carry. The 
 possibility of placing a large funding loan is at present under 
 consideration. There undoubtedly will be some further 
 inflation, but the outlook is for a gradual recovery of the 
 whole financial system of the State. 
 
 A Fallacy in Respect to Export Trade Business 
 
 In most of the discussions of Germany's capacity to make 
 reparations it is assumed, gratuitously, that payments can 
 be made only through the accumulation of a large German 
 export balance. That a favorable export balance will greatly 
 facilitate Germany's gold payments to the Reparations Com- 
 mission is undeniable, but there are other important means 
 of settlement ; such as coal, labor, raw chemicals and certain 
 manufactures. 
 
 Why payments in such products should be arbitrarily ex- 
 cluded from consideration is not apparent. The Reparations 
 Commission should have little difficulty in inducing Italy, for 
 instance, to accept coal deliveries from Germany in lieu of 
 gold. In France, where reconstruction is the first desire of 
 all Frenchmen, arrangements are being made to make use of 
 German labor, materials and machinery in rebuilding the 
 homes and factories in the devastated regions. France will 
 further need German coal for many years to come. Even 
 
 8 
 
with all her mines again in operation France's coal produc- 
 tion will still be at least 15 million tons a year short of her 
 consumption. 
 
 Experts of the Reparations Commission estimate that at 
 least one-third of Germany's annual payments under the 
 present agreement will be made in kind. The balance will 
 have to be paid in gold, but even so an export trade balance 
 is not the only means at hand. Participation by Germany's 
 creditors in certain important German undertakings is at 
 present being very seriously considered. Other methods of 
 payment are being discussed by German and Allied experts. 
 
 In its final analysis the reparations problem resolves itself 
 into a question of Germany's will to pay rather than of her 
 ability to pay. The events of the last three months have 
 shown that public sentiment in Germany has undergone con- 
 siderable change in so far as reparations are concerned. Ger- 
 many realizes, dimly at least, that she can only regain the 
 good-will of the world by making good in the measure of her 
 utmost capacity the damage she did. 
 
 Present Government on the Right Track 
 
 The present German Government undoubtedly represents 
 those elements in Germany which desire a renewal of good 
 relations with the rest of the world. In spite of its narrow 
 majority in the Reichstag, it seems to have the mass of the 
 German people behind it. As the Junker class is pushed 
 farther and farther into the background the fulfilment by 
 Germany of the reparations contract she signed appears more 
 and more certain. In both France and Germany there is a 
 growing disposition to regard the reparations question as 
 settled in principle and to leave to qualified experts the 
 solution of the details of the problem. Discussions and 
 adjustments there certainly will be; indeed, they are ex- 
 pected. 
 
 The Loucheur-Rathenau conversations would have been 
 impossible a year ago ; to-day they are accepted without 
 much comment. The trend of events in recent months indi- 
 
cates definitely that the Reparations Convention of May 5th 
 has been accepted in Europe as an equitable and workable 
 solution of the most difficult of all post-war problems. The 
 recovery of Europe from the effects of the war is more cer- 
 tain now than at any time since the Armistice. 
 
 10 
 
APPENDIX 
 
 The Reparations Agreement 
 
 "(1) Germany will perform in the manner laid down in this 
 schedule her obligation to pay the total fixed in accordance with 
 Articles 231, 232 and 233 of the Treaty of Versailles by the Com- 
 mission, viz., 132,000,000,000 gold marks, less (a) the amount already 
 paid on account of reparation; (b) sums which may from time to 
 time be credited to Germany in respect of State properties in ceded 
 territory, etc., and (c) any sum.s received from other enemy or ex- 
 enemy Powers in respect of which the Commission may decide 
 that credit should be given to Germany, plus the amount of the 
 Belgian debt to the Allies, the amounts of these deductions and 
 additions to be determined later by the Commission. 
 
 BONDS TO BE DELIVERED TO THE COMMISSION 
 
 "(2) Germany shall create and deliver to the Commission in sub- 
 stitution for bonds already delivered or deliverable under Paragraph 
 12c of Annex 2, Part VIII, Treaty of Versailles, bonds hereafter 
 described. 
 
 "(a) Bonds for the amount of 12,000,000,000 gold marks.— > 
 These bonds shall be created and delivered at the latest on July 
 1st, 1921. There shall be an annual payment from funds to be 
 provided by Germany as prescribed in this schedule in each 
 year from May 1st, 1921, equal in amount to 6% of the nominal 
 value of the issued bonds, out of which there shall be paid 
 interest at 5% per annum, payable half yearly on the bonds 
 outstanding at any time, and the balance to a sinking fund for 
 redemption of bonds by annual drawings at par. These bonds 
 are hereinafter referred to as bonds of Series A. 
 
 "(b) Bonds for a further amount of 38,000,000,000 gold marks. 
 — These bonds shall be created and delivered at the latest on 
 November 1st, 1921. There shall be an annual payment from 
 funds to be provided by Germany as prescribed in this schedule 
 in each year from November 1st, 1921, equal in amount to 6% 
 of the nominal value of the issued bonds, out of which there 
 shall be paid interest at 5% per annum, payable half yearly, on 
 the bonds outstanding at any time and the balance to a sinking 
 fund for the redemption of the bonds by annual drawings at 
 
 11 
 
par. These bonds are hereinafter referred to as bonds of 
 Series B. 
 
 PROVISION FOR INTEREST AND ALSO A 
 SINKING FUND 
 
 "(c) Bonds for 82,000,000,000 gold marks, subject to such 
 subsequent adjustment by creation or cancellation of bonds 
 as may be required under the first paragraph. These bonds 
 shall be created and delivered to the Reparations Commission 
 without coupons attached at the latest on November 1st, 1921. 
 They shall be issued by the Commission as and when it is satis- 
 fied that the payments which Germany is required to make in 
 pursuance of this schedule are sufficient to provide for the 
 payment of interest and sinking fund on such bonds. There 
 shall be an annual payment from funds to be provided by Ger- 
 many as prescribed in this schedule in each year from the date 
 of issue by the Reparations Commission equal in amount to 6% 
 of the nominal value of the issued bonds, out of which shall be 
 paid interest at 5% per annum, payable half yearly on the bonds 
 outstanding at any time and the balance to a sinking fund for 
 redemption of the bonds by annual drawings at par. The Ger- 
 man Government shall supply to the Commission coupon sheets 
 for such bonds as and when issued by the Commision. These 
 bonds are hereinafter referred to as bonds of Series C. 
 
 "(3) The bonds provided for in Article 2 shall be signed by 
 the German Government as bearer bonds in such form and in 
 such denominations as the Commission shall prescribe for the 
 purpose of making them marketable, and shall be free of all 
 German taxes and charges of every description, present or future. 
 
 GERMANY'S TOTAL ASSETS AS SECURITY FOR 
 BONDS 
 
 "Subject to the provision of Articles 248 and 251, Treaty of 
 Versailles, these bonds shall be secured on the whole assets and 
 revenues of the German Empire and the German States, and 
 in particular on the assets and revenues specified in Article 7 
 of this schedule. The service of bonds A, B, C shall be a first, 
 second and third charge respectively on said assets and rev- 
 enues, and shall be met by payments to be made by Germany 
 under this schedule. 
 
 "(4) Germany shall pay in each year until the redemption of 
 bonds provided for in Article 2 by means of a sinking fund 
 attached thereto: 
 
 "(1) The sum of 2,000,000,000 gold marks. 
 
 "(2) (a) A sum equivalent to 25% of the value of her ex- 
 
 12 
 
ports in each period of twelve months, starting from May 1st, 
 1921, as determined by the Commission, or 
 
 "(b) alternatively, an equivalent amount as fixed in accord- 
 ance with any other index proposed by Germany and accepted 
 by the Commission. 
 
 "(3) A further sum equivalent to 1% of the value of her 
 
 exports, as above defined or, alternatively, an equivalent 
 
 amount fixed as provided in Paragraph B above. 
 
 "Provided always that when Germany shall have discharged 
 
 her obligations under this schedule, other than her liability in 
 
 respect of outstanding bonds, the amount to be paid in each year 
 
 under this paragraph shall be reduced to the amount required 
 
 in that year to meet the interest and sinking fund on the bonds 
 
 then outstanding. 
 
 HOW QUARTERLY PAYMENTS HAVE BEEN 
 ARRANGED 
 
 "Subject to the provisions of Article 5, the payments to be 
 made in respect of Paragraph 1 above shall be made quarterly 
 on or before January 15th, April 15th, July 15th and October 
 15th, each year, and payments in respect of Paragraphs 2 and 3 
 above shall be made quarterly on or before February 15th, May 
 15th, August 15th and November 15th, and calculated on the 
 basis of exports in the last quarter, but one preceding that 
 quarter, the first payment to be made on or before November 
 15th, 1921, to be calculated on the basis of exports in the three 
 months ending July 31st, 1921. 
 
 "(5) Germany shall pay within twenty-five days from this 
 notification 1,000,000,000 gold marks in gold or approved for- 
 eign currencies or approved foreign bills or in drafts at three 
 months on the German Treasury, endorsed by approved Ger- 
 man banks and payable in pounds sterling in London, in 
 francs in Paris, in dollars in New York or any currency in any 
 other place designated by the Commission. These payments 
 will be treated as the two first quarterly installments of pay- 
 ments provided for in Article 4, Paragraph 1. 
 
 "(6) The Commission will, within twenty-five days from this 
 notification, in accordance with Paragraph 12A, Annex 2, of the 
 Treaty as amended, establish a special sub-commission to be 
 called the Committee on Guarantees. The Committee on Guar- 
 antees will consist of representatives of the Allied Powers now 
 represented on the Reparations Commission, including a repre- 
 sentative of the United States in the event of that Govern- 
 ment desiring to make an appointment. The Committee shall 
 comprise not more than three representatives of nationals of 
 
 13 
 
other Powers whenever it shall appear to the Commission that a 
 sufficient portion of the bonds to be issued under this schedule 
 is held by nationals of such Powers to justify their representa- 
 tion on the Committee on Guarantees. 
 
 DUTY OF COMMITTEE ON GUARANTEES 
 
 "(7) The Committee on Guarantees is charged with the duty 
 of securing the application of Articles 241 and 248 of the Treaty 
 of Versailles. 
 
 "It shall supervise the application to the service of the bonds 
 provided for in Article 2 of the funds assigned as security for 
 the payments to be made by Germany under Paragraph 4. The 
 funds to be assigned shall be 
 
 "(a) The proceeds of all German maritime and land cus- 
 toms and duties and in particular the proceeds of all import 
 and export duties. 
 
 "(b) Proceeds of a levy of 25% on the value of all exports 
 from Germany except those exports upon which a levy of 
 not less than 25% is applied under legislation referred to in 
 Article 9. 
 
 "(c) The proceeds of such direct or indirect taxes or any 
 other funds as may be proposed by the Committee on Guar- 
 antees in addition to, or in substitution for, the funds speci- 
 fied in (a) or (b) above. 
 
 "The assigned funds shall be paid to the accounts to be 
 opened in the name of the Committee and supervised by it in 
 gold or in foreign currencies approved by the Committee. The 
 equivalent of the 25% levy referred to in Paragraph B shall 
 be paid in German currency by the German Government to 
 the exporter. 
 
 "The German Government shall notify to the Committee on 
 Guarantees any proposed action which may tend to diminish 
 the proceeds of any of the assigned funds, and shall, if the Com- 
 mittee demands it, substitute some other approved funds. 
 
 "The Committee on Guarantees shall be charged further with 
 the duty of conducting on behalf of the Comimission the exam- 
 ination provided for in Paragraph 12B, of Annex 2 to Part 
 VIII, of the Treaty of Versailles, and of verifying on behalf 
 of the Commission and, if necessary, of correcting the amount 
 declared by the German Government as the value of German 
 exports for the purpose of calculation of the sum payable in 
 each year or quarter under Article IV, Paragraph 2, and the 
 amounts of the funds assigned under this Article to the service 
 of the bonds. The Committee shall be entitled to take such 
 
 14 
 
measures as it may deem necessary for the proper discharge 
 of its duties. 
 
 NO INTERFERENCE IN GERMAN ADMINISTRATION 
 
 "The Committee on Guarantees is not authorized to interfere 
 in the German administration. 
 
 "(8) In accordance with Paragraph 19, clause 2 of Annex 2, 
 as amended, Germany shall on demand, subject to prior approval 
 of the Commission, provide such material and labor as any of 
 the Allied Powers may require toward restoration of the devas- 
 tated areas of that Power, or enable any Allied Power to pro- 
 ceed with the restoration or the development of its industrial 
 or economic life. The value of such material and labor shall 
 be determined in each case by a valuer appointed by Germany 
 and an agreement, by a referee nominated by the Commission. 
 This provision as to valuation does not apply to deliveries under 
 Annexes 3, 4, 5 and 6, Part VIII, of the Treaty. 
 
 "(9) Germany shall take every necessary measure of legisla- 
 tive and administrative action to facilitate the operation of the 
 German Reparation Act of 1921 in force in the United Kingdom 
 and of any similar legislation enacted by any Allied Power so 
 long as such legislation remains in force. 
 
 "The payments effected by the operation of such legislation 
 shall be credited to Germany on account of payments to be 
 made by her under Article 4, Clause 2. The equivalent in Ger- 
 man currency shall be paid by the German Government to the 
 exporter. 
 
 ALLIES' RECEIPTS GO TO THE COMMISSION 
 
 "(10) Payments for all services rendered, all deliveries in 
 kind and all receipts under Article 9 shall be made to the 
 Reparations Commission by the Allied Power receiving the 
 same in cash or current coupons within one month of the receipt 
 thereof, and shall be credited to Germany on account of pay- 
 ments to be made by her under Article 4. 
 
 "(11) The sums payable under Article 4, Clause 3, and any 
 surplus of receipts by the Commission under Article 4, Clauses 1 
 and 2, in each year not required for payment of interest and 
 sinking fund on bonds outstanding in that year, shall be accu- 
 mulated and applied so far as they will extend, at such times as 
 the Commission may think fit, by the Commission in paying 
 simple interest not exceeding 2j/2% per annum from May 1st, 
 1921, to May 1st, 1926, and thereafter at a rate not exceeding 
 5% on the balance of the debt not covered by bonds then 
 
 IS 
 
issued. The interest on such balance of the debt shall not be 
 cumulative. No interest therefor shall be payable otherwise 
 than as provided in this paragraph. 
 
 "(12) The present schedule does not modify the provisions 
 for securing the execution of the Treaty of Versailles which are 
 applicable to the stipulations of the present schedule." 
 
 16 
 
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