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Foreign News: Success at The Hague

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TIME

In all the trade of war no feat Is nobler than a brave retreat.

Hudibras.—Samuel Butler

The retreat of Germany’s stiff-necked Dr. Hjalmar (“Iron Man”) Schacht at The Hague Reparations Conference last week was epic, masterful.

The President of the Reichsbank came upon the scene with the haughty air of a Goliath, defying not only the Allied Powers but also his own Government (TIME, Jan. 20).

The Conference had substantially agreed to sign forthwith the protocol of the Reparations Plan, drafted at Paris last spring under the chairmanship of Owen D. Young, by a committee of bankers of whom Dr. Schacht was one. He signed the original Paris draft of the Plan, approved the articles establishing a $100,000,000 Bank for International Settlements (B. I. S.), and allowed everyone to assume that of course the Reichsbank would subscribe its allotted quota of the capital of the B. I. S.

Now, suddenly, and in despite of the Socialist Government of German Prime Minister Hermann Müller, Dr. Schacht announced: first, that the Young Plan had been so tinkered that it is no longer the document he originally signed; second, that it would be “morally wrong” for the Reichsbank to associate itself with a plan so contrary to German interests, since it now sanctions France to act against the Fatherland in the event of German refusal to pay Reparations; and third, that Dr. Schacht, basing his stand as he said “on the highest moral grounds,” would not as President of the Reichsbank authorize it to subscribe a single copper pfennig to the capital of the B. I. S. Dramatically nailing his colors, Dr. Schacht barked at correspondents: “I will maintain this position until I die!”

State Above the State. How could the “Iron Man” possibly retreat without losing face after that? How dared he challenge the whole Conference? What did the irate German Socialist press—such as Die Welt am Montag—mean when they accused him of being “the head not only of a state within the State but of a state above the State”?

The peculiar strength of Dr. Schacht lies in the fact that the President of the Reichsbank is chosen for the inordinately long term of ten years, and is answerable during that time neither to the Reichstag, the Prime Minister nor the President of the Republic. Stiff-necked Dr. Schacht was appointed in 1923. Thus his term will not be up until 1933. Paradoxically the Allied Powers, whom he was challenging last week, themselves insisted on this arrangement in 1924, when the Dawes Plan was adopted. They feared that if German politicians could depose the head of the Reichsbank they might do so, and appoint a man who would wreck the Dawes Plan. Evidently last week Dr. Schacht thought he had the Allies cleverly hoist by their own petard.

Curtius v. Schacht. Chief of the German Delegation at The Hague last week was Foreign Minister Dr. Julius Curtius, successor to the late, great Stresemann, and a comparative tyro at diplomacy. He had asked Dr. Schacht to come on from Berlin as a financial expert, found him suddenly as troublesome as a Golem or a Frankenstein.

However, Dr. Curtius had two bright ideas about how to deal with Dr. Schacht. First he proceeded to ignore him, assured the Allies that if the Reichsbank would not subscribe Germany’s share of the B. I. S. capital, then the Prussian State Bank (“Preussische Staatsbank”) and the Reichs-Kredit-Gesellschaftwould. Secondly he ordered his legal experts to search through the traveling library of documents which all diplomatic delegations carry and find a way to oust the obstreperous Reichsbank President, if necessary. A good lawyer enjoys nothing so much as trying to find out how to do the legally impossible. Presently the experts reported to Dr. Curtius that, although Germany alone was impotent to force Dr. Schacht’s resignation, the thing could be done if all the Allied Powers would assent to an ouster which the Reichsbank would then pass as a German law. Of course there would be no trouble about getting unanimous Allied consent.

Clearly the lawyers’ rather neat discovery had made it necessary for the Iron Man to haul down his nailed-up flag and he, astute, knew how to perform this second “impossible” feat.

“Obey or Emigrate!” Calling in correspondents, Dr. Schacht thundered: “The Reichsbank is concerned primarily with whether the Young Plan rests on a moral basis. It does not! The only way to make the world respect the integrity of the Reichsbank is for the Reichsbank to refuse to enter into this immoral agreement. But it is now a question of law! I must obey German law or emigrate. It is suggested that I ought to resign. I will not resign to please anybody. I will resign only if I am wrong. I will continue to obey German law!”

Thus, still firm upon “the highest moral grounds,” Dr. Schacht yielded and agreed—making clear that he agreed under duress—that the Reichsbank will subscribe its B. I. S. quota. This removed the last real obstacle to complete agreement at The Hague; but throughout Germany a tempest of controversy brewed. Whereas a few weeks ago ratification of the Young Plan by the Reichstag seemed certain, correspondents of nearly all major news services now filed long despatches full of ominous doubts. Skillful Dr. Schacht had roused in the German public mind a fear that Dr. Curtius had conceded too much at The Hague—particularly on the issue of sanctions.

The Catholic Centre Party, which holds a key position in the German Government coalition, draws its strength chiefly from voters in the Rhineland, and these were in a ferment of fear last week lest the “new” and “immoral” Young Plan conjured up by Dr. Schacht should give France the right to reoccupy the Rhineland in case Germany defaults on her Reparations payments.

Foes of Dr. Schacht accused him of playing the grossest sort of politics, of fostering fear as a means of grooming himself for election to succeed president Paul von Hindenburg. “So—I am accused of ‘playing politics!’ ” said smart Dr. Schacht, unruffled. “If what I did was playing politics, then let me say I most heartily welcome the injection of moral factors into politics—they need it!”

Quick Signatures. The protocol or, in effect, treaty, embodying the Young Plan was eventually signed at The Hague last week by Snowden of Britain, Finance Minister Chéron of France, Curtius of Germany et omnes, with the French and British delegates in feverish haste to dash on to the London Naval Conference. Unless ratified by the Reichstag and other parliaments concerned, the protocol of the Young Plan is still only a scrap of paper. The one vitally important change, or rather addition to the Plan made last week, was an annex to the protocol. Significant excerpt:

“There exists a hypothesis outside the accords signed today. The creditor governments are forced to consider it without wishing to reflect on the intentions of the German Government. They believe it is indispensable to consider the possibility that in the future some German Government, failing in the obligations solemnly undertaken today, might resort to acts showing a desire to destroy the new plan. . . .

“[In this event] the creditor power or powers considering themselves concerned will submit to the Permanent Court of International Justice the question of whether the German Government had committed acts showing a deliberate wish to destroy the new plan.

“Germany declares here and now that, in the event of an affirmative decision of the court, she will accept as legitimate that with a view to assure the execution of the obligations of the debtor power as laid down in the new plan, the creditor power or powers recover full liberty of action.”

The words “full liberty of action” have an ominous ring in German ears, sound like the ghostly tread of French soldiers, perhaps yet unborn, marching into the Rhineland say in 1980, when German Reparations payments will still have eight years to run.

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