The Canadian Government has been invited by the United Kingdom Government acting in conjunction with the Governments of the French Republic, of the United States of America, and of the Federal Republic of Germany to designate a representative with the necessary full powers to sign the Agreement on German External Debts on its behalf on Friday, February 27, 1953, in London, England. Should the Canadian Government not wish to become an original party to the Agreement it may accede to the Agreement at a later date.
The terms and conditions embodied in this Agreement arose out of the Conference on German External Debts which was held in London from February 28th until August 8th, 1952. They cover the settlement of Reich debts, such as the Dawes Loan of 1924 and the Young Loan of 1930, as well as the debts of other public authorities. Provision is also made for the settlement of medium and long-term debts resulting from private capital transactions, the Standstill Debts, claims arising out of goods and services transactions and a variety of other claims. It should be noted that debts solely of East German origin are excluded.
The terms proposed for the settlement of the German debts covered by the Settlement Plan have been worked out in negotiations between representatives of the creditors and the debtors so that the Governments of the various countries concerned are in a sense endorsing the settlement reached by the private interests. Three members of the Canadian Delegation were representatives of private creditors and were able to enter into the negotiations.
The terms conform as closely as possible to the existing contracts but certain adjustments have been made in the rates of interest allowed. Except in some special cases no repayment in foreign exchange of the principal of any debt will be made during the first five years. Interest, however, will be payable as early as April 1, 1953, on some categories of debts. Commencing in 1958 the principal would be repaid on an amortized basis.
The principles of the settlement are that Germany will ensure that the debts owing to residents of any country which does not sign the Agreement will not be paid until the debts owing to residents of countries who are party to the Agreement have been paid. The one exception to this general rule is that holders of marketable securities will be eligible to receive payments no matter where they reside. A large number of the debts owing to Canadians fall in this category but a still larger number of Canadians would not benefit from the settlement if Canada did not become a party. Any creditor may refuse to accept the terms of the settlement and if he does so his legal rights within Germany are protected but he cannot be paid until all obligations covered by the Agreement have been fulfilled.
There is no reason to believe that Canada could later secure more favourable terms of settlement than those secured by the major creditor interests at the Conference with whom the West German Government would be more anxious to restore its credit. The Canadian interest of approximately $1,725,000 is only about one-quarter of one per cent of all Germany's external pre-war debts.
Canada look an active part among the countries with smaller interests in seeing that the Conference on German Debts adopted the policy of "no discrimination or preferential treatment in the fulfilment of the terms agreed on as among categories of debts or currencies in which payable, or in any other respects, should be permitted by the West German Government or sought by the creditor countries". In this connection I should point out that payment in Canadian dollars would be facilitated in certain instances if Canada were to enter into a payments agreement with Germany. I would not propose however that we enter into a payments agreement for this reason alone.
I therefore recommend with the concurrence of the Secretary of State and the Acting Secretary of State for External Affairs that Canada should be an original party to this Agreement and that the High Commissioner for Canada, London, be given the necessary full powers to sign the Agreement on behalf of the Canadian Government.
Minister of Finance
F. GORDON BRADLEY
Secretary of State
Acting Secretary of State
for External Affairs