Chapter XXVII: Part 23

Paris, 4th November 1941
Place du Palais-Royal

French Delegation to the German Armistice Delegation for Economic
Affairs

German Armistice Delegation f. Economic Affairs

Wiesbaden 5 November 1941 No. 11116 Enclosures

The President of the French Delegation for Economic Affairs,

To Monsieur Hemmen Minister Plenipotentiary President of the German
Armistice Delegation for Economic Affairs

Sir,

In execution of the decisions taken by the German government with regard to the payment of the costs of occupation, the French government has, since August 1940 made periodic payments which, on the 31st October 1941, totalled 183,200,000 francs. It was also obliged to defray certain expenses (particularly the lodging of troops) directly--expenses which amounted at this same time, to nearly 8 milliards and to cover the deficit in the Franco-German clearing account, which is, at the moment, in the neighborhood of 11 milliard francs.

The French government protested several times against the size of this imposition, drawing the attention of the German Government to the grave dangers it entails, both from the financial and from the economic point of view.

Its fears on this point are unfortunately being shown to be better founded every day.

The expenses resulting to the French Treasury from the occupation alone are as high as the expenses of the State itself. The sums paid towards the costs of occupation are also often used to a large extent to defray expenses which have nothing to do with the maintenance of troops.

It is clear that such burdens are disappropriate to the present resources of France and that they can be covered only by treasury expedients.

The national revenue is diminishing continually. If the efforts made in the field of agriculture result in an increase in the productivity of the soil, industrial activity slows down. An increase in taxation would produce a hardly noticeable result, and one must, on the contrary, expect the product of these taxes to diminish more or less rapidly. One is therefore forced to borrow at short call, either from the Bank of France or from individuals and credit establishments, up to 70% of the needs. In this way the public debt and the advances from the fiduciary swell at an alarming speed, whatever the effects may be of the measures taken to manipulate certain elements of this debt and to make it less onerous (conversion, consolidation, reduction of rates of interest).

The mass of means of payment created to deal with the expenses resulting from the occupation, seriously imperils economic equilibrium. Inflation takes place in spite of the efforts of the government to limit its volume and its consequences.

The prices of foodstuffs of daily use and of industrial products are maintained by rationing and taxation, but nevertheless tend more and more irresistibly to rise, and each day it is harder to prevent too rapid a rise in the cost of goods and property.

The increasing abundance of money available is shown both by the increased circulation of bank notes and by the increase in stocks held in private and public institutions.

The monetary circulation, which was about 160 milliard francs in June 1940, has today reached the figure of 250 milliards, in other words, it has increased by over 56%. During the same period bank deposits increased by about 50%.

The smallness of the quantity of goods offered is at the same time accentuated by supply difficulties and by the extent of the requisitions carried out in the occupied zone.

This development is leading to a catastrophy like that suffered by Germany 20 years ago.

When the French government signed the Armistice, it firmly intended reestablishing the economic situation. All its efforts since then have aimed particularly at keeping the monetary situation under control, in spite of difficulties of all kinds and, particularly, in spite of the enormous costs of occupation.

The French government is resolved to persevere in this path, but it cannot do so usefully if the payments imposed by the German government continue to render all its efforts useless in advance. It wants to warn it once more.

I am, Sir, etc.

sgd. Yves de Boisanger.

[rubber stamp] The President French Armistice Delegation for Economic Affairs

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