France and the Nazi Threat: The Collapse of French Diplomacy 1932-1939 (62 page)

The French did not share that optimism at all. One of the last dispatches by François-Poncet
³⁰
and one of the first by his successor Coulondre
³¹
carefully analyzed the issue. According to Coulondre, the Reich was creating the famous
Mitteleuropa
that had been announced so
often for an entire century.
³²
Because of the Anschluss, Germany could now use of 711 km of the Danube River (out of 2900 km). Its industry and railroads transported its products and it was planning a huge web of canals. One-third of the Danube fleet belonged to four large German companies. All the British positions that were important in the 1920s were lost and on November 14, 1936, Germany denounced the clauses of the Treaty of Versailles on international waterways.

Along with that huge structure Germany also possessed an “artificial” but very efficient component in its exchange controls. The countries that were selling to Germany could only use the Reich marks they obtained through that channel to buy German products. The Reich was willing to purchase agricultural or mining products at prices that were often 30 to 40% higher than the world markets. On the other hand, a very flexible credit system was being offered, allowing the repayment to be made in the form of products from the country that was borrowing, thus avoiding the purchase of foreign currency. The result was that since 1933 Germany had tripled its purchases and sales in the area representing 15% to 16% of its foreign trade, absorbing 30% of the exports of those countries and providing 30% to 40% of their imports. Its foreign trade was now larger than that of France, Great Britain and the United States put together.

François-Poncet provided the following chart (in millions of RM):

GERMAN FOREIGN TRADE

Coulondre reached the following conclusion: “It is very clear that the first objective of Germany’s plans is the complete economic hegemony in the European countries along the Danube and in the Balkans.”
³³

The financial attaché in London, Emmanuel Mönick, submitted a report on January 18, 1939, regarding “The economic positions of Germany
and England in Central Europe.”
³⁴
He stated that “for a number of years the British were convinced that the Third Reich’s economic system was dragging Germany into bankruptcy.” They were now adopting “a more realistic view.” This had become a political matter: “Is Germany’s industrial and commercial development meant to increase the standard of living of the German people or rather to ensure Germanic dominance over Europe?” The British no longer harbored any illusions on the subject.

Even prior to Munich, following pressure from the countries concerned, the French and British governments began researching how they could counterbalance Germany’s influence. But every French proposal seeking to organize a common effort was politely rejected by the British.
³⁵
British banks and trading companies “would not accept the use of new methods or alliances that did not take existing positions into consideration.”
³⁶

The idea of sending an entirely French mission appears to have originated at the Ministry of Commerce and Industry where Hervé Alphand was the director of commercial agreements. On October 25 a meeting took place with the diplomat Antoine Delenda.
³⁷
The “information gathered by our largest banks and business leaders confirms that our initiative could be very effective for the investments of French funds in industrial and mining concerns…this is an area where we can compete with the Germans.”
³⁸

The Quai d’Orsay reached an agreement with the minister of commerce to form a delegation headed by Alphand that would travel to Romania, Bulgaria and Yugoslavia. Representatives of industry, Paribas, and Baron Louis Dreyfus, as well as experts (François Bloch-Lainé among them), would accompany the government officials. The diplomats were to prepare the visit, and Alexis Léger sent out a number of telegrams. The ministries of agriculture (which was very dubious), nationald, marine and air were consulted along with finance, until recently headed by Paul Reynaud, who approved the proposal to restructure commercial and payments agreements, increase French purchases and invest private funds. On the other hand, he adamantly opposed another point in the mission’s program “to increase our shipments to Central European governments by offering long-term credit for payments.” This “would heavily penalize our public finances,” he said. France had already issued 920 million in credit insurance to Romania, 565 to Bulgaria, 170 to Yugoslavia and 1,250 to Poland (the implemented portion of the Rambouillet agreements).

“Your program cannot work because it clashes on that important issue with an impossible situation… I must add that the countries we wish to help are searching for markets to sell their products. It isn’t by selling them more but by buying more from them that we can help effectively.”
³⁹

The armaments section of the EMA (Etat-Major des Armées)
⁴⁰
was encouraging the mission to seek French investments in the copper, lead, zinc and antimony industries, steel and chemical plants. It pointed out that three important deals were still open: a group led by Schneider was competing with Krupp in Yugoslavia to build a weapons plant in Zenitra; Schneider was also bidding for permission to obtain a nitro-cellulose plant in Obliceno; and the “French Nobel” company wanted to build a gunpowder factory in Romania. Darlan was asking for the navy for help at the shipyards at Galatz in Romania and Split in Yugoslavia (controlled by the
Chantiers de la Loire
). He mentioned negotiations with the Romanians for the purchase of two submarines and also discussed the oil issue.
⁴¹

Clearly the visit had been carefully prepared. The mission left Paris on November 15, 1938 and spent ten days in Bucharest. It then traveled to Sofia and Belgrade, returning to Paris by December 10. The final report was delivered to the minister of commerce, Frédéric Gentin, on December 19, 1938.
⁴²

The mission was able to “identify the reasons for France’s economic decline in several of the countries visited; to immediately reach a number of commercial agreements meant to improve a situation that was detrimental to our exports and to the payment of our financial obligations”—because all the countries involved were indebted to France and not good at making payments. The mission “also seeks to show the countries in Eastern Europe that contrary to what some propaganda is saying France, without undue prejudice to legitimate competition, is not giving up on the defense of its economic and political interests in that part of Europe in any way.”

The main hope was that, since the foreign trade of those countries with Germany did not provide them with any foreign currency, they therefore wished to do business with the western countries that had “free currencies.” Furthermore, they were obviously aware of the threat represented by German economic hegemony. Unfortunately, their prices were too high with most of their products coming from agriculture and of no interest to the French market, while they could satisfy German needs. Should exchange rates be modified? Should exporters receive a discount? Should some quotas be increased?

To Romania, for example, where oil was 25% higher in price than American oil, the French government could lend up to 25 million, erasing any losses, if the Romanian government consented to sacrifices. The only agricultural product available was corn, competing with corn from Indochina. Could France act as reexporter of Romanian corn?

There was an agreement with Bulgaria on payment terms.
⁴³
Both tobacco purchases by France and French armaments purchases by Bulgaria could be increased, along with railroad supplies, if credit insurance was developed. Yugoslavia would be satisfied with increasing its purchases of French agricultural products.

All this was rather thin. The delegation was also considering a long-term solution through French capital investment to create new products.

It was up to the government to decide. The ministry of foreign affairs was very much in favor of those proposals. In a letter to Daladier the Quai d’Orsay insisted on credit insurance. The objective was not to “roll back” Germany but to show “that both Paris and London would not stand by allowing it unlimited hegemony.” Our method has remained that of “empty gestures.”
⁴⁴
An interministerial commission chaired by Daladier, with Bonnet and Gentin, met on January 13, 1939. The Quai d’Orsay continued to pressure Daladier; the new memo
⁴⁵
insisted on the need to follow up on the recommendations in the Alphand report regarding corn, the reexportation of wheat, and customs tariff rebates for agricultural countries. Our allies were waiting. A Yugoslav delegation had been in Paris for two weeks and was surprised “that until then no substantive offer had been made.” Great Britain agreed and purchased wheat from Yugoslavia and Romania. “The actions expected of us have a political importance above all. The time has come to decide if we are ready to consider rather small sacrifices…or whether by rejecting those actions or creating the impression that we cannot take them we are deliberately accepting that Romania and Yugoslavia…should permanently orient their economic and political life toward Germany.”

However, at the same time the minister of agriculture, Henri Queuille, informed Daladier of his “complete opposition” to such an operation. France was in no position to reexport 4.5 million quintals at a time when world stocks for export were up to 150 million. This would anger the United States and the Dominions. “Strangely, representatives from foreign affairs don’t seem to be aware of those risks.” They demonstrated a lack of thoroughness by not consulting with us.
⁴⁶

The key meeting was held on January 30. It was chaired by Daladier and Bonnet; Gentin, Queuille, Paul Reynaud, the minister of finance, Patenôtre of the National Economy, and Georges Mandel of the Colonies were present. It was agreed that wheat stocks would be increased and a law would be drafted offering rebates to a number of countries. That was as far as they would go.
⁴⁷

In other words, the economic counteroffensive in Eastern Europe had basically fizzled. As for capital investments, these were taking place in the midst of dangerous times and many hesitated about long-term placements in threatened countries. The electrification projects in southeastern Poland being proposed by Alsthom and Paribas, and the creation of a tractor and tank factory in Romania proposed by Renault were approved by Daladier but did not happen in time.
⁴⁸

One last point. Was any serious consideration given, as some historians believe,
⁴⁹
to an “economic appeasement” taking the shape of close Franco-German collaboration? François-Poncet had discussed it with Hitler on October 18. Hitler immediately sidestepped the issue in which he clearly showed no interest. Ribbentrop traveled to Paris with economic experts who held talks with the deputy director of political and commercial affairs, de La Baume. French farmers would have liked to increase their exports to Germany. We feel it is difficult to view those discussions as anything but normal commercial negotiations routinely taking place at all times between countries. Once Schacht had been permanently removed as the director of the Reich’s economy, and with Funk and mostly Göring, two backers of autarky both at the helm, it is difficult to see how a wide-ranging agreement could be reached, especially with a liberal like Paul Reynaud in charge of France’s economy.

True, there were half-hearted attempts here and there. Bonnet seems to have encouraged the creation, on February 28, 1939, of a Franco-German Economic Center headed by a lawyer, Baudoin-Buguet, with the support of C.-J. Gignoux, the president of the General Confederation of Business Leaders, and of Émile Mireaux, the editor of
Le Temps
. But it was a rather small affair. On the other hand, Daladier and Coulondre seemed interested in closer economic cooperation, especially at the beginning of March 1939
⁵⁰
while commercial negotiations were in full swing.
⁵¹

Had negotiations existed going far beyond commercial matters and reaching wider political opportunities, serious and noticeable traces would appear in the archives. Despite some vague projects we do not believe in the idea of an “economic appeasement” on the French side.
⁵²

2.

T
HE
L
IMITS OF THE
F
RANCO
-G
ERMAN
R
APPROCHEMENT

To follow the “English line” in the fall of 1938 meant attempting a rapprochement with Germany. The limitations of that game were clear to everyone. There were some out and out “anti-German” leaders within the government, such as Mandel, Jean Zay, Champetier de Ribes and Paul Reynaud who, following Herriot’s request, remained as ministers in the Daladier cabinet.
⁵³
The majority was pro-Munich, some of them unhappily like Daladier, or satisfied like de Monzie (Italy’s man) and his friends Pomaret and Marchandeau, or with some reservations like Queuille, Guy La Chambre, Chautemps, Sarraut and Campinchi or mysteriously like Georges Bonnet.
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