Thus a scientific consideration of Germany’s capacity to pay was from the outset out of court.  The expectations which the exigencies of politics had made it necessary to raise were so very remote from the truth that a slight distortion of figures was no use, and it was necessary to ignore the facts entirely.  The resulting unveracity was fundamental.  On a basis of so much falsehood it became impossible to erect any constructive financial policy which was workable.  For this reason amongst others, a magnanimous financial policy was essential.  The financial position of France and Italy was so bad that it was impossible to make them listen to reason on the subject of the German Indemnity, unless one could at the same time point out to them some alternative mode of escape from their troubles.[103] The representatives of the United States were greatly at fault, in my judgment, for having no constructive proposals whatever to offer to a suffering and distracted Europe.

It is worth while to point out in passing a further element in the situation, namely, the opposition which existed between the “crushing” policy of M. Clemenceau and the financial necessities of M. Klotz.  Clemenceau’s aim was to weaken and destroy Germany in every possible way, and I fancy that he was always a little contemptuous about the Indemnity; he had no intention of leaving Germany in a position to practise a vast commercial activity.  But he did not trouble his head to understand either the indemnity or poor M. Klotz’s overwhelming financial difficulties.  If it amused the financiers to put into the Treaty some very large demands, well there was no harm in that; but the satisfaction of these demands must not be allowed to interfere with the essential requirements of a Carthaginian Peace.  The combination of the “real” policy of M. Clemenceau on unreal issues, with M. Klotz’s policy of pretense on what were very real issues indeed, introduced into the Treaty a whole set of incompatible provisions, over and above the inherent impracticabilities of the Reparation proposals.

I cannot here describe the endless controversy and intrigue between the Allies themselves, which at last after some months culminated in the presentation to Germany of the Reparation Chapter in its final form.  There can have been few negotiations in history so contorted, so miserable, so utterly unsatisfactory to all parties.  I doubt if any one who took much part in that debate can look back on it without shame.  I must be content with an analysis of the elements of the final compromise which is known to all the world.

The main point to be settled was, of course, that of the items for which Germany could fairly be asked to make payment.  Mr. Lloyd George’s election pledge to the effect that the Allies were entitled to demand from Germany the entire costs of the war was from the outset clearly untenable; or rather, to put it more impartially, it was clear that to persuade the President of the conformity of this demand with our pro-Armistice engagements was beyond the powers of the most plausible.  The actual compromise finally reached is to be read as follows in the paragraphs of the Treaty as it has been published to the world.