Financial conference at Calais

On 24 August 1916 an Anglo-French conference on financial matters met in Calais. It brought together the finance ministers of the two countries, the British Chancellor of the Exchequer, Reginald McKenna, and the French Minister of Finance, Alexandre Ribot. According to Ribot’s diary, published in 1936, the French minister pressed for the heads of both governments to be present at the talks as well, and his correspondence shows that the British Prime Minister, Herbert Henry Asquith, was in Calais. The conference ended with the signing of a protocol on new British credits for France.

The dispute over American loans

Both sides were finding it ever harder to obtain dollars for purchases of arms, munitions and raw materials in the United States. According to Ribot’s diary, at the inter-Allied conference in London in July the ministers had agreed that for the time being they would only sell foreign securities or raise loans against them through specially created companies, which issued their own bonds on the market. The own credit of Britain and France was to be saved for a great joint loan that the Allies wanted to raise in America after the presidential election of 7 November. France took this route. In the summer the American consortium American Foreign Securities, set up by the Morgan bank, National City Bank and Guaranty Trust, granted the French Treasury a three-year loan of 100 million dollars secured on American and neutral securities.

On 18 August the French learned that McKenna was raising a public loan of 250 million dollars in the United States, directly in the name of Great Britain, secured on American, Canadian and neutral securities. Ribot regarded this as a breach of the recent agreements. That same day he wrote to London that if England itself pledged the best securities in America, France would have nothing with which to secure further loans, either its own or joint ones. The French chargé d’affaires in London, for his part, had reported as early as the beginning of August that the British Treasury itself was in growing difficulties and was hesitating over whether it could go on financing the Allies.

Gold for credits

At Calais McKenna set out the difficult position in which the British Treasury found itself. The two sides concluded a new agreement. Britain opened credits of £150 million for France, and in return the Banque de France was to lend the Bank of England £50 million in gold. It was another arrangement of this kind. Since the spring of 1915 France had been handing gold over to the British, receiving in return credits roughly three times as large, with which it could pay for purchases abroad. The French economist Gaston Jèze, who after the war described France’s war finances, pointed out that from the spring of 1916 the gold was no longer sold to the British but lent. The Bank of England was to return it as the credits were repaid. As a result the Banque de France’s gold reserves went much further than if they had been used to pay for purchases directly.

On 28 August Ribot sent the Calais protocol to the French ambassador in London, Paul Cambon. He wrote that Asquith had apologised on behalf of the government for McKenna’s mistake and asked that the incident be forgotten, but that he himself doubted whether the Chancellor would be able to go on issuing bonds against securities indefinitely and still meet his commitments to France and Russia. He admitted, however, that France, left to its own resources and weaker on the American market, could not have covered its enormous obligations on its own. “We have bound our fate to that of England, and it was the only thing we could do,” he wrote. He sought comfort in the events of the last few days: Romania’s entry into the war and Italy’s declaration of war on Germany. The British loan in America, according to a footnote by the editors of Ribot’s diary, met with only moderate success, and the Entente’s dependence on American money grew with every month.