d up for Europe some prospect of financial stability and
reconstruction.

The further elaboration of these ideas, however, must be left to Chapter
VII., and we must return to Paris. I have described the entanglements
which Mr. Lloyd George took with him. The position of the Finance
Ministers of the other Allies was even worse. We in Great Britain had
not based our financial arrangements on any expectations of an
indemnity. Receipts from such a source would have been more or less in
the nature of a windfall; and, in spite of subsequent developments,
there was an expectation at that time of balancing our budget by normal
methods. But this was not the case with France or Italy. Their peace
budgets made no pretense of balancing and had no prospects of doing so,
without some far-reaching revision of the existing policy. Indeed, the
position was and remains nearly hopeless. These countries were heading
for national bankruptcy. This fact could only be concealed by holding
out the expectation of vast receipts from the enemy. As soon as it was
admitted that it was in fact impossible to make Germany pay the expenses
of both sides, and that the unloading of their liabilities upon the
enemy was not practicable, the position of the Ministers of Finance of
France and Italy became untenable.

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 nece