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A Small Nation in the Turmoil of the Second World War

A Small Nation in the Turmoil of the Second World War: Money, Finance and Occupation (Belgium, its Enemies, its friends, 1939-1945)

Volume: 35
Copyright Date: 2009
Published by: Leuven University Press
Pages: 494
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  • Book Info
    A Small Nation in the Turmoil of the Second World War
    Book Description:

    Based on intensive research in the archives of six countries, this monograph presents an in-depth analysis of Belgium’s monetary and financial history during the Second World War. Exploring Belgium’s financial and business links with Germany, France, The Netherlands, Great Britain, the United States, and the Grand Duchy of Luxembourg, the study focuses on the roles played in this complex wartime network by the Central Bank and private bankers in Brussels, by the Belgian government in exile in London, and by the Belgian minister plenipotentiary in New York. Among the many subjects arising in the course of the analysis are: German attempts to plunder Belgium and Belgian resistance strategies; the peripeteia of the Belgian gold reserve, given in custody to the central banks of France and Great Britain; the role of the Belgian Congo; Belgium’s participation in the discussions leading up to the Bretton Woods conference; and the negotiations for creating a Customs Union, the so-called Benelux, blueprint for the 1958 Treaty of Rome. The final part of the book analyzes the famous monetary reform devised by Belgian Minister of Finance Camille Gutt at the liberation of the country in September 1944. A Small Nation in the Turmoil of the Second World War is a magisterial contribution to European history, Belgian history, and the history of the Second World War.

    eISBN: 978-94-6166-052-7
    Subjects: Economics

Table of Contents

  1. Preface
    (pp. 13-16)
    Herman Van der Wee and Monique Verbreyt
  2. CHAPTER 1 Prelude to a New World Conflict
    (pp. 17-32)

    The inter-war years (1918-1939) proved to be a very difficult period for one Belgian institution in particular; this was the National Bank of Belgium (referred to simply as ‘the Bank’ in what follows). A chaotic government policy failed to curb war inflation after peace was concluded in 1918. The Belgian franc therefore remained under pressure, progressively losing ground on both the domestic and international exchange markets against the American dollar and the pound sterling, the two international reserve currencies at the time. The Bank took action and used its powers of persuasion in an effort to reverse the situation, but...

  3. CHAPTER 2 The Blitzkrieg and the Banque Nationale de Belgique
    (pp. 33-46)

    In the small hours of 10 May 1940, a spring day that brought the sun with it, German fighting units poured across the south-eastern border of Belgium: the feared attack was under way. For Hitler, it was a new phase in his obsessive plan to reorganize the political and socioeconomic face of Europe into aGroszraumunder German hegemony. The time of European nation states – in his view, a time of destructive, mutual conflicts and murderous economic competition – was dead and gone. What theFührerproposed in their place was a new entity, a unified Europe under German leadership that,...

  4. CHAPTER 3 France and the Monetary Crisis
    (pp. 47-60)

    The negotiations between France and Belgium to give definitive form to the provisional monetary agreement of 14 May were resumed on 20 May¹. Progress was slow and difficult, especially as Great Britain had to be taken into account in the three-country agreement conceived in Paris. Communication worsened by the day, particularly cross-Channel communication, and this decided Gutt to leave for London on 23 May. He hoped for fruitful consultation there regarding the half-finished discussions in Paris over that agreement, but also wanted to take advantage of the occasion to conclude an Anglo-Belgian agreement, already hinted at during the Paris meetings....

  5. CHAPTER 4 A Rudderless Belgian Government
    (pp. 61-78)

    The French government’s headlong flight from Paris on 10 June triggered an immediate and chaotic dash southward of all French central administrative services. The government installed itself provisionally at Bordeaux and in the vicinity, and was joined there a short time later by theBanque de France.By then, the Belgian government and its two to three thousand officials had already experienced a substantial peregrination. It had arrived at Poitiers on 23 May, hoping to be able to organize itself suitably there, but scarcely three weeks later had been requested to move on to Sauveterre-en-Guyenne, a small village of barely...

  6. CHAPTER 5 In the Aftermath of Belgium’s War Drama in France
    (pp. 79-92)

    As stated in the previous chapter, Janssen transferred broad areas of competence to his deputy Ingenbleek, before he left for Brussels. The first concerned the conversion in France of French money into Belgian by Belgian refugees returning to their own country. Additionally, he was to act as State treasurer and State banker to the Belgian government at Vichy. Lastly, he was given responsibility for repatriating the Bank’s assets.

    The conversion of French money into Belgian was beset by many difficulties to which both the refugees and the Bank fell victim. Confronted by the virtually insuperable difficulties in exchanging their money...

  7. CHAPTER 6 The Installation of the German Administration
    (pp. 93-108)

    As indicated above, the evacuation of government departments had been poorly planned, if indeed there was any planning at all. Soon after the German invasion not only had the parliamentary representatives and the government quit the country, but they had been followed by many officers of the central administration, the sole exception being the magistrates, most of whom, both locally and centrally, remained at their posts¹. The situation was repeated at the Bank and among the other semi-public institutions: many officials and white-collar workers had slipped across the border to join their institution in France. The officials of the Postal...

  8. CHAPTER 7 The Establishment of the Banque d’Emission
    (pp. 109-126)

    In retrospect, the negotiations with Möckel and Heppner appear to have been no more than an initial exploration of the terrain on the part of the Germans, pending the long-term organization of theBankaufsichtamtthat was to be set up at Brussels. Instructions for this were being awaited from theReichsbankin Berlin and finally arrived on 9 June, theReichsbankalso announcing the leadership of the new body. It was to be headed by von Becker, with Hofrichter as his deputy¹. The two had received concrete instructions from theReichsbank² which they laid before a delegation of Belgian bankers...

  9. CHAPTER 8 The Politics of Accommodation in Daily Reality
    (pp. 127-148)

    At its establishment on 27 June 1940, theBanque d’Emissionwas given a wide range of competences, in line with the view of the German administration and the founding fathers, who envisaged it as Belgium’s central bank for the duration of the war. However, the return of the governor of the Bank from France on 10 July and the repatriation of the substantial stocks of banknotes of the Bank from the strongroom at Mont-de-Marsan placed a check on the original plan for theBanque d’Emission. As theBanque d’Emissionwas not wholly ready with its new banknotes by the time...

  10. CHAPTER 9 The Policy of Accommodation Put to the Test
    (pp. 149-166)

    The Currency Protection Office (Devisenschutzkommando) was notifying the Belgian civilian population as early as 21 May 1940 that free access to the hired safe-deposit boxes in the strong-rooms of the private banks was temporarily suspended. The hirers were requested to present themselves and, by appointment, to open their safe-deposit box in the presence of a representative of theKommando, who would verify the contents and list them. Should the hirers not appear, members of theKommandowould force the boxes and, after verification, draw up an authenticated inventory of the contents. Gold, foreign currency and securities would be deposited in...

  11. CHAPTER 10 The Looting of Gold
    (pp. 167-194)

    On 20 August 1940, during the negotiations of the Franco-German Armistice Commission at Wiesbaden, Richard Hemmen, head of the German delegation for economic affairs, found out that the Belgian gold had been evacuated to Dakar in Senegal¹. He immediately signalled the news to Brussels and Paris, and requested that steps be taken to have the gold repatriated as soon as possible². In this, the Germans skillfully played the safety card, touching the Bank’s governor in one of his most sensitive spots. At that time, no-one could doubt that Europe was a safer place than Senegal, as the situation in French...

  12. CHAPTER 11 In the Shadow of Janssen’s Death
    (pp. 195-206)

    Janssen’s death on 6 June 1941 thoroughly dislocated the operation of the Bank and theBanque d’Emission,of which he was respectively governor and chairman. Although Belgian government circles in London certainly valued him as a person, they, nevertheless, had become increasingly critical of his policy and had taken particular exception to the stance he had taken in the question of the gold, which they regarded as a very grave error¹. After the war, because of the courage he had shown and his old friendship with Gutt, all these errors, however, were to be treated tactfully.

    The death of Janssen...

  13. CHAPTER 12 The Gold Cover and the Clearing System under Discussion
    (pp. 207-230)

    The growing circulation of banknotes during 1941 placed the Bank in a dilemma regarding the legal requirement to hold a minimum quantity of gold – 40 per cent – as cover for its direct obligations to pay cash. That requirement dated back to 1850, the date of the institution’s establishment, when the minimum quantity was set at 30 per cent. That minimum had been raised to 40 per cent in 1926 and had been reaffirmed in article 7 of royal decree of 24 August 1939¹.

    With the occupation, the question of the cover requirement surfaced again. Within a very short time, the...

  14. CHAPTER 13 The Installation of the Banque Nationale de Belgique in London
    (pp. 231-242)

    After the French defeat in June 1940, the British government was greatly disappointed by the decision of the Belgian ministers to give up the struggle against Germany and to return to Belgium, if possible. The British had few illusions about the help that could be expected from occupied Belgium and her vacillating government, but were concerned about the Belgian Congo. No later than 20 June, the British Foreign Secretary, Lord Halifax, had informed the Belgian ambassador, Cartier de Marchienne, that Great Britain could not countenance the Belgian Congo falling within the German sphere of influence. Was this a warning shot...

  15. CHAPTER 14 The Banque Nationale de Belgique in London in the Maelstrom of War
    (pp. 243-262)

    Just before leaving France for Belgium in early July 1940 Jannsen had asked Montagu Norman, Governor of the Bank of England, what he was doing about the instruction to transfer the Belgian gold from London to the Federal Reserve Bank of New York¹. Norman replied with the vague words: ‘…we are taking steps to deal with the gold held here for the National Bank of Belgium on the lines set out in the memorandum(of)8th June’². In a letter of 18 July, Baudewyns also asked Norman what progress had been made with the transfer³. Norman again answered in...

  16. CHAPTER 15 The Proceedings against the Banque de France in New York
    (pp. 263-282)

    The telegram Kauch sent from Toulouse to New York on 26 January 1941 to inform Theunis, Belgian Ambassador Extraordinary to the United States, of the transfer to Germany of the Belgian gold entrusted to theBanque de Francewas couched in somewhat cryptic terms: Theunis was told that it was now up to him to undertake action in New York against theBanque de France. Exactly why these instructions were not more explicit and why it was not clearly stated who was giving them are questions that still remain unanswered¹. But it was clear that Theunis had to decide on...

  17. CHAPTER 16 The Payment Orders ‘Laut besonderer Mitteilung’
    (pp. 283-296)

    The winter of 1941-1942 proved to be the turning-point in the fortunes of the belligerents. For Nazi Germany, it was a period of reverses. The failure of the ‘Barbarossa’ Blitzkrieg offensive in the Soviet Union and the enormous loss of men and material during the overwintering of the German army in the bitter cold of the Russian steppes, capped by the United States’ entry into the war on the side of the Western Allies in December 1941, represented major setbacks for a regime that had thus far gone from one victory to another. The reverses also had unmistakable repercussions on...

  18. CHAPTER 17 The Creation of a United Front
    (pp. 297-310)

    The memorandum approved unanimously by the management on 3 October 1942 was submitted to the Bank’s supervisory council and theBanque d’Emission’s board of directors on 8 October. The next day the supervisory council examined it¹. Bekaert declared that the Bank should refuse to co-operate in financing German purchases on the black market and, to that end, should develop a supervisory system that would examine every transaction. Berger and Van Nieuwenhuyse, present at the meeting, demurred, unconvinced of its viability and preferring a general measure, more particularly the abandonment of the 1940 convention. Bekaert, an experienced and pragmatic businessman, and...

  19. CHAPTER 18 The Rupture of the United Front
    (pp. 311-326)

    On 3 November, the dramatic events of the ‘All Saints’ weekend were revealed to the founder-bankers and the Bank’s supervisory council. Galopin, in his personal notes, regarded making the payment as ‘unconditional surrender’ that severely weakened the Belgian negotiating position and consequently boded ill for the future. He was also critical of the opinion given by the two jurists, who had recommended that the payment be executed so that negotiations could be continued. But how were they to be continued? By hostages? The Bank and theBanque d’Emissionnow had to get agreement to the unacceptable demands of 16 October....

  20. CHAPTER 19 Towards the End of the Occupation
    (pp. 327-344)

    The repercussions of the turn of the tide for the German armies since 1942 were also felt at the Bank and theBanque d’Emission. Their pressure to have a more effective say in clearing operations now found greater response from the Military Government, handicapped as it was by an increasing shortage of qualified German personnel¹. Internally, theBankaufsichtamteven agreed that it was pointless to oppose the growing resistance by threatening to close the two institutions².

    At the same time, however, the Berlin government began to take a much tougher line towards its own officials in Brussels. One of the...

  21. CHAPTER 20 The Liberation in Sight
    (pp. 345-360)

    The fact that the relationship between the Bank and theBanque d’Emission,on the one hand, and theBankaufsichtamt, on the other, remained tense, was due not so much to the occupying authority, which was inclined to adopt a more flexible line, but to the chief person on the Belgian side, namely the director Vandeputte. He was a stickler for the rules, never failed to spot an irregularity and subjected every dossier to the same perfectionist eye.

    A major point of resentment continued to be the occupier’s practice of requisitioning¹. This had already been widespread in the early period of...

  22. CHAPTER 21 Preparation in London for Post-War Belgium
    (pp. 361-374)

    By the late autumn of 1940, it had become evident to everyone in London that the Germans had lost the Battle of Britain, and hope had began to dawn that the final victory would be for the Allies. The Belgian government in exile now judged it opportune to start studying the post-war reform of Belgium’s institutional structure, not only political reform, but also plans for a new socio-economic system¹. Around the same time three prominent Belgian socialists who had fled to London – Jef Rens, Max Buset and Louis de Brouckère – had planned to set up a Belgian Committee for the...

  23. CHAPTER 22 The Build-up to Post-War International Cooperation
    (pp. 375-384)

    Quite early during the war, Gutt, supported by Theunis, began to play with the idea of setting up a form of monetary and economic cooperation with the Netherlands. The idea first crystallized in discussions during the spring of 1941 between Gutt and Johannes van den Broek, head of the Dutch Economic Mission in the United States. Before the war, they had been members of the international tin cartel and their work together had engendered a mutual respect. Encountering each other in New York, and now with government responsibilities, their talks were chiefly about how the post-war economy in Europe ought...

  24. CHAPTER 23 Belgium and the New Economic World Order
    (pp. 385-394)

    The problems exercising the governments and central banks in London and Washington were much broader than the setting of new, more realistic exchange rates aimed at economic recovery in Western Europe after the war. In particular, there was the question of a new economic world order. Everyone was agreed that the ending of the war would provide a unique opportunity to rid the world of the pre-war monetary chaos and to harness international cooperation to achieving a stable and ordered system of free world trade and unhindered payment flows.

    In June 1942, Gutt invited the famous English economist John Maynard...

  25. CHAPTER 24 The Return from London
    (pp. 395-412)

    When Brussels was liberated on 4 September 1944, the Bank’s management had all the counters closed and waited for instructions from London. However, these did not arrive immediately and the Brussels board of directors found itself in a state of temporary paralysis. A degree of clarity was provided by Prime Minister Pierlot’s address on the government’s return to Belgium on 8 September, in which he declared that all appointments made in Belgium during the war were to be regarded as null and void. At the same time, he elucidated the measures taken by the government a few days earlier in...

  26. CHAPTER 25 Back to Normality
    (pp. 413-424)

    Three major questions remained to be resolved with theBanque de France: the cost of the abandoned legal proceedings in New York; the decisions to be made when theCaisse d’Epargne du Luxembourgdemanded the return of the gold it had deposited with the Bank; and the steps to be taken by theBanque de Franceto recover Belgian gold that might be found in Germany or elsewhere. The first question was resolved rapidly and satisfactorily. During the October negotiations, it had been agreed that, with the exception of lawyers’ fees, legal costs would be shared between the two central...

  27. CHAPTER 26 The End of an Era
    (pp. 425-440)

    The Gutt Operation was an extremely large-scale undertaking. At the 2,158 bank branches and post offices accredited for the purpose, no less than 1.3 million individuals applied to exchange old banknotes for new¹. Between 9 and 12 October, a total of 14.4 billion Belgian francs’ worth of banknotes were exchanged and a further 73.6 billion francs’ worth of old banknotes were declared and deposited, but not exchanged. The Bank estimated the stock of banknote’s held by banks, public, semipublic and assimilated institutions at 2.5-3 billion francs, meaning that an overall amount of 92.5-93 billion francs’ worth of old banknotes had...

  28. CHAPTER 27 The Commission of Enquiry and the Legal Investigation
    (pp. 441-452)

    The euphoria-inducing sound of Allied tanks rolling into the country had barely died away before the settling of scores began. The hour of repression had struck in Belgium and the hunt began for the culpable, for those deemed responsible for four wretched years of occupation and privation. In the dramatic one-liner later uttered by Ingenbleek: ‘Les dieux avaient soif’ (‘The gods were thirsty’)¹.

    On the proposal of the ministers returned from London, a decree was issued on 11 December 1944, whereby a Commission of Enquiry was set up with the specific task of examining and assessing as soon as possible...

  29. Epilogue
    (pp. 453-460)

    This has been a lengthy book to write and its writing has taken many years of research, demanding close examination of countless items from the archives of prestigious institutions in Belgium and abroad. In their research, moreover, the authors were never shy of ‘picking the brains’ of eminent historians, politicians and journalists who, on paper or on tape, had recorded their fascination and knowledge about the Second World War. And yet the book leaves many questions still unanswered – essential questions to which the interested reader would no doubt have expected a clear answer. Could it be that, despite all the...