At the commencement of your last session I had reason to hope that, emancipating themselves from further unavailing discussions, the two Governments would proceed to settle the Central American questions in a practical manner, alike honorable and satisfactory to both; and this hope I have not yet abandoned. In my last annual message I stated that overtures had been made by the British Government for this purpose in a friendly spirit, which I cordially reciprocated. Their proposal was to withdraw these questions from direct negotiation between the two Governments, but to accomplish the same object by a negotiation between the British Government and each of the Central American Republics whose territorial interests are immediately involved. The settlement was to be made in accordance with the general tenor of the interpretation placed upon the Clayton and Bulwer treaty by the United States, with certain modifications. As negotiations are still pending upon this basis, it would not be proper for me now to communicate their present condition. A final settlement of these questions is greatly to be desired, as this would wipe out the last remaining subject of dispute between the two countries. Our relations with the great Empires of France and Russia, as well as with all other Governments on the continent of Europe, except that of Spain, continue to be of the most friendly character. With Spain our relations remain in an unsatisfactory condition. In my message of December last I informed you that our envoy extraordinary and minister plenipotentiary to Madrid had asked for his recall, and it was my purpose to send out a new minister to that Court with special instructions on all questions pending between the two Governments, and with a determination to have them speedily and amicably adjusted if that were possible. This purpose has been hitherto defeated by causes which I need not enumerate. The mission to Spain has been intrusted to a distinguished citizen of Kentucky, who will proceed to Madrid without delay and make another and a final attempt to obtain justice from that Government.