THE FRENCH DEBT.

Auckland Star, Volume LVII, Issue 200, 24 August 1926, Page 9

THE FRENCH DEBT.

WHAT ABOUT MODIFICATION?

THE WHITE PAPER LETTERS,

(From Onr Own correspondent.)

LONDON, July 14.

While the settlement of the French debt, to make which M. Caillaux dramatically flew across the Channel, is in the main that made last year by Mr. Churchill, there are modifications to be recorded.

The agreement to accept 62 annual payments of £12,500,000 or their equivalent remains, so that the debt is still standardised at four-fifths of what is in fact due to us from France.

In view of the disordered condition of French finance, it has, however, been arranged that for the first few years the payments shall be much smaller than the average amount payable. This year the payment will be £4,000,000; next year, £6,000,000; the third year, £8,000,000; the fourth, £10,000,000; and the fifth, £12,500,000. After the thirtieth year the annuity will rise to £14,000,000. The annJal payment covers the discharge of all debts and accounts as between the two parties; all outstanding special debts and credits are cancelled. It is an arrangement that benefits France in some respects, and this country in others. On the one hand, Great Britain will receive £6,000,000 in all this year, since £2,000,000 of French money now in London will be transferred to the British Exchequer. Moreover, subsequent French payments will be larger in the earlier years, but smaller in the later years, than to tho United States. The annuities payable are more evenly distributed, and this at least is an advantage to us, since present cash payments are worth more than deferred payments.

A notable point is the demand from France for power to modify payments in the event of Germany defaulting. In the White Paper issued last night, according to M. Caillaux's letter, the French Government reserves the right in such an event of asking the British Government to reconsider the question in the light- of all the circumstances , then prevailing.

Mr. Churchill, in his reply, says: "His Majesty's Government must maintain the position that the settlement why we have arrived at of the Freic% wai debt to this country depends, like that debt itself, on the sole credit of France. You will realise that in the hypothetical circumstances that you mention, Great Britain would already have euffered a diminution of the receipts from the Dawee scheme, which we have taken into account in arriving at the various debt settlements, -and this is one of the factors whidi would have to be borne in mind in the event of any reconsideration of the question being desired by the French Government. Subject to this I do not object to the statement that you make. In the event cf any modification being made, I should expect, in prder to secure equal treatment among creditors, that other creditors of France would take into consideration a corresponding modification of debts due to them.* .

Attention;, is being called to-day to the fact that Great Britain undertakes not to commercialise the French bills. <3reat Britain, for her part, hard to agree in her own funding terms with America to concede America's right to put the British bills on the market whenever she wanted. America, of course, would ■never thus insult a good debtor, and Great Britain, as the history of our time proves, would not thus insult any debtor. But why did M. Caillaux insist?

"The only practical value (if any) of the clause to France," says the "Manchester Guardian," "would be in the contingency of a French intention to default over to-day's agreement—a contingency which no one entertains. The explanation must be that M. Caillaux is so perturbed about the franc that he wants to lay even bogies. Naturally French credit could never stand either a British or an American commercialisation of her bills, but M. Caillaux knows that her bills would never be commercialised in London."

Mr. Runciman, as a finance expert, on being asked what he thought of the settlement, said it contained one or two doubtful things. One was, does the letter written by M*. Caillaux, and replied to by Mr. 'Churchill', mean that this agreement lapses if and when Gefmany fails in her reparation payments to France? And if the agreement lapses, does it mean that there must be a transaction de novot Or does it mean that there is to be a mere interruption of the agreement, and that the amount for which France is liable becomes a direct liability on Germany? It looks on the face of it as if the French would be entitled to claim that the present agreement was of that nature, and that a new agreement would have to be negotiated if at any time Germany failed in her payments.