"DISASTROUS."

Auckland Star, Volume LXIII, Issue 282, 28 November 1932, Page 7

"DISASTROUS."

BRITISH PAYMENT.

TREASURY WORRIED.

As Injurious to Receiver As

To Payer,

DEFAULT TALK SCOUTED. (United T.A.-Electric Telegraph—Copyright) (Received 11.30 a.m.) LONDON, November 27. . Mr. Ramsay Mac Donald and other Ministers were busy to-day preparing the draft reply to the United States. It will be ready for Cabinet on Monday. It is believed it will be an impressive document, practically a manifesto, which it_ is hoped will result in the modification of America's attitude. : • It is understood the Government recognises clearly that the p-esent issue is not the debt itself, but the question of the December payment. It holds strongly that the payment will prove disastrous both to the payer and the receiver alike. The best city opinion stresses the fact that the moratorium is only a subsidiary issue, and that unless it. is followed by drastic debt revision Britain will probably be compelled to default in 1933, and Germany will force the issue by declaring a complete moratorium on long-term foreign debt. The decline in sterling, complicated by the floating debt, is reported to be worrying the Treasury. The Bank of England has expanded nearly £300,000,000 since April and has readied the rccord figure of £580,000,000. Even if this is reduced by £150,000,000 at the end of the financial year, owing to an unexpected surplus in revenue, it will still be unreasonably high. . Regarding the British reply to the American refusal of the war debt moratorium suspension request, the Chancellor of the Exchequer, Mr. Neville .Chamberlain, said yesterday that Britain would, take the occasion to develop in greater detail the reasons which led her to make the original request. The 'bestinformed newspapers recognise that, the negotiations with America, in so far as they affect next month's payments, are not concerned with Britain's ability to discharge them, but with the advisability ; of America receiving them. The widespread suffering and loss of trade affecting the prosperity of the whole world which has resulted from the handling of the debts problem during the last two years was referred to in a speech on the war debts crisis by the • Prime Minister, Mr. Ramsay Mac Donald, at Retford. Britain's Heavy Sacrifice. "During the war,", he said, "we shared with-America the task of financing the Allies, and the total loans we made amounted almost exactly to the same as the loans made by the United States. The British taxpayer had to bear a heavy charge for interest on them. "Immediately after the war, the Government pointed out that the burden of these debts threatened to cloud not only the financial but the political conditions of the world, and we offered years ago to. enter into any equitable arrangement for reduction or cancellation of interAllied debts, provided that such an agreement applied all round. The proposal ■was not adopted and we were_ called upon to fund our debts to America, for the situation had to be> regularised.

The British Government sitill decided to carry through its policy in so far as it could, declaring that in no event did it desire to make a profit out of reparations and war debts. That was contained in the famous Balfour Note of 1925.

"It was stated also that we were prepared to take no more from our debtors than was necessary to pay our creditors. Under this arrangement we have slowly written off GO per cent of the debts due to us, and owing to the fact that we funded our debt to America some years before we funded the Continental debt due to us, we.have, in fact, up to date paid approximately £200,000,000 more to America than we received from Europe.

"We have done it uncomplainingly. It •was all in the day's work. This was the situation two years ago, and then the crisis broke out which very nearly •wrecked some countries, and the whole .system of international debt payments has broken down. In . these countries every nation, large and small, is suffering to-day on account of the way in which war debts have been handled. Debt Strangling Prosperity. "The loss of trade outweighs tenfold, or twentyfold in some respects, the actual amount of those debt payments. Confidence and credit cannot be restored until an end has been put to these attempts to force the stream of capital to run uphill.

"It was in this spirit that we went to the Lausanne Conference and there, for the first time, we got a general agreement among the European Governments, This vast nexus of inter-Gov-ernmental debt which is strangling the prosperity of our peoples must_ be cleaned up. That was the great achievement of Lausanne, so far as Europe was concerned. We were in agreement, but our agreement had to be concluded by a similar action on the part of the United States in order to enable the world to go round again on its economic axis.

"It is in the first place necessary to free the world from the crushing loads and the impenetrable entanglements of war debts which, while legal, are operations tantamount to economic madness. These payments have done as much as the Great War did to impoverish the •nations, both those paying and receiving, to ruin the people and to turn millions of men and women on to the, streets with their bodies steadily starving and their minds being steadily darkened."

The "Morning Post" says: "It has been suggested in certain quarters that Britain must default because she cannot pay." That would simply be ludicrous if it were not so mischievous. However inexpedient payment may be in the general interest the plea of incapacity would deceive 110 one here, still less our creditors in America.

"However, if between now and December 15 America can be dissuaded from the coursc indicated in Mr. Hoover's Note, so much the better for everybody, •but if not default cannot merit a moment's ccaifidderation."