The Press Friday, December 16, 1932. France's Default.

Press, Volume LXVIII, Issue 20731, 16 December 1932, Page 10

The Press Friday, December 16, 1932. France's Default.

It is ironical that France, who since the War has insistently proclaimed the sanctity of treaties, should bo the first country to break her debt-funding agreement with the United States. Even more ironical is the fact that a year ago France's political and financial hegemony over Europe seemed so complete that the United States Government, persuaded that France alone would be able to maintain her war debts payments in full, was almost effusively friendly towards her. M. Laval's visit to Washington was commonly thought, both in America and in Europe, to mark the conclusion of an informal alliance destined to have a controlling influence in world affairs for several years to come. The sudden estrangement of the two countries over the war debts issue must in part be attributed to the false hopes aroused by this event, hopes which Mr Hoover and M. Laval were unwise not to dispel. France disliked the Hoover moratorium from its inception, believing that its motive was not altruism but a desire to safeguard American investments in Germany. M. Laval went to the United States, so it was said, io seek an assurance from Mr Hoover that, in the event of the moratorium on reparations payments being extended, the United States would make compensatory reductions in war debts claims; and a somewhat equivocal statement by Mr Hoover about the need for a readjustment of the Young Plan created the impression that such an assurance had been given. The indignation throughout France against the demand for payment of the December war debts instalment is duo mainly to the belief that Mr Hoover ; has been playing a double game. The j belief is unfounded; but it is at least true that the policy of the United States Government in relation to intergovernmental debts has been deplorably short-sighted and inconsistent. As under the Young Plan France received from Germany twice as much as she was 'paying to the United States, it should have been realised in Washington that the Hoover moratorium gave , her a strong and just claim to revision lof her funding agreement. The State Department's view that war debts and reparations are not connected may be true in a narrow legalistic sense; but it is in violent contradiction to the whole history of the post-War period. Though the main canso of France's default is political, it is probable that the Government's financial embarrassments also influenced the decision of the Chamber of Deputies. The prospective Budget deficit is about £120,000,000; and although in relation to the country's financial resources this figure ought not to bo dangerously large, the instability of French politics makes Budget deficits very difficult to overtake. Nevertheless, the American view that France could have paid, and for political reasons did not choose to pay, is substantially correct. It is still too early to say whether the decision of the Chamber of Deputies is a disaster or a blessing. The danger is that, by arousing in America a wave of indignation against Franco and the other countries who have followed her example, it will accentuate the isolationist tendency of American foreign policy. As America's attitude must largely determine the success of the Lausanne agreements, the Disarmament Conference, and the World Economic Conference, to look only to the immediate future, the possibility is a disturbing one. The latest cables from Washington show, however, that in Government circles at least tho immediate reaction to France's. default has been realistic rather than emotional. It is wisely realised that only generosity, and prompt generosity at that, will prevent default from developing into repudiation.