GERMAN REPARATIONS

Dominion, Volume 22, Issue 218, 11 June 1929, Page 11

GERMAN REPARATIONS

REPORT OF COMMITTEE OF EXPERTS DEFINITE LIABILITY FIXED INTERNATIONAL BANK’S OPERATIONS The report of the committee of experts on reparations is published. The main effect of the committee’s work is to fix definite liability to cover Germany’s entire obligations. (British Official Wireless,) Rugby, June 9. The full text of the report of the committee of experts on Reparations, which was signed in Paris on Friday, will be issued during the week-end. Its main provisions, however, can be stated in general terms. The experts propose the establishment of an international bank with a capital of £20,000,000, to handle the realisation of German payments. In order that it may not enter into competition with existing institutions it is proposed to put the administration in the hands of existing central- banks, and so give them control over any operations that might merge into competition with them. It has not yet been decided in which country it shall place its offices, though Belgium, Holland and Switzerland have been mentioned. Present Value of the Annuities. The new plan of reparations is intended to come into full effect on September 1, 1929, when the new annuities proposed in the plan will, take the place of the Dawes contributions. There are 59 annuities. The first 37 have a present value of 1,988,800,000 marks, which with the 61,200,000 marks service of the German external loan of 1924 amount to an agreed annuity of 2,050,000,000 marks. There is a gradual rise as compared with the Dawes annuity after the first year, which continues to the end of the thirty-seventh year, after which there is a sharp drop, and thereafter they cover little more than the obligations of the creditor countries in respect of their net out-payments for war debts. German Institutions Escape From Tutelage. The annuities have been divided into conditional and unconditional. Germany may postpone the transfer of the conditional payments for periods not exceeding two years, subject to the approval of the Governments concerned, after they have been furnished with the report of the Advisory Committee. Part of the conditional annuities will be taken for ten years in delivery in kind. As for the unconditional payments, the responsibility for effecting the transfer in foreign currency reverts to Germany. The Reichsmark is defined in terms of fine gold and the conditions of convertibility are laid down. Thereby Germany escapes from the tutelage to which various German institutions were subjected under the Dawes Plan. The revenues from alcohol, sugar, tobacco, etc., are no longer controlled, railway and industrial bonds cease to exist, and the index of prosperity is abolished. The railways remain liable to contribution, which is to take the form of a direct tax to bring in 600,000,000 marks a year for 37 years, but complete independence of the German railways is assured. The plan, indeed, makes it clear that all the liabilities of Germany arising out of the war are covered by the annuities contained m the plan. Britains Share. The share allotted to Great Britain is less than it would have been if the experts had not abandoned the percentages agreed upon by the Finance Ministers in 1925. There are said to be compensating advantages, one of which is that Great Britain will receive a fixed proportion for her variable debt payments in earlier years. In the concluding chapter of the report the experts plead for the obliteration of the atmosphere left by the war, and stress the need for co-operation and goodwill in carrying out the settlements, which they say should have the effect of bringing all the nations concerned to a higher level of economic stability and reaching a closer understanding than ever before. ... The report has now to be submitted to the various Governments concerned for their adoption. The experts ask that it shall be accepted as a whole. MAIN EFFECT OF EXPERTS’ WORK LIABILITY DEFINITELY FIXED Rugby, June 8. The full text is now available of the report of the committee of experts on Reparations. The main effect of the committee’s work, which has been achieved with unanimous agreement, is to substitute a definite fixed liability to cover Germany’s entire obligations of reparations for the determinate scheme launched by the Dawes Conference in 1924. Thereby it is expected that the financial, economic and industrial interests throughout the world will benefit. At present under the Dawes Plan Germany pays the equivalent of £125,000,000 a year for an indefinite period. By the new plan she will make 37 annual payments of an average value of practically £99,450,000. With the service of the Dawes loan such payment amounts to an average annuity of £102,500,000. The plan comes into operation on September 1, 1929. Progressive Increase in Payments. The first full year begins with an annuity of £85,400,000 and the annual payments increase progressively until in the thirty-seventh year the annuity is £121,450,000. Then for a further period of 22 years Germany, with the assistance of the special reserve fund of the International Bank, is to make much smaller annual payments, just to cover the Allied war debts, varying between £80,000,000 and £85,000,000. It is important to note that while no juridical connection exists between the reparations and the war debts, the experts have made a de facto relationship between them. They provide that if there is any reduction in the debts during the first 37 years, two-thirds of this relief shall profit Germany and

one-third shall benefit the creditor concerned. During the last 22 years Germany would benefit by the whole of the relief. Of each of the first 37 annuities, a sum equal to £33,000,000 is payable without any right of postponement. The committee recognises that this is a conservative amount, but it considers it wiser to underestimate than to run a risk of weakening German credit by fixing it too high. France’s share in this unconditional portion is As to the major part of the annuity, Germany, by giving 90 days’ notice, can, in the event of grave economic difficulties suspend it for a period of two years. The constant rise in the annual payments is to reflect the anticipated increase in Germany’s prosperity. Sources of Annuities. The sources of the annuities are to be the German railways and the budget of the Reich. The experts have decided to maintain deliveries in kind for a period of ten years. During the first year their value will be £37,500,000, but they will decrease progressively to £15,000,000 in the tenth year, when deliveries in kind will cease altogether. The disbursement on this account will be managed by the International Bank. Of these deliveries Great Britain takes 23 per cent, and France 54 per cent. As to Great Britain’s share in the whole annuity, the object of the British experts has been first of all to provide year by year cover for cover for the American debt, leaving over and above this a constant sum to meet the Dominion claims. In the first full year, beginning next April, Great Britain receives £18,350,000 out of a total annuity of £85,400,000. The largest sum that comes to her is £22,850,000 in 1940. In the last of the 37 years she receives £20,500,000 out of a total of £121,450,000. The net result from Great Britain’s point of view is that her share is somewhat lower than would come to her on the existing basis. The International Bank. In regard to the International Bank, which, is to be established, the report says: “The bank excludes from its procedure all political influences and Business principles and practice intervene to facilitate the settlement of Germany’s obligations without in any way qualifying her independent and sole responsibility. The office for the Reparation payments and its associated organisations in Berlin will be retired and the Reparation Commission’s relations with Germany will be terminated. Germany will assume responsibility for raising and transferring the annuities and the bank will take over the work of their receipt and disbursement.” BENEFITS TO GERMANY Australian Press Association. (Rec. June 10, 7 p.m.) London, June 10. The “Daily Telegraph's” diplomatic correspondent says the first impressions of the Reparations report is that it is decidedly favourable to Germany. While retaining complete financial autonomy, Germany retains the benefits of the transfer or safeguard clause enabling her during a period of depression to suspend temporarily either the transfer abroad or-even the payment of two-thirds of the average annuity. France also stands to benefit from the new banking institution.