WAR DEBTS

Evening Post, Volume CXV, Issue 102, 3 May 1933, Page 10

WAR DEBTS

AMERICA'S STAND

LOANS AND REPARATIONS

THE FUTURE

In an address to members of the Rotary Club yesterday, Mr. Walter Nash, M.P., dealt with the complexities and difficulties of the war debt problem. Mr. Nash p'ointecl out that the debts were in three forms: —(1) Reparations pnyable by the defeated Power to the Allies; (2) loans raised between the Governments of the Allied countries, now referred to as intergovernmental debts; and (3) | war loans raised internally by 'feaeh country borrowing from its own citizens. It might be advisable to cancel or reduce war debts, but the full implications and meaning of the proposal should be understood before any promises were made. Tho history of reparations, said Mr. Nash, commenced with the report of the Committee of. Experts, which included Lord Cunliffe, governor of the Bank of England, Sir G. C. Foster, Canadian Minister of Finance, and Mr. W. M. Hughes, Prime Minister of Aus^ tralia. This Committee reported to Lloyd George in 1919 that the direct cost of the war was twenty-four thousand million pounds, and that Germany and the other defeated Powers :eoukl pay this sum at the rate of one thousand two hundred million pounds per annum., This was reduced in 1921 to a capital sum of six thousand six hundred million, plus 26 per cent, of Germany's exports, estimated to produce between one hundred and fifty million pounds and one hundred and sixty million pounds per annum. In 1924 a furthor adjustment was made under the Dawcs Plan, when the capital sum for repayment by Germany was estimated at two thousand two hundred million. Following this came the Young Plan, which reduced the payments to about two thousand million pounds, and provided for annual payments ranging from eighty-two million pounds to one hundred and seventeen million pounds over a period of fifty-eight years. In 1932, at Lausanne, it was agreed to .accept a, final payment of ono hundred and fifty million pounds, with, a moratorium for three years, or until such, time as it was determined that Germany could pay. \ INTERNAL LOANS. The repayment of loans raised internally by the respective countries from their own citizens for war purposes might ultimately be the major problem, said Mr. Nash, as it was impossible to give different treatment to those who invested money in war loans from those, who, invested money iii ordinary loans. The magnitude of the problem of arriving at an equitable adjustment was shown by the fact that in 1931 the internal indebtedness of the main countries was:;— £ Great Britain 6,600,000,000 U.S.A. ...... 1. 3,200,000,000 Franco . 2,300,000,000 Germany ...... .. 500)000,000 The problem was a difficult one, and he felt that ultimately it would be necessary to scale down all debts. . INTER-GOVERNMENTAL DEBTS. The section of the war debt problem around which controversy ranged, said Mr. Nash, was the debts owing by the respective Allied Governments to each other, and in particular from the European countries to tho United States. Prior to the entry of the United States into tho war Great Britain's war purchases from America amounted to six hundred and sixty-six million pounds. These purchases were financed by the sale of gold—and American securities held by British investors —and by tho raising of loans by Britain' in the United States. These loans (with tho exception of twenty-eight million pounds due in 1937) have all been repaid. The money, now due is for advances made by the United States to Britain from April 1, 1917, to June 30, 1919. At par these loans totalled oight hundred and fifty million pounds. Whilst Britain was contracting these debts to the United States she loaned to the other Allies tho sum of sixteen hundred million pounds. BRITAIN'S OFFERS. In February, 1920, Britain offered to wipe put all debts. • The offer was repeated six months later by Lloyd George, and was declined on each occasion. . ■ .' The Balfour Note addressed to all the Governments, concerned in August, 1922, among other things, said: "The policy favoured by H.M. Government is ■. " . ~: that of ' surrendering its' sharo of German, reparations, and writing- off, through ono great transaction, the whole body of inter-allied indebtedness. But if this be found impossible of accomplishment, we wish it to be understood that wo do not in any event desire to make a profit out of any less satisfactory arrangement. In no circumstances do wo propose to ask more from our debtors than is necessary to pay to our creditors." Thisi policy was generous from Britain's point of view, as the amount owing to her, irrespective of reparations, was nearly twice the sum she owed to the United States. The obvious answer of the United States was that she had everything to Ibso by such ' a transaction, and on the surface nothing to gain. The offer was declined, and in December, 1922, the debt of Britain to the United States was funded, 4}. per cent, interest being paid between the date of loan and funding, and 3.3 per cent, from the funding date until the principal had been repaid, the payment .of interest and principal to extend over a period of 62 years. Britain has faithfully kept this arrangement, said Mr. Nash, but the tariff barriers of U.S.A. are making payment more difficult as each year passes. Successive efforts to obtain cancellation, adjustment, or reduction have failed up to the present, and that there is a splendid case for readjustment is shown by the fact that the United States (as it might reasonably be charged against Britain during the period of previous wars) has improved her financial position. ■ The United States of America, at the Commencement of the war in 1914, had an external debt of. six hundred million pounds. In 1928 shje had an external credit of three thousand million pounds. • ~ WHAT HAS BEEN PAID. .The following table shows the repayments to U.S.A. on account of funded war debts:— Original debt in millions of Amount Balance of Int. pounds. paid, principal, rate. £ £ £ Britain .. 920 302 878 3.3 France .. 805 »7 T73 16 Italy ... 408 19 401 ■.4 Others .. 180 47 240 2313 525 2293 It would be noticed , that in some

cases the amount now owing is greater than that due at the or.iginal funding. Taking the dollar at par, 4.86 dollars to the &, the following table was even moio interesting:— ■ c Amount provided Amount for of repayment original with luterest loan. at funding. Millions. Millions. £. £ Great Britain ..;. 850 22J1 France 658 1309 Italy 331) 4SI The United States said that taking interest rates at 5 per cent., she had already cancelled half the amount .due. She also said that in 1931 the five major countries indebted to her made payments totalling £45,600,000 on account of funded debts, and that in the same year, the same countries spent £307,200,000 on armaments. Whilst willing to negotiate on the debt question she was not prepared to wipe off loans to enable the money to be spent in preparation for futuro wars. THE AMERICAN CASE. "Writing on December 19-, 1932, President Hoover gave the United States reasons for declining to postpone payment any further. He said:— 1. It would amount to the practical breakdown ,of the integrity of agreements, vv, 2. It would impose an abandonment of the national policies of dealing with these obligations separately with each nation. ■ . 3. It would* create a situation where debts would have been regarded as being a counterpart of German reparations and indemnities, and thus not only destroy their individual character and obligation, but^ become an effective transfer of German reparations to the American taxpayer. 4. It would be no real relief to 'the world situation, without consideration v of the destructive forces ' militating against economic recovery. 5. It would not be a proper call upon the American people to make further sacrifices unless ■ there were definite compensations. ' President Hoover then stated that he would not entertain the thought of cancellation. PAID WITH THEIR OWN MONEY. Mr. Nash concluded by stating that Germany ■ had paid approximately seven hundred and fifty million pounds, but during tho same period she had borrowed over one thousand million pounds from allied countries, mainly Great Britain and U.S.A., so that tho moneys received on account of reparations by the Allies had first been borj rowed from them, and they had been I paid with their own money. i He- also quoted the following table !of war debt transactions showing balance of receipts and payments:— Excess Excess \ payments receipts over over receipts >, payments in millions. In millions. „■ . • ■ ' £ £ Oermany .V. 750 Great Britain .... 133.7 ; — United States ...... — 451France ..; —- 163 Belgium — 119 Seven other countries — , ■'■ 146 "The World Economic Conference," said Mr. Nash, "cannot solve the problems facing it unless the ■external and internal indebtedness-of all the countries is considered,' and some drastic measures taken to overcome the existing chaos and uncertainty.",: At the conclusion' of tho address Sir Alexander Roberts, in moving a vote of thanks; stated that members would be pleased to hear that Mr. Nash had agreed to speak further on the problem at a later meeting.