DEBTS OF GERMANY

Evening Post, Volume CXVIII, Issue 93, 17 October 1934, Page 11

DEBTS OF GERMANY

MORATORIUM DEMAND

DR. SCHACHT STATES HIS CASE

LOWER INTEREST ALSO

An improvement in the world economic position, according to Dr. Schacht, will be possible only if Germany's foreign creditors agree to a several years' moratorium for all German foreign debts and then to reduce Germany's foreign debt's to a lower level, reports Ihc "Manchester Guardian." These two demands were advanced by tho interim Minister of Economics and President of the Reichsbank at a sitting of the international conference for agrarian science meeting at Bad Eilscn, at which twenty countries arc represented, including Great Britain. "The only practical way to have overcome the present difficulties," said Dr. Sehacht, "would have been for the Governments of creditor States to have agreed one or two years ago to buy a greater amount of goods from Germany and for her creditors to have reduced the debts. Two or three years ago such a course would have promised success, but today it would be insufficient. Germany is so impoverished that at present she can no longer carry oven reduced interest rate. A large-minded action alone can lead us out of this hopeless position. THE "CEITICAL OBSTACLE." "Germany can pay her debts only under an enlarged volume of world trade. All that remains to do is to grant Germany for her recovery a moratorium on all debts for several years. Simultaneously tho burden of her foreign debts must be reduced to a level which, after the termination of the moratorium, can be borne by her in future. "If these two conditions are guaranteed by an international agreement then tho critical obstacle in tho way of a revival of world trade will have been removed. The result will automatically be that Germany will receive the credits she needs to appear on the world markets as a regular buyer. "It may be better to acknowledge that today it needs greater sacrifice to | turn tho wheel of international comjmerce than a year ago, but it is Gcri ninny's duty to emphasise, that every month now lost reduces her capacity for carrying on world trade, diminishes world tradCj protracts the world crisis, and renders recovery more difficult." Examining in detail tho causes which havo led tho world into the present economic impasse, Dr. Schacht maintained there was sufficient money in the world ready to be made productive. International credit, however, failed to function, witk the result that tho drop in demand on tho world market has had a paralysing effect on world trade. "The present derangement of currencies cannot bo mado responsible for this paralysis," Dr. Schacht said. "Today's relative stability of tho devaluated currencies should have had a favourable effect on world trade, but the countries which havo remained on the gold standard could not put up with a continual import dumping. Their answer has been a trade restriction. As the devaluation advantages of the other countries greatly impeded thu export possibilities of the gold-standard countries, resulting1 in a considerable shrinkage of world trade, devaluation by gold-standard countries would throw back the world to the. point whore it stood in 1031, when currency depreciation begins. WAYS OF PAYING. Dr. Sohacht contended that the political debts from the World AVar were tho disturbing factors in the world market. Before tho war interest and capital of international debts were being paid and amortised by raw materials, but the AVorld AVar has destroyed the world trade mechanism and, as Dr. Schacht added, almost entirely at the expense of Germany. He recapitulated tho economic and financial developments since 1918 and stated that Germany's foreign indebtedness at tho end of 1930 amounted to twentyfive milliard marks'approximately, or £1,250,000,000 at par, including fifteen milliard marks short-term debts. He said that during the last three years Germany had paid back of this slim over 7,000,000,000 marks (approximately £350,000,000 at par): 1. By sacrificing tlie Kcichsbaiili's gold and foreign currency reserves to the amount of roughly 3,000,000,000 marks (approximately £130,000,000 nt pur). 2. By liquidating all realisable- foreign credits. 3. By rigorously restricting imports and lorcing her exports. 4. By a deflation policy which the Layton Report of 1931 described as "without parallel." "Germany's capability of transfer is exhausted. Tho reparations which Germany today unfortunately owes no I more to Governments but to bona fide private persons, she can no longer settle out of her own resources. "Germany's foreign debts problem has become a world problem, but the world is no longer able to buy from Germany as many goods as would be necessary to enable her to pay her debts. Therefore it is useless and foolish to force German payments by pressure, and the only guarantee for the revival of world trade and the termination of the world crisis is the rearrangement of Germany's foreign debts." Dr. Schacht once more said he declined to follow tho advice of Germany's creditors to overcome the difficulties by means of deflation or devaluation. After remarking that an international clearance, as "a last resource," would not be of much avail, Dr. Schacht concluded: "'lt would be fundamentally wrong to look upon the international debt problem only from an economic standpoint. The world crisis has led to an impoverishment of largo masses of the population in all countries. A development of this kind must have serious social consequences. Tho Bolshevik danger in Germany has been bauished at tho last hour by tho National Socialists, but thero is much unrest in other States. "These Communist propagandists are able to agitato systematically in England, which shows that even in tho richest countries difficulties have arisen which must, no longer be underestimated. Tho reason for today's unrest in tho world lies in the fact that the standard of life is everywhere boing threatened by the world crisis."