TRADE DRIVE

Evening Post, Volume CXXII, Issue 14, 16 July 1936, Page 28

TRADE DRIVE

GERMANY AND BALKANS

DEBTS USED AS A WEAPON

PAYMENT WITH GOODS

For three years Germany has quietly, pursued a policy of economic penetration in South-eastern Europe, says • a ■writer in the "Manchester Guardian." The result represents a striking success for German ingenuity. Faced with an abnormal'need1 for' raw■: materials during a "period of lavish re-armament and capital expenditure,, she has secured supplies from countries which she can force; to take her industrial exports in-exchange. Starved of foreign credits, she has taken what amounts to forced loans by allowing her trade debts to accumulate until the creditor State concerned, • for fear of losing everything, must give up old connections arid ; conform to Germany's requirements.

Until ,1933 Germany had no planned economic, policy irt South-eastern Europe. Individual German-firms-had invested: capital in industrial . and trading chiefly in Bulgaria ' and Humariia. The -authorities, mere . content to promote German, trade .by. . conventional methods, and to 'torpedo successive French and Czech efforts' to ; exclude r ; German influence . from Danubiari markets. In 1933 the-Ger-, man Government began to .take .matters in hand. Individual efforts were ; co-ordinated and placed under official control. Attention was concentrated upon encouraging the production of raw materials in these regions both by long-term contracts and by investments of capital. As a result Germany has I attained a measure of influence which, I varying from predominance to virtual control, bids fair to assure her of a reliable^ supply of raw materials vital to her military needs. Economic influence has, at least in the case of Yugoslavia and Bulgaria, been followed by close political co-operation. And it is largely the fear of succumbing to German political dominance that has recently led Greece and Turkey to revolt against the econommic pressure of Germany. EASIEST IN BULGARIA. The German plan was easiest to realise in Bulgaria, which is both economically weak and politically isolated. For many years Germany had bought more than any other country of Bulgarian tobacco, vegetables, fruit and livestock. During the last four years Germany's share of Bulgarian exports has risen from 26 to 48 per cent.; as these purchases were paid for largely in goods her share of Bulgarian imports has risen to 54 per cent. There is, however, a limit to the quantity of German manufactures which Bulgaria, impoverished by the prolonged agrarian slump, can take. Germany has consequently incurred a net debt of some eleven million marks —£813,000 at present rates. (The figures given in this article have been carefully compiled, but are subject to some measure of possible error.) This is so large a sum for Bulgaria that Germany has had to abandon' the principle of payment in her own goods; she has supplied Bulgaria, with six million marks' worth of wool, cotton,and coffee which she herself had to buy from overseas for cash. Germany's increasing capital investments in Bulgarian raw material production are, however, reducing the need for such sacrifices. Experiments in cotton-growing have not yet shown much return; but striking results have been achieved with soya beans. The area .under soya has increased from twelve acres in 1933 to 38,550 acres in 1935. "The demand for soya beans is unlimited," the Bulgarian Minister of Economics declared last December. "A market has been guaranteed for an unlimited period at fixed prices." The identity of the guarantor may be inferred, from the fact that the soya company was founded in 1933 as an offspring of the German Dye Trust, though it has since been 'transformed into a nominally independent concern, CASE OF YUGOSLAVIA. . The case of Yugoslavia illustrates most clearly the changes in the .main currents of Balkan trade since 1933. The French'share in Yugoslav exports, which" used to be substantial, has sunk .almost to zero. Italy had taken an increasing proportion until the application of sanctions put an almost complete stop to Yugoslav-Italian trade. Germany has seized her opportunity. She diverted to Yugoslavia large orders for agricultural produce and industrial raw materials, such as copper, ore, lead, zinc, antimony, chromite, mercury, and pyrites. In exchange, Yugoslavia took a growing quantity of German manufactures; but here again saturation point was quickly reached. Germany's debt to Yugoslavia mounted up from 223,000,000 dinars to 470,000,000 dinars (£2,300,000), ■which was nearly half as much again as Yugoslavia's export surplus in 3935. In.an effort to reduce the debt,the Belgrade Government recently accepted the; £750,000 tender made by Krupps for renovating the State-owned' iron works at Zenitza—or, as some Czech papers said, for building an arms factory on the site—though the Czechoslovak Wittkowitz iron works made a lower offer. The reason for the choice of Krupps was that Czechoslovakia has a large credit balance in Yugoslavia, while Germany has a debt twice as large! Further orders have been given to German firms for bridge-building material, machinery, roll ing-stock, the construction of railway works at Kraljevo,,: and for. : a tiydro-'electric power station , and electrification scheme at Skoplje. At the same tin.2 German capital is being invested in concerns producing- raw materials. The German-Yugoslav trade agreement of May, 1934, provides expressly for a change-over in agrarian production from food to industrial crops such as cotton, hemp, and soya beans. Some progress has already been made on these lines, and a new agreement recently concluded at Zagreb adds a new development by suggesting intensified exploitation of Yugoslav mineral resources in favour of Germany. RUMANIA'S POSITION. ; ■ Rumania's large resources of oil and mineral ore have made it easier for her to deal with Germany on equal terms. Nevertheless, Germany's policy has met with tangible success. • Her purchases of oil —by far the most important of Rumania's exports—rose from 260,000 tons in 1934 to 670,000 tons in 1935. As the largest purchaser of oil, Germany could force Rumania to take increasing quantities of her manufactures. As in other Balkan countries, she has used her large trade debt to finance the production ■of the raw materials which she most needs. Thus Germany has acquired an interest in the Transylvanian copper and bauxite mines, and she is trying to obtain a footing in the Rumanian oil industry.

Perhaps the position in Rumania will he transformed if France stands by the promise given to M. Titulescue in Paris to buy some 750,000 tons of oil annually for twelve years. There have also been negotiations for the placing of large Rumanian armament orders in France. The difficulty is that France, like Britain, has the misfortune to bo a large creditor of Ru-

mania, while Germany, as the powerful debtor, can call the tune.

In Turkey the Germans have been-handicapped by the:long-stand-ing -preponderance of Soviet Russia and - the anxiety of the Turkish Government to; increase trade with Great Britain. ..;■ But ■ even here Germany has realised one side of her usual bargain by doubling her imports of Turkish produce. It remains to be . seen whether Turkey will be forced, by the threat of large losses, to allot*to German , firms the share in her Fiveyear Plan which she would like to hand to British industry.

. There remains Greece; and Greece provides interesting proof that Germany has drawn perilously near the danger point where hard-pressed creditors may lose their confidence and cut their losses. By increasing her purchases of Greek produce, chiefly of tobacco, Germany has incurred the enormous debt of £2,500,000. She has used this debt, with some success, as a lever, to force German goods into the Greek market. But of late German exporters have alowed themselves to raise prices unduly. The result -is that the Greeks are reluctant to give Germany further credit. They are anxious to develop trade with Britain. They.have already increased their trade, with Czechoslovakia. A few weeks .ago the Greek Government con- j eluded a clearing agreement with Rumania, by which a large part of Rumanian exports to Greece is to be paidfor, by the transfer of Greek claims on Germany. Thus Greece, anxious to ■escape the German grip, is reducing her bill against Germany at a loss, while Rumania will become the more dependent upon Germany. With Bulgaria and -Yugoslavia already committed, the ' success of the German economic penetration of South-east Europe, -with all that it means" 'for political-relationships, can'no longer be:in doubt. • -