GERMAN TRADE CRISIS

Evening Post, Volume CXXIII, Issue 3, 5 January 1937, Page 6

GERMAN TRADE CRISIS

COMMERCIAL DEBTS POSSIBLE DEFAULT Germany's financial difficulties ara increasing so rapidly that before long Dr. Schacht, head of the Reichsbank, may feel compelled to announce a cessation of all payments on Germany's commercial debts, states the Berlin correspondent of the "Daily Telegraph." Such action could, of course, be taken only in the case of countries —such as Britain —with which no clearing system yet exists. Export trade has beome far more difficult in the last few months as a result of the devaluation of currencies in France, Holland, Switzerland, and Czechoslovakia. In consequence the German export subsidy has had to be greatly increased—in the case of Czechoslovakia it is now about 40 per cent. —and the burden of industry which has to provide' the money has been doubled. It is thus becoming more and more difficult for Germany to obtain foreign exchange for imports. Things will become even worse as the winter advances, for the remaining reserves ara likely to be heavily called upon to pay for imports of grain. 1 Faced by this calamitous situation, Dr. Schacht, who appears to have had little success on his recent journey to the Near East, has already begun to call up the foreign securities held by German nationals. A default on commercial debts may well be the next step. GERMAN NEED OF COAL. In the case of Britain, Dr. Schacht'3 reasoning may be somewhat as follows:—Although under the present payments agreement he is assured of a certain amount of free foreign exchange, Germany at the same time must buy a number of things—for example, coal, herrings, and various sorts of finished goods—which, as the four-years selfsufficiency plan makes progress, sha will not require from abroad. If the payments agreements were denounced, a clearing system would automatically come into force in Britain. Dr. Schacht may, however, think that he would be placed in a good bargaining position, owing to the fact that Britain takes more goods from Germany than she sells to her, and might thus, in the end, be induced to agree to a new arrangement which would be more advantageous from the German point of view. The payment of the debt service on the Dawes and Young loans is also guaranteed under the Anglo-German payments agreement. Any denunciation of the agreement would thus involve, at the same time, a default on these debts.