LEAGUE LOANS

Hawke's Bay Tribune, Volume XXII, Issue 221, 1 September 1932, Page 4

LEAGUE LOANS

TO CENTRAL POWERS. — DISPUTE OVER INTEREST. The inability of Austria and Hun-, gary to continue paying service on the loans with which the League of Nations rehabilitated their finances eight years ago involved the Governments of both countries in a bitter dispute with the League’s representatives over the disposal of the securities on which the. loans were granted, says the “New 4 York Times.’’ Hungary has announced definitely she could no longer find sufficient foreign exchange to exempt her 1924 League loan from the transfer moratorium that applies to virtually all the rest of her foreign debt. Austria delayed the formal announcements of the suspension of service on her 1923 League loan, but a practical transfer moratorium on that and the rest of her foreign debt was put into effect by the National Bank pending the decision of the big Powers on her application for a new loan. Both in Austra and in Hungary the sources of Government income earmark ed for payment of tho service on the League loans are far more than sufficient for the purpose, and the practice has been for the League’s trustees, after satisfying their claims from them, to hand the remainder back to the Governments.

On the Hungarian Government’s announcement that it equid continue to repay the League loan only in pengoes, the trustees, Sir Henry Strakosch, Marcus Wallenberg, and 0. E. ter Meulen, immediately exercised their right to sequestrate the whole of these securities, including the gross Customs revenue from the tobacco and salt monopolies and the sugar tax, to bring in £8,000,000, The Government retaliated by announcing it would refuse to recognise this distraint, and instead itself would take charge pf these assets and pay over from them to the League only enough to meet the service on the League loan in pengoes. FORMAL RIGHT. To newspaper men, Finance Minister Koranyi said he recognised the formal right of the League to sequestrate the revenues in question, but said it was impossible for the Government to relinquish 30 per cent, of its whole income. Virtually the same situation exists ip Austria, although' it has not yet Come to an open dispute* pending a decision about the Austrian loan. The League trustees for the Austrian loan have also refused to hand over the remainder of the gross Customs revenue and tobacco monopoly revenue to the Government, although tho total income from these sources is £1,200,000 monthly, and the service on the League loan is only £300,000. The Austrian Government has, been trying to decide Whether to take the same action as Hungary and probably will bo forced by circumstances to do so. A complication in tho case of Austria is that her 1923 loan is the.only League loan the big Powers will have to make good if the debtor defaults.