Manawatu Evening Standard. WEDNESDAY, SEPT. 20, 1933. FOREIGN BORROWERS.

Manawatu Standard, Volume LIII, Issue 251, 20 September 1933, Page 6

Manawatu Evening Standard. WEDNESDAY, SEPT. 20, 1933. FOREIGN BORROWERS.

The Einancial Secretary; to the British Treasury (Sir | Arthur Samuel) has addressed a l , gathering- in England on a 1 subject which has given serious thought alike to the investors and Government of Great Britain—the default of borrowing (nations. There are not many ! foreign countries which have taken advantage of the facilities of the London money market and yet honoured their obligations in the present economic crisis. To take Europe as an example. ]A number of States that suffered during the Great War and immediately afterwards raised substantial loans under the aegis of the League of Nations, partlyj in Britain and partly in othejr countries. Yet there are only two coming within this category— Danzig and Esthonia —that have not defaulted. Greece, Hungary, Austria and Bulgaria are among those to which the stigma ( of default applies, both to service and to the special revenues that! were pledged as security and ! upon which the investors relied, j Roumania, as Sir' Arthur . Samuel also pointed out, is another State in default. The position is (most serious in the Latin States of South America. There is |iardly one that is meeting the interest payments on loans raised from British people. Chile provides a typical example of the lengths to which some may go in these lands where revolutions are a frequent occurrence. Last year Chile declared the expropriation of foreign credits lying- in its banks after default hadl been made in regard to its foreign indebtedness, which also was] repudiated. Since then the position has not been made clear, but possibly Sir Arthur Samuel had Chile in mind when he said that untold millions of British, savings were lost in South America. The Einancial Secretary j was, however, dealing mostly in his address with the case of Germany. Three months agp Dr Schacht, president of the Rjeiclisbank, announced a transfer moratorium on all Germany’s foreign debts except what are known as the “standstill” credits. iThis was defended as an econ'omic measure, the Reich lacking- the means, because there was pot a sufficient export surplus, to 'meet the service of the foreign debt. The alternative was depreciation of the mark. But, the London Times commented at the time, bad as the financial position 1 of the Reich is, it is difficult to see how such a wholesale measure of default can be justified. Subsequently, the Reiclisbank announced a modification of the moratorium as the result of 'discussions in London. Gernfany refused to continue the transfer of the full service on its longterm debts, but agreed that priority should be accorded the Dawes and Young loans, meeting the service of the Dawes loan in full, both as regards interest and amortisation, but transferring the interest only on (the Young loan. Further, the Reibhsbank announced that any foreign exchange available would be used to meet the coupons on other German loans up to 50 per cent. “These concessions,’’ the journal mentioned commented, “g-o some way to mitigate ( the severity of the German default, but they still appear to fall short of the maximum effort which might be expected from a debtor nation of high standing, which is anxious to preserve its credit m the markets of the world.” The policy pursued by Herr Hitler has played a not inconsiderable part towards the difficulties Germany is in and has helped to destroy confidence in the German people. The consequences of the default have been voiced in Sir Arthur

Samuel’s warning. “It is unlikely,” lie says, “tliat after this experience Germany will be able to raise money again in Britain, France and America in our lifetime. Slie must be left to her own resources and fate.” These debts, as he also pointed out, have played a not unimportant part in the collapse of the world’s economic structure. The dishonouring of obligations has caused profound resentment among the lending nations,’ and of them all Great Britain no doubt has suffered the most because her investors have always been ready to subscribe to development loans which in normal times have been considered sound investments. But now these foreign borrowers have been proved to be “uncreditwortliy,” they will, as stated, ultimately receive British goods as gifts.