THE New Zealand Herald AND DAILY SOUTHERN CROSS. FRIDAY, APRIL 16, 1926. FRENCH WAR DEBTS.

New Zealand Herald, Volume LXIII, Issue 19303, 16 April 1926, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS. FRIDAY, APRIL 16, 1926. FRENCH WAR DEBTS.

Two tasks in particular seem to be handed on practically unchanged as Government succeeds Government in France. One of purely domestic incidence is to produce order in the internal -counting-house of the nation by balancing the budget and reducing inflation, the other to strike a mutually satisfactory bargain with external creditors. The present Minister of Finance, announcing the repudiation of a tentative bargain made by M. Caillaux with the British Treasury last August, forecasts the opening of new negotiations. Doubtless the successful funding of the Italian debt, on terms even more lenient than those granted Italy by the United States, has had something to do with the renewed effort. Also there is possibly growing appreciation in France of a principle insisted on by experts elsewhere, that finance cannot be divided into water-tight compartments, and that nonpayment of French debts to other nations has had much to do with the depression of the franc. When realisation of it begins to penetrate further there may be greater earnestness and determination shown in the effort to devise terms acceptable to both France and her creditors —Britain and the United States. Each has been very patient. Neither has received any payment on account of interest or principal. At present France is reaching a position almost of isolation. The two chief debtors of Europe to be without any form of composition with their creditors are France and Russia. France may not care for the companionship.

The sum of the French debt to Britain is something over £600,000,000. To meet it the British Treasury last year suggested a funding arrangement whereby France would pay annually the sum of £12,500,000 for 62 years. This offer was reached by a process of compromise. At the outset Britain had offered a funding agreement on the basis of £16,000,000 a year, this amounting to a remission of one-half the debt. M. Caillaux, who was then negotiating as Minister of Finance, replied by suggesting £10,000,000 a year, which represented a remission of two-thirds of the principal. A hurried meeting of the British Cabinet resulted in Mr. Winston Churchill receiving authority to propose a compromise, the £12,500,000* already mentioned. It was limited by two conditions, first the principle laid down in the Balfour Note, that no other creditor should receive more favourable terms, and second that the payments should be made irrespective of what France received from Germany under the Dawes plan. Though the British statement contained no reference to it, M. Caillaux spoke at the time of a moratorium delaying the commencement of the annuities until 1930. This date is significant. Though France has not repaid any nation for wartime obligations, she has been steadily settling with private foreign creditors for commodities or services obtained during the war. Th» aggregate sum amounts to over £200,000,000. By 1930 the greater part of this will have been wiped off. It can be well imagined that the idea of postponing payment to Britain to this more favourable time appealed powerfully to M. Caillaux. However, the offer was never accepted in any form, M. Caillaux fell from power, and the renev/al of conversations sees another man representing the French Ministry of Finance. M. Peret says he hopes to. secure more favourable terms than those contained in the tentative agreement of last year, which he definitely repudiates. The principal new circumstance on which he doubtless relies is the settlement made with Italy at the beginning of this year. Under it Britain will receive, in liquidation of the debt, £4,000,000 a year for 62 years. As the French and Italian debts are approximately equal, the prospect might seem favourable. Two circumstances are against this. Mr. Churchill, in explaining why Italy was given such terms, said Italy's capacity to pay : was rated at one-third that of France. In addition, Italy was receive only one-fifth the share of German reparations that Franco was allotted. As has been pointed out many times, justice to the British taxpayer must be considered as well as generosity to war-time debtors. Britain has to pay £33,000,000 a year to the United States now* Eventually it will be £38,000,000, JjtiQ proceeds of the

Dawes plan are not yet definite. Britain relies on joint payments from the two sources to meet what must go to America. Therefore until the future is more, assured, without discarding all principles hitherto enunciated, it does not seem possible to agree to terms more lenient than those offered last year. The French Minister wants a clause making French payments dependent on the proceeds of German reparations. This is just what Britain has consistently declined to consider. If Britain herself receives more from Germany than required to make up what goes across the Atlantic, then concessions, on past indications, may be made. On the other hand, it has always been insisted that debt payments from France must be independent of the proceeds under the Dawes plan. It follows then that M. Peret has raised difficult points in his discussion of the task he is soon to undertake. v