THE New Zealand Herald AND DAILY SOUTHERN CROSS TUESDAY, JULY 9, 1929. FRENCH WAR DEBTS.

New Zealand Herald, Volume LXVI, Issue 20302, 9 July 1929, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS TUESDAY, JULY 9, 1929. FRENCH WAR DEBTS.

The war debts owed by France to Great Britain and the United States arc responsible for another crisis which threatens the existence of the Cabinet, promising to load to another of those reconstructions so typical of French political life. The question, as always of recent years when the subject has cropped up, is whether the two funding agreements existing, but still in a state of suspense, shall be ratified as they stand or not. Both agreements were made in 1926, but no Government since then has succeeded in persuading tho Chamber of Deputies to give them the seal of formal approval. Even now there is, it is reported, an organised attempt to arouse public feeling against the terms of the agreements. This, of course, is a counter to the official desire to have them ratified. If it is defeated, the logical course is a demand for modification of the terms. The present is not a propitious time to negotiate for that purpose. Just be fore the recent general election, Mr. Philip Snowden strongly denounced the British settlement, indicating that if there were any modification proposed while a Labour Government was in office, he would not be so ready to make concessions as Mr. Winston Churchill had been in 1926. His warning on that point has been taken seriously enough in France to arouse an official desire for ratification before any new development could occur. A campaign to have the discussion reopened is not likely to be welcomed by responsible French opinion There is a strong case for ratifying the American settlement too. In addition to war i debts, France owes the United States some £80,000,000 for surplus war stocks purchased in 1919. If the debt agreement is ratified this sum is merged in the war loan total. If not, the whole amount falls due on August 1. Short of speedy ratification France will have to find £80,000,000 for capital repayment in three weeks. It leaves little time for fresh negotiations. Apart from the time factor making ratification an urgent question, there is, on impartial review, little to be gained by waiting. The only motive would be the desire for better terms Comparing the settlements made by both creditors with France, and those concluded with other debtors, there appears little chance of further concessions, indeed, little reason why they should be made. The Arberican agreement, for in- ' stance, has been assessed by an expert in the employ of the United Stated Government to amount to j a reduction of almost 53 per cent. I This result was reached by taking ; the present value of the annuities agreed upon, interest being calculated at 4,} per cent., and comparing it with the capital sum owing at the . time of funding. The amount of the debt in April, 1926, when the agreement was made, is given as roughly £846,155,000 on an approximately accurate conversion of dollars to sterling. This, according to the 'experts' calculation, was reduced to a series of annual payments over a terra of 62 years, with a present value of some £399,302,000. Tho actual sum total of the 62 annuities will be £1,369,500,060. This, according to another authority, represents repayment of the capital debt with an average rate of interest over the whole period of a little more than 1" per cent. The payments, moreover, were arranged to begin at £8,000,000 in 1026, rising to the maximum of £25,000,000 in the seventeenth year and continuing at that rate to the end. The British debt, of approximately the same amount, was funded on the basis of interest at 3A per cent. The same term of 62 .years was fixed, but the annuities began at £33,000,000, rising to £38.000,000 in 1034. The reduction is less than 20 per cent. By comparison with what Britain accepted. France could scarcely expect more lenient terijis from the United States. The funding agreement negotiated by Mr. Winston Churchill and M. Caillaux, in July, 1926, gave France even more lenient terms in settlement of her debt to Britain. The accrued debt on March 31 of that year was £617,106,000, or, with allowance for French gold deposited in London during the war, £600.000,000. Inpayment in full on the terms of the original loans would involve an annual bill of £30,000,000 for interest alone. In discharge of this obligation Mr. Churchill agreed to an average annuity of about £12,500,000 for 62 years, a settlement involving the cancelling of practically three fifths of the debt. The annual payments began at an exceedingly low level, £4,000,000 for the first year, £6,000,000 for the second, £8,000,00(1 for the third, £10,000,000 for the fourth, £12,500,000 for the fifth and annually thereafter to the thirtieth year. After that the payment is to be £14,000,000 a year until the end of the 02 years. Added to this exceedingly lenient scale was an informal but perfectly definite undertaking that France should be allowed to defer payments if the transfer of the money threatened to upset foreign exchange rates. There is, further, an understanding that in the event of a serious breakdown in the payment of German reparation instalments, there shall be a revision of the whole arrangement. Again, it is difficult to sec what better terms Franco could secure even if this agreement were repudiated. The campaign against ratification now proceeding cannot be, in essence, anything but a demand that there shall bo no repayment of debts at all. For the sake of French credit, it is to be hoped such a movement will not be pressed too far.