GERMAN DEBT CRISIS

New Zealand Herald, Volume LXX, Issue 21494, 18 May 1933, Page 8

GERMAN DEBT CRISIS

An intimation by the Reichsbank that the German exchange position is so unfavourable as to affect the transfer of funds for debt service covers a position which is both complicated and disturbing. To grasp its meaning necessitates going back over European financial history for some distance. In the middle of 1931, when clouds were gathering, German economic stability was threatened by the rapid withdrawal of shortterm credits. A committee of experts which met at Basle recommended a "standstill" agreement, which, involved the freezing, with the lenders' consent, of these assets. The plan was adopted, being given a currency of six months, to February 19, 1932. In January of that year an extension for a further 12 months was accepted by the creditors, subject to .a reduction by 10 per cent of the sum total, which amounted to approximately £300,000,000 at par of exchange. In February this year the position, when examined, showed that during 1932 the amount of the debts had been reduced by 14 per cent. The agreement was extended for another year, with provision for further reduction. The repayment of instalments of this debt is now threatened. The agreement was made and loyally supported in the effort to prevent a collapse of the currency. To the same end a joint credit of some £20,000,000 was advanced to the Reichsbank in June, 1931, by the Bank of England, the Bank of France, the American Federal Reserve Bank, and the Bank

for International Settlements. Within the past few weeks the President of the Reichsbank announced that this amount would be repaid. With the drain on the exchange resources these operations entail, intensified by the fact that for the first two months of this year the export surplus of Germany has been less than half that of January and February, 1932, a crisis such as that just announced has been foreseen for some time. Before the middle of April possible difficulties in meeting external debt service were being discussed in London. The economic stalemate threatening Germany was quoted as a factor to inspire the World Economic Conference, so that " the process of international payments might be set going again." The recent demeanour of Germany has not been helpful, but the threatened impasse demands handling lest there be another currency collapse as a further shock to a shaken economic fabric.