THE OTAGO DAILY TIMES SATURDAY, MAY 21, 1931. FRANCO-GERMAN ECONOMIC RELATIONS.

Otago Daily Times, Issue 21650, 21 May 1932, Page 10

THE OTAGO DAILY TIMES SATURDAY, MAY 21, 1931. FRANCO-GERMAN ECONOMIC RELATIONS.

Since the. relations of France and Germany are at the heart of both the world’s political and economic problems, it is gratifying that Lloyds Bank has devoted a special supplementary number of its Monthly Review to an attempt to popularise the moderate opinion on all sides. Sir William Dampier provides the introduction; Professor Schumpeter, of Bonn University, gives the German view; M. Frederic Jenny, the financial editor of Le Temps, gives the French view; find Sir Arthur Salter and Mr Lionel Blackburne sum up. The important question is whether there is any possibility of agreement if ever the moderates in France and Germany obtain the opportunity to work out their plans. Lord Cecil stated, with general acceptance, at the last Assembly of the League of Nations, that a real understanding between these two countries would remove three-quarters of the political tension in Europe. The purpose of the investigation is to discover whether there are economic differences that make political agreement possible. The discussion is set in a consideration of the causes of the world depression, for the relations between France and Germany are at the same time both a cause and a result of the depression. Sir Arthur Salter places his emphasis on sectional over-produc-tion, especially of agriculture. Reparations were not the main cause, but an important factor coming on top of the other factors. The French representative also criticises the view that the fall in prices is a monetary phenomenon, believing that it must be

ascribed to an irrational development of production, regardless alike of the real needs of consumers and of their purchasing power. This agreement over the causes of the depression is carried one very important step further with the recognition by all writers that it is necessary to reduce the impossible international payments of Avar debts and reparations, and for the creditor countries to learn to accept payment in goods or give temporary relief by lending their balances to the debtor countries.

It is very satisfactory that M. Jenny quotes Avith approval the declaration of M. Tardieu made in February of this year: “ The peoples, to Avhom avg Avcrc opposed by the Avar forced upon us, knoAV that, so far as Ave are concerned, they can rely upon an attitude both loyal and generous, Avhich, Avith the exercise of the necessary reciprocity, does alloAV of reconciliations of interests and ideas.” On the one hand, therefore, is the recognition that Germany cannot be asked to make any reparations payments in foreign exchange for some time to come; on the other hand there is the Avillingness by France, as represented by M. Jenny, to make substantial concessions, Avhile holding firmly to the principle of reparation, both for its OAvn sake and as an integral part of the Treaty of Versailles. Sir Arthur Salter, holding, as it were, the balance between France and Germany, approves of this position, as France can rightly protest against Germany exploiting economic necessity to secure a political victory. How far will Germany agree ? Professor Schumpeter gives full weight to the psychological factors that explain the German desire for complete cancellation. In neither France nor Germany is there any possible combination of parties which wfmld command a sufficiently strong majority to pursue a policy of doubtful popularity. Extreme German opinion Avould repudiate reparations. Professor Schumpeter does not associate himself with this demand. He admits the possibility of Germany resuming reparations Avhen the depression is over, particularly in satisfaction of the net claim of France in respect of tlie devastated regions. And so the ground is prepared for the possible agreement of the moderate sections in France and Germany for the solution outlined by Sir Arthur Salter himself.

The Lausanne Conference, Sir Arthur Salter believes, must extend the present moratorium either for a very substantial period, four years or so, during which Germany can have time, to recover from the depression, or for a shorter period with provision for extension on the basis of a predetermined criterion. Secondly, there must be a reduction of the sums payable, and this reduction should be made fit once without waiting to judge of the situation when the moratorium is over. The European debtors could then negotiate with the United States with a view, if possible, to reaching agreement, and in any case to standing together in their policy. Thus, while creditors would be sacrificing a greater part of their claims, they would have the satisfaction of knowing that they were not being asked to give up principle as well as substance, and that the debtors were at least making an effort. The debtors would be obtaining the substantial relief they need, while not exploiting a financial necessity for a political purpose. Meanwhile the common economic interests of France and Germany would be able to continue the economic measures of agreement which sooner or later must modify the political antagonism. Despite the political tension following the Hitler movement, and the fears of an Austro-German union, economic relations before the depression were becoming closer and ever more cordial. Statistics given by both Professor Schumpeter and M. Jenny show that the creditor country France (in notable contrast with the war debt creditor, the United States) bought the debtor’s goods to an extent which substantially helped the balance of payments. Inter-industrial conversations led to agreements between the producers of both countries to avoid competition. A Franco-German economic committee is investigating the possibility of working out a common policy not merely in regard to many manufactured goods, but also in regard to airways, shipping, and overseas markets. The hope in the economic situation is, as Professor Schumpeter points out, that the two countries are essentially complementary rather than competitive, and that if the political problems can be settled there are no fundamental economic antagonisms to disturb the world peace.