THE OTAGO DAILY TIMES THURSDAY, JUNE 21, 1934. GERMANY AND HER CREDITORS

Otago Daily Times, Issue 22294, 21 June 1934, Page 6

THE OTAGO DAILY TIMES THURSDAY, JUNE 21, 1934. GERMANY AND HER CREDITORS

Germany’s declaration of a moratorium for six months in respect of foreign debt payments has produced impressive reactions. A formal protest has been issued by the Government of the United States, where a very large proportion of these foreign obligations are domiciled. In France, as in Sweden, the Government is taking the matter up in the interests of bondholders; the Bank of International Settlements has raised its voice against a violation of treaties; and the Chancellor of the Exchequer has announced that it is the intention of the British Government'to propose legislation for the setting up of an Anglo-German clearing house unless a satisfactory agreement is reached ensuring fair treatment for both British bondholders and British commerce. The clearing house plan would presumably mean that credit for German exports sold in Britain would, if necessary, be diverted for the payment of British creditors. Premonitory signs of trouble over Germany’s borx’owings were not lacking. Six months ago the British Government

found it necessary to intervene for tlie defence of British creditors under the German long-term loans. In return for trade concessions from the Dutch and Swiss Governments the German Government had agreed that Dutch and Swiss bondholders should receive the full 100 per cent, value for their scrip. This was clear discrimination against the British bondholders who continued to receive only 75 per cent., which proportion was further reduced in December last to 65 per cent. Representations to the German Government had the effect, it was reported in February last, of producing a provisional agreement that discrimination against British and American bondholders should cease. Now comes the moratorium, with complete suspension of foreign cash transfers on State loans. The terras upon which the Reichsbank is apparently offering to purchase coupons from their holders at 40 per cent, of their face value certainly seem to give support to the belief expressed in British financial circles that the Reichsbank reserves are to be used to buy German bonds where they are depreciated as a result of German policy. It is said that purchases of that kind to the value of six hundred million marks were made last year, and indignation is expressed at such tactics, which are regarded as having contributed to the German default. Germany’s creditors abroad, in Great Britain at all events, have been considerate in never asserting the view that she could pay in full. Now they are faced with a melancholy prospect unless retaliatory measure of an efficacious kind can be instituted. Regard for her credit, or, as The Times puts it, the slender remains of her credit, Germany appears to have none. Before the investments of British, American, and other foreign capital were made that were to rebuild her industries and secure her general rehabilitation she had already staged a bankruptcy which ruined all her own small investors. These obligations in respect of which she has now declared a moratorium, and which include the international loans under the Dawes and Young plans, are, of course, on an entirely different footing from war debts. They are commercial debts, and between commercial and war debts the British Government has always been careful to distinguish. Behind this latest move on Germany’s part, as behind all her financial and economic dealings, looms the inscrutable and dominating figure of the President of the Reichsbank, Dr Schaeht. He, it has been suggested, might be regarded as the real ruler of Germany to-day, deriving his power from the weakness of the two factions which are now struggling to dominate the Third Reich. According to the author of an apparently well-informed sketch of his activities and character nobody in Germany questions Dr Schacht’s authority, and all the economic plans of the Nazi Government come before him for final approval. “ He is feared and respected, but has no friends. He fancies himself the economic Napoleon of the Third Reich.

. . ; His bold strategy and capacity for intrigue have ensured him a national and international position ■which is almost unparalleled in contemporary politics.” It is truly as a Machiavellian figure that Dr Sehaeht is pictured, and if it be the case, as suggested, that Germany’s creditors abroad have believed that they would lose everything but for him, there is room for speculation whether their faith will stand the latest test.