MIXED RECEPTION

Otago Daily Times, Issue 23542, 4 July 1938, Page 9

MIXED RECEPTION

GERMAN DEBT SETTLEMENT EFFECT ON INTERNATIONAL LENDING INVESTORS DISCOURAGED . (United Press Association) (By Electric Telegraph—Copyright) LONDON, July 2. (Received July 3, at 7 p.m.) Although Austra-German loans were sharply marked up, it would be wrong to infer that the city wholeheartedly approves of the debt settlement with Germany. On the contrary, an influential body of opinion considers that it undermines the principles of sanctity of contract. thus discouraging investors from further international lending, which some quarters regard so desirable. It is pointed out that Germany formerly had no difficulty in paying the full contractual rate of interest on the Dawes and Young loans while the Austrian Government, with its more slender resources, scrupulously met its obligations. The city correspondent of the Daily Mail says that there was great excitement in the city after business hours, when the terms of the agreement became known. Austra-Ger-man bonds bounded up by £ < to £lB per cent. DAWES AND YOUNG LOANS FINANCIAL ARRANGEMENTS It was reported last week that Germany had agreed to accept responsibility for the Austrian debt, conditional on a fresh basis being reached for trade between Britain, Germany and the countries of the British Empire and a rearrangement of the interest rates on the Dawes and Young loans. . , , , The Treaty of Versailles included proposals to make Germany pay the whole cost of the war, and make reparation for all damage done by bombing from land, sea or air. Economists were agreed that the amount fixed by the Allies was clearly beyond Germany’s capacity to pay* Following Germany s default, and France’s invasion of the Ruhr in 1923, an international conference was called to study and form an opinion of Germany’s capacity to A commission of experts, headed by the American banker, Charles G. Dawes, was appointed. The gist of the commission’s report may be given in these words: “ Beyond the fixed annuities which shall be normally 2,500,000 milliard gold marks, there will be no longer any other liabilities arising out of the Treaty of Versailles or the World War. The actual payments made, in millions of gold marks, were: 1924-25, 1000; 1925-26, 1220;’ 1926-27. 1500; 1927-28, 1750; 1928-29, 2500. In 1930 the Dawes Plan gave way to the Young Plan. This plan obtained its name from the head of the international commission, Mr Owen D. Young, of the United States. It provides for a series of annuities to be paid by Germany, through the Bank of International Settlements, with the regularity of coupons of ordinary commercial bonds. It reduced the total German indebtedness by £25,000,000 and, as contrasted with the Dawes Plan, indicated a definite number of fixed annuities instead of payments depending on prosperity. Also, instead of providing any measure of external control, it gave financial autonomy to Germany. On 1934 Germany’s financial position so deteriorated that the German Government defaulted in its payments.