FRENCH WAR LOAN

Wanganui Chronicle, Volume 73, Issue 440, 4 December 1930, Page 8

FRENCH WAR LOAN

QUESTIONS IN THE COMMONS

appeal to world court ( British Official Wireless. I RUGBY, Dec- 2. Asked in the House of Commons whether he proposed to refer to the World Court the claims of British investors in the French war loans. Mr Philip Snowden stated that the whole question was still under consideration.

There is a moral aspect to the fate of those British investors who lent their saving during the war to the French Government, for the loss of fourfifths of their money is a matter of some concern, writes a correspondent of the London Observer. But the more practical aspect is the contractual. A loan is a contract. Has the French Government broken or does it intend to break its contract by receiving a loan

in sterling or its equivalent and repaying it- in the medium of a paper franc which since the making of the contract has been reduced in vbalue, reduced by the deliberate action of the borrower herself to one-fifth of what it was at the time of the contract? Huge Sum Raised The broad facts are these. In 1916, 1916, 11*17 and .1918 the French Government raised from British investors a sum of approximately £50.000,000. It was paid in sterling. The French Gov ernment received that amount of sterling as a loan used it for the repayment of its own debts and for other purposes excusively its own. The prospectus in each case was widely and repeatedly advertised in the British Press and each advertisement contained these words: “The Governor and Company of the Bank of New England with the consent and approval of his Majesty ’s Government of the French Republic to receive applications for this issue.” An investor looks first to the security of his capital. This was a French Government loan issued through the channel and therefore, with the reflected halo of the Bank of England and with the expressed approval of the British GovernmentTo the man n tihe British street it looked gilt-edged. Wording of Prospectus At if to heighten that impression the prospects further contained this sentence: “Both Capital and Interest, which will be exempt from all French taxes, present or future, will be a charge upon the general revenues of the Government of the French Republic.” And again: “For the purpose of providing against depreciation in the market prices of the National IDefence Loans (the official title of the loans in question), the French Government undertakes to set aside monthly, until otherwise decreed by law, a sum of 60,000,000 francs to form a fund to be used for the purchase of bonds of these loans in the market.’’ The French Government, therefore, as an inducement to lenders gave an elaborate guarantee of security, based upon the name of France. The window-dresing of the loan had for its main object the emphasising of its capital security. It was the resultant conviction that induced the British people to lend £50.000.000 to France. The Times of December. 1925 for instance. commented thus:

‘‘The terms of the London issue of the French loan are undoubtedly very attractive as an investment. The security is of the finest.” Contractual Issue ]t is true that it was a franc, not a sterling Joan and that the older city men expressed a doubt whether the French franc was as good as the Eng lish sterling (cp. The Times. November 30. 1915: “In some quarters of the city it is doubted whether the temptation to ordinary investors will suffice to remove their usual prejudice against an issue in a foreign currency,” but the point, is that the franc was stabilised by the French Government at a time subsequent to the contract at a level four-fifths below the level at which the contract was made. The contractual question, therefore, is: Can a borrower of his own sweet will, and without consulting his debtors divide - his liability by five and then maintain that he is meeting his liability? When the French Government funded its war debt to the British Government it did not “repudiate” fivesixths of it, but begged in forma pauperis (although France was the second richest nation in the world after the United States) 1o be relieved and was with consent relieved of that amount. But the holders of French Rentes were not consulted when four Fifths of their money was annexed in France by the devaluation of the franc. That is pure repudiationRussia's Move Repeated When the Russia Government repudiated JOO per cent, of its liability, and the chief holders of Russian bonds happened to be French investors, a cry went up fiom one end of France to the other that tore the heavens. Yet France proposes to go four fifths of that same road of repudiation. Technically, France can argue that the bond contained no contractual obligation to repay in sterling that is merely to argue that France is content with the knowledge that an investor who took France at her face value has reason to regret it. Nor is there much analogy between the French and the British holders of the Rentes. The French Government, if it wishes, and if its electors permit, is competent to confiscate French capital lent in good faith, falls within a different category faith, faals within a different category.

At the Lausanne Conference in 1923 Ismet Pasha offered to repay the French Government its loans in paper francs. The French Government refused such payment because the franc exchange was below par. The French Government rejected the ironic compliment of being paid in its own currency for a good reason; for the same reason, intensified several times over lhe British creditors of that Government now demand, as a point of elementary honesty, that they be not repaid in tokens that in effect are a sham having been made a sham through the deliberate devaluation made by that Government itself.