The Waikato times With which Is Incorporated The Waikato Argus. FRIDAY, NOVEMBER 7, 1930 THE 1915 FRENCH -LOAN.

Waikato Times, Volume 108, Issue 18170, 7 November 1930, Page 6

The Waikato times With which Is Incorporated The Waikato Argus. FRIDAY, NOVEMBER 7, 1930 THE 1915 FRENCH -LOAN.

The gdvernor and company of the Bank of England with the consent and approval of ,the British Government was authorised hy the French Government in 1915 to receive applications towards a London issue of 5 per cent., French National Defence Loan. At that time £1 purchased 27$ francs and on this basis the loan was floated. In a prospectus Issued at the time the FrertCh 'Government announced that “ 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. For the purpose ~6't providing against depreciation in the market prices of the National Defence 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 Fe 5.60,000,000 to form a fund to be used for the purchase of bonds of these loans In the market.” The franc now stands at 124.21 to the pound and it is'at this valuation that France proposes to repay the loan. This decision of France to repay about £10,000,000 only for the £50,000,000 borrowed—the figures are approximate—is causing much resentment, in view of the statements issued, when the mohey was raised, quoted above from the prospectus. There is a. moral aspect, to the fate of those British investors who lent their savings for the loss of fourfifths’ of their money is a matter of some concern. 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 Lie contract has been reduced in value; reduced by the deliberate action of the borrower herself to one-fifth of what it was at the time of contract? By France’s unfavourable and expressed inability to grant any equitable compensation to British holders it would

appear so. The British investors are told that they are on the same moral footing as French citizens. It is not true. France got the whole of the money and used it. Britain got no benefit from it. The appeals and assurances from Paris for British support diverted from Brita n's own safe loans the funds obtained. In the policy which reduced the franc to a fifth of its former value French electors had a voice. British investors had none. When Russia defaults on private debts to the extent of twenty shillings in the pound, this is called pure dishonesty. When so rich a country as France keeps back sixteen shillings in the pound, honesty becomes a piebald jade. France in her present humour does what she likes in this financial matter. It is said on France’s part that regret is expressed that the British Government should have brought up the question of special payment to British subscribers to French rentes. It is considered that this step cannot be productive of any good result, but may give rise to much Irritation. There is good authority for saying that no French Government could contemplate paying British or any foreign subscribers at a rate different from that paid io French subscribers. It is argued that no reference was made in the prospectuses of the issues In question of any definition of the franc other than that which governs it in all French business, public or private. The State, it is contended, cannot admit that there are two standards'for the franc (he., paper franc and gold franc). A franc is a franc and has a universal value at law; namely, that which Is defined by the State. The whole question was gone into with great care by M- Poincare at the time when he stabilised the franc, and was decided by an emphatic negative. To reverse his decision, it is felt, would be to stultify the whole financial and economic effort of France of recent years. Be this as it may it is apparently the intention of the French Government to repay these bonds at the face value of the franc to-day, thus returning to investors in Britain little more than one-fifth of the amount freely subscribed to France during the days of the war, when she was< in urgent need- of financial., assistance. France is now a prosperous country and it is hard to see on what moral grounds she can justify such an offer. It is even more difficult to find justification when it is recalled that on two occasions" recently France has taken io the International Court at The Hague cases in'which the principle concerned has been the same, but with one difference, that she would have been the -loser, instead of, as now, the gainer if repayments had been allowed in depreciated francs. It is true that in' the cases of debts owed her by Serbia and' Brazil the term " gold .frart&s ’’-was used in the prospectuses. That is a distinction which may assume significance in a law court, but which cannot in any way relieve France of her moral obligation to repay her British creditors in full. The fact remains that France got the money.. The Allies won the war, and the largest item in Britain’s Budget is the payment' of the interest on the various War Loans, France, however, decided, when it came to a question of stabilising the franc, to do so at about onefifth. of its original value, and thus the holders of French Government Bonds were robbed of sixteen shillings in, the pound. The creditor, while not dding into bankruptcy, treated heir debtors as if she had. The French Government was proclaiming to the world how- poverty struck was the country, and how great were the sacrifices needed on the part of patriotic- Frenchmen. On the same plea of poverty the British Government abandoned the greater part of Iter claims; and so, with the Ameiican settlement, and later sacrificial gestures, bound, round the necks of the people of Britain, a load of taxation so great as almost to crush them. And then, as soon as all the agreements were concluded, and France had got the most favourable terms from everybody because of her terrible plight, it began to be realised that she was not poor, but rich. She has amassed gold in her vaults greater than that in Britain; she has, for political reasons, ,at times deliberately depreciated the value of the pound. And now this rich country proposes, with this mass of accumulated gold, to pay off the British bondholders at the rate of four shillings In the pound. It is possible that, if Mr Snowden forces the matter to arbitration, the French claim will be upheld. Yet, whatever the law, nobody can have any doubt about the justice, which' is that sht should pay those who trusted in her honour that which she borrowed of them.'"'' " -