The Washington herald., 1922-06-11

German finances.
Returned Negative Response.
Accordingly Germany returned "a
negative response to the allied de-
mand and we had foreshedowed t's,
crisis of May 81. when her payments
would stop and, failing a morato-
rum. she would be in default and
liable to military coercion which Nj.
Poincare in recent Bar -le-Du c
speech threatened. But after Genoa.
Germany plainly thought better of
IL and. Influenced by fear of French
military operations and by hopes of
an international loan, sent a new
answer to the reparations commits
sion, which was accepted as sass-
factory and thus eliminated the das1-
ger of immediate military opera
tions and a fresh European upset.
1t remains. now. to examine the
situation as It stands. Up to the
present moment France has ex-
pended more than $4,000. 100000 OF
her own money upon reconstructs on
and other Items which under the
terms of the treaty of Versailles she
was entitled to charge to Germ any.
She has, in other words. borrowed
from her people $4,000. 900. 900 ars,ic-
ipating German payments and by
far the greater part of this huge
sum has gone for reconstructiop in
the devastated area. Today the an
nual interest charge of this sum is
around $500. 100000.
France Fixes Budget.
with the budget of 1928 Fra nee
arrives at meeting all the ordinary
costs of government out of hep or
binary revenue. There remain tonly
two extraordinary costs; first, the
interest and sinking fund charges
to- meet the $4,000. 900, ,0O8 due from
Germany, plus such further eNpen-
diture as she must make for re-
construction. which Is. as yet. far
from completed and. secondly. the
moneys required to meet the costs
of the loans she has negotiated dur
ing the war with Great Britain and
the United States. which amount to
approximately Sc. .0O0. 100000. SO far
this latter item has not been of i'm
mediate concern, because neither
Great Britain nor the United states
has required payment. Butt both
countries are now discussing such a
requirement.
France. then. faces a situation in
which she must meet the costs OF
interest and sinking fund fer the
enormous sum of $4,000. 900. 900.
which must represent an annual
cost OF not less than sS0OL000. 900
and will rise with additio nal ex-
penditure on reconstruction in the
devastated area. As against this
burden she has a claim. recognized
bv law. recognized by German and
allied signature alike. to something
more than $4,000. .0o0. 900. which is
her share OF the s33.00o. 900 900 rep
arations total fixed a year ago by
the reparations commission
Fiscal Situation HopeI ess.
The French fiscal situation Is
then. hopeless. unless Germany can
be made to pay. But Germ any can
not pay at the moment unless she
can raise an international loan. II
for example. she could borrow the
s2.500. 900. 900 that her own financial
experts believe necessary. then she
might pay France a sum sufficient
| to meet one or two years interest
on the French debt. In this fash
ion the immediate French situation
would be relieved. the danger OF
! French military action would be
eliminated and Europe. and the
world would have a breathing
space.
Yet II must be clears that any
such device would not In the least
go to the root of the situation: Il
would postpone a crisis bnt II would
not in any sense settle the repara-
tions problem. Moreover, II is clear
that unless Germany made an ade =.
duate paymen, cut II to, proceeds
of her loan. France could not meet
her debts to the United States and
to Great Britain and ala payments
on these accounts would be con-
tingent upon German payments to
France. Such in a nutshell Is the
situation today. 1t turns upon the
French fiscal condition resulting
] from the enormous expenditures of
France for reconstructfng her de-
wasted area and her inability out Of
her own resources to carry the bur-
den longer against future German
payments which are ar best prob
lematical
In this situation Lloyd George has
recourse to a proposal which is in
reality very old and was originally
widely circulated by Keynes in his
first book. although 1t was previous
| ly discussed during the Paris con-
ference; namely. a matual cancella-
| ton of Allied debts and a reduction
by a corresponding amount of the
total of German repRrations. This
means. in reality, that Great Britain
and the United States. the creditor
nations. should cancel the debts
owed them by their allies and sub
tract the net from. the total of
reparations. To this Lloyd George
now joins the proposal that Britain
cancel her share of German repara-
tions, as we'll
But Little to Say.
AS to this proposal 1t is necessary
at the present hour to say but little.
1t would mean. in the aggregate,
that the United States cancel some
$1,000. 100000 owed by the Allies
that Great Britain, as a result of
the cancellation of debts owed her,
and of her claims on German
reparations. together with the can
collation. by the United States Of
the $4,000, 900. 900 Britain owes US.
would surrender claims. amounting
to another 81 900, 800, 900. Cancella-
tion by France OF what Belgium
and Italy owe her would advantage
her about $4,000, ,000,00 which
might be deducted from the sum
owed France by Germany.
When the whole process was COM
pleted, France and Belgium would
| \ ~ 1of.