Evening star., 1923-07-20
FRANCES CAPACITY
T0PAY j. s. RESTS
W|THHER DEBTORS
Can Meet Obligations of
5000, 600, 900 if Ger
many and Others Pay.
BY DAVID LAWRENCE.

PARIS, July 20.-The debt ques-
tion between the United States and
Great Britain having been settled.
1t is natural for Americans to ask
what is the chance of an agreement
by France to pay something on the
loan she secured from Washington
during the war. which amounted to
about $4,000, 900, 900 and upon which
no interest has as yet been paid.
Frances capacity to pay the United
States is to a certain extent depend
ent upon the sums she will receive
from Germany, but an altogether
misleading impression has been given
to the American people about the
capacity of all European peoples to
pay their war debts, chiefly because
foreign officers everywhere have
thought that was the way to bring
about reduction. if not a cancel
latior, of those debts.
Unfortunately the Europeans have
talked SO much about their inability
to pay their war debts unless there
is an all-around cancellation. that
they have put up a poorer face than
tion of the balance sheets or by the
progress of the peoples in recon-
StruCtion.
Related to Tax System.
The capacity of a nation to pay is
so theoretical subject that esti-
mates are frequently colored by de-
sire. 1t is similarly true that the
peoples paying power is related to
the tax system used. Who. for in
stance, would have thought ii pos
sible in 1914 that America could
swing war debt of twenty seven
billions or that it could be reduced
by four and Il half billions five years
after the ware Naturally there is a
distinct difference between America 5
people to draw on, and Frances with
forty million and Germany'S with
sixty million. but the Europeans have
by no means perfected their tax ad-
ministratiOn to point Of collecting
taxes from all people whose incomes
are taxable
TO understand what the French are
able to pay America. the balance
sheet Of France must first be ex-
amined. The total amount OF
Frances external debt, including the
amount owed to the United States,
Great Britain and Japan, is eight
billion dollars To this should be ad-
tied the eighteen billion dollars of the
twenty six billions.
To offset these liabilities the
French have on the other side of the
ledger three billion dollars owed them
by Russia, Belgium, Serbia. Rumania,
Greece. Poland and Czechoslovakia.
To this must he added approx i:r1ately
seventeen billions Of reparations due
iron. Germany, or a total in assets of
twenty billions against liabilities of
twenty six billions. 1t is interesting
to note that this deficit of six billion
dollars is approximately what France
used to carry as bonded debt before
the war. so that if all countries owing
money to France would show signs
of paying there would not be a
serious question at issue today as to
Frances solvency-
Russians owe Billion.
But of the sums owed to France
from the allied countries about one bill
lion dollars is Russian debt, and who
can say what soviet Russia will do?
Similarly, the seventeen billions due
from Germany is more than half of
the German burden, and British and
American financial experts say Ger
many cannot pay anything like thirty
two billion dollars. While Germany
has lost AlSace-Lorraine. Upper SileSia
and her colonies. she also has been re-
pense. The French think, of course,
that Germany can swing such a big
debt. but if that is true, then France,
with the acquisition of Alsace-Lor-
raine, the new colonies and the man.
dated regions is potentially much rich
er than Germany was before the war.
Argument Applies to France.
In other words. the French argu-
ments for Germany's paying to the
ip,,it
But France would be willing to pay
off her debts to America and other
countries if she could depend upon
getting substantial sums from Ger
many.
The big point of interest to Amer
lea, however. is what is Frances true
capacity if she does not realize from
Germany the amounts due her Sup
posing the French found ii neces-
sary to accept only eight billions
from Germany. They would move
heaven and earth to get the British
three billions to Offset 1t. but the
most that would probably result
would be the reduction by the United
States of interest charges and the
funding. of the debt over longer
term of years than granted to the
British Although America Is NOR
ally bound not to give better terms
to any nation than those given to
Great Britain, the chances are the
British would relieve America of that
embarrassment in the hope Of sat
isfying the French.
Reconstruction Cost Heavy.
France has ahead of her another
expenditure of three billion dollars
for reconstruction, which Is not COW
cred in the above balance sheet. Per-
haps that estimate will ultimately be
cut down. or short-time loan foated
to meet it, especially if payments be-
gin to be made by the Germans.
Potentially, France is able to nav
her debts. and. indeed. so Is Germany.
All Europe has the capacity to paw.
That's not the problem, but the crux
OF the matter Is, will each nation let
the other get strong enough to pay.
strong enough to pay means strong
enough to fight National security
is at the bottom of the whole busi-
ness.