Evening star., 1925-07-03
U.S.FIXES WAR DEBT
LIQUIDATION BASIS
ability to Pay" Considered
as to Interest Only on
Europe'S Obligations.
BY DAVID LAWRENCE.

ability to pay will not be an
acceptable basis for payment by
Europe on the principal of war debts,
but will be taken into consideration
with respect to interest payments
onlv.
This is the most important piece
of information which the European
governments have just obtained from
the United States Government IN the
course of various conversations, eX-
changes Of diplomatic notes and other
communications on the subject OF al
lied war debts.
Britain's Reminder" Is Noted.
America has noted the statement of
the British government in her re
minder" to European debtors that II
an arrangement is made TO pay any
thing on debts owed to the United
States, "proportiOnate" sums must
also be paid to Great Britain. Coupled
with this is the significant declaration
of Great Britain that she will not
object If the United States makes
easier terms of payment with the con-
tinental allies than were arranged be-
tween Great Britain and the United
States.
This has been Americas understand
ing of what was logical and equitable
ever since the British announced that
they would regard ability to pay
as worthy of consideration in agree
ments made with France and other
debtors. But this is the first time
the British have publicly said they
would not ask for a. revision of their
agreement with America if the latter
gave France and the others easier
terms.
Held as Clearing the Air.
On the whole. the British declara-
ton is regarded here as clearing the
air and enabling the United States
TO make real headway in negotiations
with the French and Belgians, who
are at the moment considere@ most
likely to make the next settlements
with the United States
While the Italian negotiations for a
time gave promise of reaching some
thing tangible, there is little hope now
that anything will be done until after
the French and Belgians have agreed
with America on terms. There is nat
ural disappointment here that Italy
cannot Immediately do something to
clear up her debt problem, but inter.
nal difficulties in Italy are held to be
largely responsible. Also, it is said
that Italy does not yet realize the diff
hculties she will encounter with her
credit situation if she does not begin
cultiVating her own public opinion to
view the American debt as a real and
not theoretical obligation.
Quotations From Italian Press.
Some of the editorials in the Italian
press lately have given the impression
that Italy doesn't owe America any
thing at all and that such payments
as are made will be made merely in
the interest of good will. Such an
attitude has not been reflected in the
conferences with the Italian officials,
but until the Italian people are aware
of the responsibility of their debt it
is not felt here that the Italian gov
ernment will be able to present pro-
Dosals that can be accepted by the
American Government AS to easier
terms of payment expected by France
and Belgium, recent negotiations have
d1sabuSed the mind of these two
debtors that any reduction of prin-
cipal will be accepted. There may be
a lengthier term for payment of the
principal than Great Britain secured,
but the biggest concession that Amer
ica can give Is on the interest charges.
Possible Concession in View.
1t would not be surprising if the
United States, before the end of this
year, let it be known TO France and
Belgium that an elimination of in
terest charges from the arrnistice to
date might be considered provided
definite arrangements We're made to
begin paying at once money on the
principal, so that in the next fiscal
year the United States might have
something instead of nothing coming
in from the five billions of dollars
scattered among her European CONT
mental debtors. This is about the only
hexibility America has, and even this
Is subject to the temper of Congress-
If the American World War Fund
ing Commission, however, can show
Congress that the allies are actually
beginning to pay something it is pos
Sible that this would influence Con-
gress, especially as another tax reduc-
ton IS in prospect, and any payment
which can be obtained from the allies
would reduce by that much the
amount that now has to be set aside
out of income tax receipts to care for
the sinking fund or the public debt.
Progress Seen in Negotiations.
Altogether the situation may be con-
sidered as progressing, and if Belgium
and France will only see that their
own credit situation will De vastly i'm
proved by a prompt settlement ii is
expected here that trade relations
with Europe will be stimulated. The
American economic situation would
thus be assisted through a better tax
law and an increase in power to pur-
chase European products.