Evening star., 1932-06-05
GERMANY MEETING
SERVICE ON LOANS
Bankers Unable to Forecast
Result of Brenuing With
draWaI, However.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, June 4.-The sudden
breaking up Of the Bruening govern
ment in Germany has injected a new
and confusing factor into the domestic
financial situation, and one whose COL
lateral features 1t Is not possible for
international bankers to see through
clearly.
Investigation indicates, however, that
there are no immediate defaults on
German dollar bonds in contemplation.
Semi-annual interest has been paid on
the German government 51a per cent
loan which was issued two years ago.
These bonds are quoted around "a,
against the issue price of go.
Other Loans.
On July l interest is due on 16 other
German loans. The funds to cover
these semi-annual payments have been
coming in steadily week by week.
There is a general expectation that
they will continue to accumulate dur
ing June and that the July maturities
also will be met when due. What may
happen after July l no one is now
willing to predict. At that time the
one-year moratorium, declared by
President Hoover last June, will have
been completed. The fiscal policy of
the German government will then de-
pend on the negotiations scheduled to
begin at Lausanne in about two weeks,
although there is considerable doubt as
to whether, under the unexpected de-
velopments in the Reich, this meeting
will be held.
The next Semi-annual interest pay
ment on the German external per
cent loan of 1924 is not due until Oc-
tober IS. This is the largest single
amount that was to be met. It is
worth mentioning that in the 715 years
OF the life of this loan, the original
subscriber to it who still holds it. has
received $525 in interest on each bond
for which he paid 1920 In the mean
time, he had plenty of opportunity to
dispose Of his investment at premium
over cost ranging from $50 to $3.50 for
each 81 900 bond
Until lately the threat of a morato-
rum in Germany had only concerned
what are known as political debts"
Now 1t Is openly advocated by the Radi-
cal party in Germany that at least
partial holiday should be observed in
connection with private debts, or those
held by investors in the United States
and in the countries of Europe that
have subscribed to the various German
government loans as well as to munic-
ipal provincial and corporation issues.
This would also cover the large out
standing amount of short-term credits
now temporarily frozen" under the
stand-still agreement and believed to
be between $800,0O0,0 and $90O,000,-
900, so far as American institutional
lenders are concerned. One suggestion
coming from Germany was that only
IS per cent OF this private debt be paid.
Whether or not this relates to both
principal and interest was rot indi-
Gated. Undoubtedly if there is to be
a scaling down of the former there
would also be an attempt made to
reduce the service of each individual
loan to corresponding degree.
Effect on Europe.
The effect of the situation in Ger
many obviously reacts on all of the
countries in Central and Southeastern
Europe that have in the past 10 years
negotiated dollar loans in the United
States. A number Of these have been
close to the line of default for some
time. Unfavorable developments are
anticipated shortly from some of these
borrowers. The prices Of Austrian
government and municipal loans. as
well as those of Bulgaria, which has
Just notified one Of its neighbors that
it cannot pay its next reparations in
stallments, and those of the govern
ment of Greece, clearly indicate where
the weak spots in the dollar loan stu
alton are to be found.
(Copyright, 1922