Evening star., 1935-04-21
Strain, on Holland Severe,
Early Action Likely
in Switzerland.
TRADE is SMOTHERED,
EUROPE LOOKS TO U. S.
Even France Expected to Quit
Standard Eventually-World
Defation Feared.
BY CHARLES F. SPEARE.
Special Dispatch to The Star.

servations on the European financial
situation which follow are the result
of investigations made by this writer
in the course of a months journeying
through Italy, Switzerland and France.
The observations are not particu-
larly happy in their conclusions. for
they must reflect the present commo-
ton in the currencies of these coun-
tries-a commotion which has not yet
reached its climax. They point con-
clusively to what has long been appar-
ent to those who have followed the
course of economic and social events
on the continent-namely. the general
abandonment Of gold, which started
late in March when Belgium devalued
her money by % per cent.
Holland cannot long stand the pres
sure, while conditions In Switzerland
indicate an early movement to bring
her long maintained currency nearer
to a parity with her neighbors. Italy
is struggling with an overvalued lira
and strangling her trade by measures
that retain her gold but destroy her
commerce.
Belgian Banks Frozen"
1t Is now known here. though not
so clearly as in Europe. that the crisis
in Belgium was finally precipitated by
the condition OF the Belgian banks.
They were in sorry plight. in de-
gree much like those in the United
States in March. 1893. Runs had been
going on for weeks. Institutions Of
considerable size had failed. The
banks were frozen" with loans on
industrial collateral and weakened by
the fact that speculation had led even
the strongest members of the banking
group into enterprises that were in a
decaying state In numerous in
stances banks held as high as 80 per
cent of the stock of manufacturing
and mining companies which con-
stantly were in need OF new money to
keep them above water.
There had been a heavy transfer OF
Belgian funds into Dutch and French
gold notes. After devalution occurred
an immediate return flow of currency
into the Belgian banks began. So
great was 1t that in five days these in
stitutions took back l,600, ,000, 900
francs, creating a situation Of cur
rency abundance which is now one OF
the most pressing problems Of the
banking situation In Belgium.
The Dutch cannot escape devalua-
ton. They we're able to do SO when
France, Belgium and Italy reduced
the value Of their currencies 10 years
ago. The situation today is different.
Then there was no demand for it.;
now the pressure on the Dutch f1nan-
cial world from industrial interests
for a rate for their monetary unit
that will equip them for a better
trade position is too strong to be de-
MED. There were rumors this week
that agreement had been reached on
20 per cent cut. This was denied.
There is not the same set of banking
circumstances in Holland as in Bel
gium or in Switzerland to force Hol-
land of gold, but the twice raised
discount rate tells its own story.
Swiss Funds in Germany.
Switzerland, like Holland, main
tanned the value of her franc when
ner neighbors reduced theirs Now
condition that will before long result
in a movement to reach a fair parity
between her monetary unit and that
of other countries with which she
does business. Trouble in the Swiss
banking world became serious months
ago. One of the causes Is the large
investment in Germany. Associated
with this is the inability to date to
obtain an adjustment with Germany
respecting her short-term credits.
Perhaps the most serious factor is
the degree to which the Swiss banks
are frozen" with second mortgage real
estate loans which they purchased on
a large scale when money was cheap
and when there seemed to be gener-
GUS equity in real estate above the
outstanding and well distributed first
mortgages.
The leading question in financial
circles in Europe today concerns the
future. of the French franc. If Hol-
land and Switzerland follow Belgium
and devalue, how can France stand
alone on her golden pedestal? Theo-
retically, Italy is still on gold; prac-
tically. long ways of it. So France
would have to support the franc with
no actual or moral support from the
other members of the bloc"
The Frenchman gradually begins to
admit that sentiment and tradition
must be compromised with when all
but his country have abandoned gold
and that possibly, at some time in the
future, q second readjustment of the
franc to internal prices will be neces-
sary. The best judgment is that this
will not occur until after Parliament
has been dismissed next Summer.
Money Is on Move.
Money is not only superabundant.
It is nomadic. It wanders all over
seeking a safe resting place. One
day it is hurried from Paris to Lon
don, the next day back to Paris from
London. There is tremendous pool
of nervous money In the British and
continental centers that ebbs and
flows with the days rate Of exchange.
Never in financial history has so much
capital been on the move.
The effect of all this on business
must be apparent. The currency
dilemma is smothering trade in
France, Belgium and Italy and the
high rates of exchange are killing
the tourist movement into France
and Italy, which was the velvet"
in past years on which they pros
pered and with which invisible
credits they were able to erase their
commercial trade debts.
The countries still on geld, plus
Belgium, have a population Of 130,-
900 700. If any sort Of trade con-
cert could be established they could
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