Evening star., 1938-07-02
S0LACE IS FOUND
IN DEBT ACCORD
Germany's Pact With Britain
Emphasizes Refusal to
Appease U. S., However.
BY CREsTON B. MULLINS.

NNEsS ID
The Anglo German debt settlement
announced yesterday in the House of
Commons by Sir John Simon, chan
cellor Of the exchequer, was received
IN Washington with mingled optimism
and chagrin.
Optimism because the settlement,
which affected the vast majority of
German debts held in England, was
regarded as the first step taken by
Germany since the transfer mora
tortum of 1888 to normalize its debt
relationships with the rest of the
world.
Chagrin because Germany had
recognized its obligation toward the
British government and British bond
holders with respect to the Austrian
external debts, while failing to answer
two American communications de-
manding similar recognition for the
American Government and American
bondholders.
. There was some comfort, too, for
official Washington in the reduction
of the interest rate paid to British
holders of the Dawes and Young loans,
for this brought it more into line with
what American bondholders have been
receiving, thus substantially reducing
existing determinations against the
United States.
Straddled With Debt Policy.
German debt policy since the trans
fer moratorium of l933-shortly after
Adolf Hitler became Chancellor of the
Third Reich-has been one of avoid
ing direct outlay of gold or foreign
exchange as much as possible in
servicing the foreign debt but at the
same time avoiding direct default on
its obligations.
DR.. Hjalmar Schacht, German
financial wizard who was succeeded
earlier this year as Reichsminister for
economics by Walther Funk, was the
guiding spirit in this policy, and it
was at his direction that Germany
adopted the practice of paying the
coupons on foreign-held bonds with
new bond issues carrying 3 or 4 per
cent.
While this results in pyramiding
the foreign debt-by the necessity of
paying interest on intereSt-it has
been far more than offset by the buy
ing up of deprecated German bonds
in foreign markets. This repatriation
of the foreign debt may now have
reached the stage, it is believed here,
where debt settlements can be ad-
vantageously offered to the Reich's
creditors.
Thus the regrets that American Off
eials feel at the failure of the German
government to reply to the notes of
April s and June II are tempered by
the expectation that before long the
German government may see At to
make some move toward opening debt
talks with the United States. not only
in regard to the Austrian debt but the
entire German debt held in the United
States.
American Debt Near S400. .00O, 900.
This American debt of the
Reich is now estimated at somewhere
near $4o0, 0,000,0 900, less than half of
the approximately 81 900 600, 900 worth
Of German dollar bonds. This is COM
posed of about s6Co0o,OOO of Dawes
loan bonds, s91 100000 of Young loan
bonds. $27.000,000 of per cent 10
year funding bonds issued in this
country in March. 1887 and the bal
political subdivisions.
Besides these, American bankers
have extended about 500, ,000, 900 in
credits to Germany and about S10,-
100000 of commercial credits remain
frozen although they may be utilized
in various ways for the purchase Of
German goods.
The Austrian debt held in the United
States is divided into two parts:
About 100000 due the United
States Treasury on the Austrian relief
loan of September 4. 1920, and about
$l9,000,000 of various federal, provin-
cial, municipal and corporate bonds.
The latter figure represents an esti-
mate of what is still held in this coun-
try of more than s38,000,000 par value
; of dollar bonds issued at various times
In the past. The balance is believed
to be held within Austria itself.
Financed Flour Sale.
The relief loan of 1920 was made
originally under an act of Congress
of March 30, 1920, authorizing the
United States Grain Corp. to sell -four
on credit to relieve populations in Eu-
rope suffering from want of food. The
debt was funded in an agreement May
8, 1880. and payments on this loan,
halted in the moratorium agreement
, OF 1882, had not been resumed at the
time Germany took over Austria.
The United States Government, in
recognizing the absorption of Austria
by Germany in the April note, point
ed out that service had been continued
by the Vienna government on various
issues held privately in the United
States and stated the expectation that
payments be continued by the German
government.
The controversy over German for
eign debts dates from the 1888 trans
fer moratorium, in which Germans
were ordered to continue Servicing
their debts abroad. but to pay the
sums in marks to the Reich conversion
office This bureau made payments on
non-g governmental debts partly in for
eign currency and partly in scrip,
which the Gold Discount Bank repur-
chased at only fraction of its value.