The Guardian (And Evening Star, with which is incorporated the West Coast Times.) SATURDAY, MARCH 8th., 1921. FINANCES OF FRANCE.

Hokitika Guardian, 8 March 1924, Page 2

The Guardian (And Evening Star, with which is incorporated the West Coast Times.) SATURDAY, MARCH Bth., 1921. FINANCES OF FRANCE.

Mien concern Ims been (rivaled in Fiance. says a London financial jour--I,al of a recent date, by the severe (beline in (lie value of the national currency. Tile par of exchange is about g'.yi francs to the £, but during lasi week the rate touched US 1 ,, by which tbe franc fell to about one-fourth of its nominal value in terms of .sterling. 'lbis depreciation, though severe, is of course unite moderate compared with timt which has been witnessed in tbe currencies of several other European countries since the war. Eranee, liovvevti, has not found it necessary to adopt inflation on a large scale. It is tine that expenditure for some years past has greatly exceeded revenue, full the diUerciico has hceil met by selling (ioverunient securities to Ereuch investors. The terms trpnn which these set iicities were tillered had,' to be made im musingly attractive, and it is calculated that recent, issues ot Credit ,\atiomil liontls, carrying lliu guarantee of the State, were ottered on terms giving an average yield ot about t:| pei cent, free of taxation, while if the income tax in France stood at the level uliicli obtains in this country the o| elation would be equivalent to'bonowing at 10 per cent, less tax. France, thereiore. was laced with the problem that If investors refused to take tip Government loans except at a rate which the State con’isidered prohibitive. there might lie no alternative hut to full hack upon inflation of the currency, in which event there would certainly Pe a much more severe flepieeiatum ot the train- than has yet been uiim-sseil. It was, however, in another respect that the position of France was most unsatisfactory. The financial structure largely rested upon the theory that reparations would he obtained from Germany. Because of this Fiance had two distinct Budgets; one, an ordinary Budget, which was made to balance, and the other an extraordinary one. which could only he balanced by borrowing. The ‘special 'Budget •mainly dealt with what is termed “Recover*s. . , able Expenses," and lor tins year provided for an expenditure of 11.727 million francs, with a deficit of 0,000 million francs to lie met from direct Government borrowing. In addition 5.00(1 million francs wore to he raised through the Credit National (the State’s hanking agent for reconstruction) and 1,000 millions through the groups ot claimant.- for war damages, films the total public borrowing fore-shadowed under the special Budget was 15.000 million franca, hut the ordinary Budget also authorised loans to a total of -1.0075 million francs “for the service of the Treasury.” Consequently, the French people were faced this year hy demands coming directly or indirectly from the Government for an aggregate amount of 19,000 million francs. This is an extraordinarily large sum tor peace times, for even at the present depreciated level of the franc it is equal to alout £200,000,000 while at the prewar value it represents £800,000,000. Evidently this special Budget is to he dropped, and the French Government, recognising the seriousness of the' position, appear to have taken steps ot a somewhat drastic character for the purpose of improving the position. Those imlude measures to check the speculation in the franc which it is considered is on important cause of the depreciation of the national currency, tn(louhtedly there has been such speculation, hut it is sate to say that it would not have been entered upon had there heon no reason for thinking that the position generally warranted a decline in tlie franc. The special Budget which has figured in the finance accounts of Fram e since the conclusion of peace is to disappear, and the people are to he asked to make sacrilices which admittedly are burdensome but would have been still more burdensome it the situation had been allowed to drift. The guiding principle of the new j>iograniiue is that the franc must lie restored to its real value. Measures are pl.t forward by the .Minister ot Finance which it is calculated "ill increase the national receipts this year hy 8 mliliaidsof francs, while taxation will ho increased by 2(1 per cent., thus producing, it is hoped, additional revenue to the amount of 5 milliards of francs. It is estimated that a further 3 milliards of francs will he obtained hy savings upon public services and by the suppression of fraud in regard to taxation, with special reference to transferable securities. In connection with the new policy, the French Bank Rate has been raised tw ice of late by f per cent., and now stands at 6 per cent., though it is perhaps significant that directly after the second advance was announced there was a distinctly adverse movement in the French exchange. Indeed, it may he doubted whether even a much higher bank rate would have any effect in restoring the franc in the absence of remedies which nrj to the root of the disease.