WELLINGTON NEWS

Hokitika Guardian, 17 January 1929, Page 3

WELLINGTON NEWS

AN 'ECONOMIC PROBLEM

CSpecial To The Guardian ]

WELLINGTON, Jan. 14

An economic problem of first class importance to Europe, the United States and the whole world will shortly come up for consideration, and that is the question of German reparations. The plan of the Dawes Committee did not fix the total amount of the reparation debt payable by Germany. It merely laid down a schedule of annuity payments, without stating a period for which these should continue. Germany has this year to pay 250,000,000 gold marks (£1.25,000,000) and under the plan the obligations of the German Government are discharged by payment in marks to the credit of the Agent-General for Reparation Payments, and tho responsibility for the payment of these marks abroad is vested in a Transfer Committee. This body is charged with the task of .purchasing tile'requisite foreign exchange, but in so doing jt must not threaten the stability of the German currency. Provision is made for payments as from 1020-30 onwards to ibe increased if an index of prosperity in Germany should warrant that step, while payments may he increased or decreased automatically, should changes in the value of gold, as compared with 1028, amount to no less than 10 per cent. So far Germany has punctually discharged her obligations under the plan, (mt she lias only been able to do so by reason of very extensive, foreign borrowing, both by the German Government and its .municipal and commercial houses. Last year Germany borrowed 200,000,000 dollars (£58,000,000) or a third of the amount of reparations to lie paid in 1928-29. Germany has not been liquidating her reparation liabilities out of the proceeds of a genuine trade surplus—the. only effective way in which such debts can really bo discharged—but in exchanging one form of debt for another. The Dawes Committee regarded their scheme as temporary, to restore confidence and to facilitate a final and comprehensive agreement. The plan has restored coiffidence and has enabled Germany to reform and stabilise her currency, to balance her budget, to restore her credit, to reequip her industries, to replenish her depleted capital supplies and gradually to expand her production. But there is still doubt as to Germany’s capacity to make effective payments abroad. The opinion prevails in some quavers that it would be. desirable to continue he ordinary operations of the Dawes plan for a further period until more experience has been gained, but the politcal and financial considerations are too urgent. Germany is anxious to secure an early evacuation of the Rhineland, but several of the Allied Powers take the view, that the question of evacuation and reparation arc intimately connected, the inference being that a satisfactory and complete settlement of the reparation problem will facilitate agreement upon the question of evacuation and viceversa. France has not yet ratified her debt agreements with Britain and the United States although meeting the instalments falling due, and the delay is attributed to the disinclination of France to undertake permanent commitments until she knows more definitely where she stands in regard to future reparation payments. Tho possibility of realising some of the reparation securities by sale to-the private investor is also a factor. The anviuitpis payable by Germany from this year onwards are derived from the ’ Budget, 1,250 million marks, Transport Tax bonds 250 . million marks, German industrial debentures 300 million marks and German railway bonds 660 million marks. The industrial debentures for 5000 million marks and the Railway bonds for 11,000,000 marks are held on behalf of the creditor governments, and the possibility of selling these and tho transport tax bonds, as arid when financial; markets could absorb such offerings has been kept in mind. So far. no suitable opportunity for making an issue of this kind has presented itself, and in any case unless some new and special ' provisions are made the purchasers would obtain no greater rights than those vested in the Allied Governments. If these are prepared to guarantee the service of their respective reparation bonds, then sales to private purchasers could be possible. Tn any case, whether guaranteed or not, the debt would become commercialised to the extent to which bonds wore sold. There is no doubt that all countries would benefit considerably if the problem of reparations could be taken out of the realms of uncertainty and placed upon a permanent and solid basis. Germany, by knowing definitely'that her liabilities wore, and the creditor powers, by being aware of the sums upon which they could reasonably count, would be able to order their finances with greater certainty, and a position which is financially unsatisfactory and may at any time be the cause of serious disputes and misunderstandings would be removed.