SPAIN’S CIVIL WAR

Waikato Times, Volume 122, Issue 20503, 20 May 1938, Page 9

SPAIN’S CIVIL WAR

THE TESTING TIME GERMANY’B TZNACIOUS GRIP MORE PERSISTANT THAN ITALY (From a Correspondent' LONDON. April 16 No doubts are entertained in Whitehall that General Franco s victory is now only a question of time, says the diplomatic correspondent of the Sunday Times. When the war is over events will show whether or not Spain is capable of throwing off the yoke of foreign domination. This will be the testing time. Diplomatic circles in London are unanimous in believing that the German hold over Spain will prove to be more lasting than the Italian. The Italians are unpopular and do not hold any key positions. It is taken for granted here that Italian troops will all be withdrawn —they are needed elsewhere—although Italian war material may remain. Franco's Debt Apparently General Franco not only pays the wages of all Italians and Germans in Spain, but has also ronfra'*f*'<l a book debt for all arms suppl.ed. This debt is being rapidly paid off by exports of raw materials and does not stand at a figure which would induce General Franco to turn to the London money market to meet It. But the Germans in Spain are in a different position. Many of them hold key Jobs as technicians and organisers, and their services would be difficult to dispense with, even in peace time. Munition factories have been erected in Nationalist Spain entirely under German direction. There is no information in London to show that either Germany or Italy has yet concluded an alliance with Franco Spain. But it Is quite possible that plans for a treaty of friendship and alliance between Germany and Spain—and possibly between Italy and Spain, too —are at the moment under consideration. To offset this development almost the only pressure that Great Braitain can bring to bear is through the importance of her market for Spanish exports of

wine, fruit and olive oil—for which Germany and Italy do not offer an alternative outlet. Whether General Franco, in the great work of reconstruction that he must undertake after victory, will be obliged to seek capital in the London money market is a debatable question. The example of Germany shows that the closed economy system, which Franco has adopted, opens up resources in the banking system untapped by the ordinary capitalist State. Inflation can be carried on without the attendant dangers of a flight cf capital due to loss of confluence. This automatic check upon an Increase of credit In proportion to cash reserves is thus removed. Recovery of Gold Spain is naturally an exporting country, and for this reason would not find It difficult to accumulate the necessary reserves of foreign exchange. But this does not mean tiiat Franco will be any less anxious to recover the Spanish gold which Barcelona Is so busy exporting. There is, perhaps, short of British propaganda—of which there is none in Nationalist Spain—no better method whereby Britain could recover her popularity in Salamanca than to assist In the return of this gold. Here is a real question of Spanish pride. In these circumstances the relations between Britain and Portugal acquire a new Importance. There Is no question but that the British guarantee includes the Portuguese colonies. The treaty of 1899. signed secretly at Windsor, speciflciallv renews the article in the 166! treaty, whereby the King of Britain promises to defend and protect all conquests and colonies belonging to the Crown of Portugal against ail their enemies “as well future as present." Pact With Portugal The Portuguese treaties were designed for nival co-operation between these two countries, whose strategic interests, both in Europe and in Africa, are remarkably complimentary. But neither »>n the Portuguese side nor on the British is there any doubt that in the new* circumstances naval co-opera-tion must be extended to the air and must Include aerodrome facilities for Britain in the event of war. Meanwhile, it v.ould not be surpris- % ing if Portugal, w»i‘ch at present has only a commercial agent at Salamanca, were shortly to appoint an Ambassador accredited to Nationalist Spain. There are, incidentally, 7000 Portuguese • volunteers fighting for General Franco.