Debts and Deficits Both Germany and Italy have in the
past week given new evidence of their financial difficulties. Signor Mussolini in his speech in the Chamber on Saturday gave the Budget deficit for this year as 4,000,000,000 lire (about 166,000,000 at present rates of exchange), and the estimated deficit for next year as just under 3,000,000,000 lire. How the gulf was to he bridged he did not indicate. Presumably there will be further internal loans. In spite of this new armament expendi- ture amounting to 2,000,000,000 lire was announced. Germany, in the endeavour to maintain something like a trade balance, has restricted imports still further, importers having their allowance of foreign exchange cut from 25% to 10% of the present " basic quota," or, in other words, from 123-% to 5% of the 1930-1931 payments. (Since that date, of course, prices have fallen heavily.) The result must inevitably be increased unemployment in industries depending on imported raw materials. The debt settlement compromise, which appeared at first sight to give foreign creditors as much of their interest (in cash or funding bonds) as they could hope for in view of existing transfer difficulties, looks now like breaking down altogether, and even the service of the Dawes and Young Loans is in doubt. Germany's economic outlook, like her financial outlook, is black.