2 JANUARY 1932, Page 8

This Year of Crisis

"NTOTHING," an English publicist has written in a

-LI New Ycar message to a German paper,' " is more important for the world in 1932 than a final settlement of reparations at a sum Germany, after a period of recOvery, will be capable of paying, and the reduction of the armaments of the world to a level that will make the promises given to Gerrnany. in 1919 a reality." That summarizes adequately enough, if a little obviously, the tremendous task facing the world at this moment. It can no longer be evaded, certainly not the financial part of it. Dr. Brfining is still holding Germany together almost by a miracle. His December decrees have been accepted with astonishing resignation. The Christmas truce he imposed has been maintained unbroken almost everywhere. But there are five million unemployed in Germany to-day. Herr Hitler is quiescent, partly because of the Chancellor's firmness, but mainly because he believes it is only a question of biding his time. And next month the short-term credits accorded to German industrial concerns must be renewed, with the bankruptcy arid collapse of German industry as the only alter- native. But the necessary conditions for their renewal cannot be created till the reparations crisis 'has been faced and Germany's Governmental obligations under that head reduced to a figure within her capacity of payment instead of hopelessly beyond it. It is for this month's conference to effect that reduction—a reduction from Germany's nominal obligation of an average of £100,000,000 a year (at par) to—what ? That, of course, is the vital question. By far the simplest solution, and on many grounds the most equitable and the most practically beneficial, would be to wipe out international war-debts and reparations altogether. But there arc two objections to that. The United States will not agree to wipe out war-debts and France will not agree to wipe out reparations, from which she receives some £20,000,000 a year more than she disburses in debt paymentS. The conference, therefore, must find some other basis for its decisions.

That would be a disquieting prospect if the plain fact were that Germany could pay no reparations, however great France's desire to receive them. But that is not the fact. That Germany can make no reparation payments to-day is common ground. France herself admits it. But neither France nor anyone else contemplates any- thing so sombre as the assumption that Germany's financial condition will always be what it is to-day. The whole purpose of the present discussions is to change that condition, to put Germany in a situation in which, for example, the unconditional portion of the Young Plan annuities, £33,000,000 a year, will be well within her capaCity. Nothing in the report of the Basle Committee that reported last week casts any doubt at all on the feasibility of a settlement on some such lines as that, and it is only creating needless difficulties, as well as completely misrepresenting the financial proba, bilities: to contend that Germany, having suspended the reparation payments under the Hoover moratorium of last July, can never be called on to resume any part of them. What has to be decided now is hoW long a moratorium is to be accorded and what paymentS arc to be looked for when that moratorium ends.

The difference of opinion that may arise over that will be primarily a difference not between Germany and her creditors—debtor and creditor are never expected to see precisely eye to eye--but between Great Britain and France, and the success of the conference Will depend more than anything else en the extent to which those two creditor countries find themselves ielle to make common cause. NO effort must be spared to achieve that essential end. We start from different premisses

from the French. They frankly challenge Germany's good faith. We are inclined, on the whole, to believe she has paid what she could pay, and the Basle Report;

in the main, supports that conviction. They abandon with reluctance the idea of exacting their 'Mil •poinid: of flesh. We are disposed to accept philosophically the necessity of cutting losses on occasion. But we both of us stand to-day in face of an economic crisis of which the German situation is only a single aspect. France, moreover, has reputedly as many partially and totally unemployed as we have, and reflections on that un- precedented situation are chastening. It would be a profound mistake to assume that France at the conference will necessarily be, as a Frenchman would put it, difficile. On the contrary, there is more hope than there has been for some time that France and Britain, companions in the general misfortune, driven (not at all regrettably) into a common attitude on debts in face of toe almoit frivolous incapacity of the American Congress to face realities in that field, may reach a new understanding with one another not merely on the reparation decisions, but on other kinked problems clamouring. not less insistently for settlement.

But reparations come first. Germany's liabilities must be fixed. She must be freed from the paralysing effect of sustained uncertainty. France, it is to be feared, will not assent to the five-year moratorium width the situation demands. In that case some shorter period, but the longer the better, will have to In accepted as a compromise. The conditional payments will almost certainly go by the board altogether. In regard to the unconditional £33,000,000, if that is maintained in full, the moratorium may be divided into two periods, in the first of which Germany makes no payment at all, because her budget will not stand it, while in the second she pays in marks but does not complicate the exchange problem by attempting to get them across her frontier. In that period, in other words, there would be a moratorium on transfer but not on payments. The money would be invested in some form in Germany itself for the benefit of Germany's creditors.

But these are practical details on which the con- ference will have to pronounce. The point it is desired to emphasize here beyond all others is that common action by Great Britain and France is a vital and imperative necessity. Mr. MacDonald has shown his recognition of that by his personal letter to M. Laval, who, it is worth observing, while' he is a realist, has never shown himself a dogmatic doctrinaire in the matter of repara- tions or anything else. He demands that the frame- work of the Young Plan shall be preserved, and so it can be, for that plan, in fact, lends itself with' a little perfectly practical adaptation to all the emergency measures that the situation demands to-day. -There is-i obstacle to agreement between France and Great Britain there. And an accord on reparations would be a hopeful prelude to conversations on those other- problerns; tariffs, exchange restrictions, disarmament, on which Franco-British agreement is a condition of the world's recovery. Artificial and insincere agreement would be worse than nothing. But at least we can 'start'with'the faith that real agreement is attainable, and the eon• vietion that its attainment would be the greatest con= tribution the two countries could Make to the defence of civilization -in -this year of crisis: - -