GERMANY AND PRIVATE DEBTS.
THE larger question of the indemnity to be paid by Germany which is being settled by the Supreme Council in consultation with the Reparation Commission has its counterpart in the debts owed by German traders to British firms and private persons. If we may judge from rumour, not much more progress is being made now in the one case than in the other in collecting the money ; and this after a satisfactory period when private debts were being collected smoothly and regularly. So much atten- tion has been bestowed upon the enormously difficult problem of settling the indemnity to be paid by the German Government for the guilt of the German nation in destroying property as an act of war that very little atten- tion has been given by the public here to the parallel problem. Nevertheless, this parallel problem of causing Germans to pay their British creditors debts which were contracted-before the war is one of far greater magni- tude than some people suppose. We have heard it said that some British firms which are now almost " in Queer Street " owing to the slump in trade could carry on with confidence if only a settlement with their German debtors could be effected. The tragedy of the whole thing is that the average British trader, having outlived the hot fits of the war when he declared that he would never do business with a German again, is really anxious to trade with German firms if the Germans make it possible for him to do so. He is anxious to. do so not because he has any new reason for loving the Germans, but because, like a sensible man, he recognizes that the only hope for a general and stable settlement of Europe is that all countries, whether they were called Allies or enemies or neutrals during the war, should commercially go full steam ahead now. But though this is the frame of mind of the British trader, there seems to be a hitch ; it is said that the German Government, acting on behalf of the German traders, propose to make default in payment of the monthly balances due to British creditors. These monthly balances need a few words of explanation. Under Part X. of the Treaty of Versailles the private debts of Germany to the Allied countries are liquidated through Clearing Offices. London has a Clearing Office for dealing with these debts, and Berlin similarly has a Clearing Office for dealing with debts due to Germans from the nationals of -the Allies. The London Clearing Office presents an -account to Berlin every month debiting Germany with the claims of British nationals which have been admitted by Germany, and crediting her with the claims of German nationals which have been admitted here. Germany, according 'to the Treaty, is bound to pay the balance, if it is against her, in cash 'within seven days. The rumour that Germany is contemplating making default is all the more disturbing because the public understood that the busi- ness between the German Clearing Office and all the Allied Clearing Offices was proceeding smoothly. In this country it' has even been a cause of congratulation that the ability and, above all, the suavity and reasonableness of our officials were responsible for better progress than could have been expected. We are net informed as to the nature of the hitch between ourselves and Germany, but the rumours that something is wrong and that Germany may bring the monthly settlements to a standstill are so persis- tent that we must believe them.
The Times of Friday, March 18th, made some comments tin this subject which offer perhaps a partial explanation of the situation. It said that under the Treaty there was no reason why the German Government should have been involved in any loss whatever through the operations of their Clearing Office except in so far as certain German firms which owed money to Allied creditors had become bankrupt since the beginning of the war. As the Times indicates, although the Treaty- provides that the debts shall be settled in sterling it does not relieve the individual German debtors of securing sterling credits with depreciated marks. Neither the German Government nor the Berlin Clearing Office was required to make good the results of depreciation—that responsibility rested solely on the private debtor. The German Government, however, on its own authority, and without reference to the Treaty or to the Allies, took the -reaponsibility of telling German debtors that they could pay their debts by handing in marks at the Berlin Clearing (lace at the pre-war rate of exchange. The Times adds : " This threw on the Berlin Clearing Office the onus of facing the loss involved in making payment in sterling, and, furthermore, the loss thus voluntarily shouldered wa s made a basis for claiming more lenient treatment from the Allied Clearing Offices." According to the Times, the position thus created was soon found to be untenable :- " Relief was sought, however, not by withdrawing the con- cessions made by the Berlin Clearing Office to German debtors, but by preventing German creditors from receiving the fuU benefit of the payments made to them by British debtors in sterling. The argument ran that the mark had not depreciated very astonishing assumption—but that sterling had appre- ciated owing to the war, and that the benefit accruing to German creditors from the high exchange constituted a war profit, which formed a proper subject for taxation. Accordingly, for some time past, the German Government has subtracted a very large propertion of the difference between pre-war and current rates of exchange on such payments as a war tax. Possibly one explanation of this action is that, on the whole, the German debtors are understood to represent a less wealthy class than the German creditors. As matters stand at present, it is probable that the loss involved in the concessions granted to German debtors is roughly offset by the tax deducted from the payments to creditors."
Whatever may be the exact truth about the deadlock, Germany would do well, for her own sake, to make an end of placing technical objettioes in the way. It is essential for the future prosperity of Germany that she should have well regulated and amicable trade relations with this country. The frame of mind of traders here—their anxiety to trade—is as we have described it. It is a remarkable fact. If German diplomacy had set to work to create an atmosphere in Great Britain to her own advantage she could not have achieved such a success as has been brought about by the pressure of economic circumstance. The ques- tion now is whether Germany is going to destroy this atmosphere and replace it by another which would be quite as bad for her as for us, and probably worse. She is in great danger of doing this, and she thereby displays her curious and persistent inability to understand the workings of other people's minds. What we have said about the difficulties of British traders owing to the threatened default of Germany is of course just as true of the difficulties of British banks and Accepting Houses. German foreign trade was largely financed in the past through the British Accepting Houses, and unless these houses are enabled to liquidate their obligations there will be a disastrous delay in the restora- tion of Anglo-German trade. Were rumour not so explicit it would be almost incredible that the Germans really think that it is worth their while to make default in pay- ment of the monthly balances. Such a default would of course mean a complete severance of financiil relations between the traders of the two countries. We earnestly hope that this will be clearly understood in Germany, and that it will further be understood that if the crash should come it will not be because it has been sought by British traders. Whatever the future may hold, we have thought it our duty to offer this plain and perfectly honest warning to Germany. Although private debts may possibly be regarded in Germany as on a different plane from public debts, they are regarded here as being of the same character. The conduct of Germany in respect of private debts is bound to react upon the whole question of reparation and indemnity. Germany will be judged in the larger matter by her rrinciples in the smaller. By unreasonableness in the business of the Clearing Offices, by what the member of the House of Commons calls . " obstruction," she is making her case worse all along the line.
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