Default

When Austria was taken over by Germany three months ago the little nation owed a total of $400,000,000 in foreign debts. No one seriously expected Germany to continue payments on these and last week, when the first interest payments after the anschluss came due, Germany defaulted on three Austrian foreign loans totaling $230,000,000 which were largely held in the U. S., Great Britain, France.

A British commission, under Sir Frederick Leith-Ross, Chief Economic Adviser to His Majesty's Government, came home from Berlin last week to report that the only payment the Reich will consider is one in goods. His Majesty's Government met further rebuff with a German reminder that Britain had refused to take over the debts of the Boers.

When Germany gobbled Austria she swallowed three indigestible items. First, Austria's foreign debts, which, from her action last week, Germany intends to digest by ignoring them. Second, while Reichsbanker Dr. Hjalmar Schacht hurried to Vienna to impound $43,000,000 of Austrian gold reserves he also realized that another $32,000,000 of Austria's foreign exchange reserves was banked abroad, $25,000,000 in London. Extensive litigation will be necessary before this money can be released and Dr. Schacht's chief fear now is that the courts will turn the money into payments on loans.

Third and soggiest lump was the fact that Austria's imports have exceeded her exports. During the first four months of 1938, Austria's adverse balance was $7,600,000, an almost insurmountable addition to Germany's own $28,400,000 adverse balance for the same period. According to League figures, Germany's net imports of raw and semi-raw materials totaled 1,731,000 metric tons (a metric ton is 2,204.6 pounds) in 1936; Austria's 1,867.000. In foodstuffs and livestock for the same year, Germany imported 2,168,000 metric tons more than she sold abroad, and Austria 1,121,000 more. Thus, the little nation of 7,000,000 Austrians, due to her insufficient agricultural production and almost non-existent import restrictions, had to buy abroad more raw and semi-raw materials, half as much in food, as did highly developed Germany with her 65,000,000 inhabitants.

That the new burden is rubbing Germany raw is indicated in the May Deutscher Volkswirt, Dr. Schacht's organ, which reveals that in April, Greater Germany imported $10,400,000 more than she sold abroad. Of this, only $2,800,000 came into the old Reich, $7,600,000 was necessary for her new province.

Observers agree that the Reich will attempt to unsnarl her tangle by selling more abroad, particularly to Great Britain, but British financial interests, which stand to lose most on the Austrian loans, are unlikely to accept such a solution until the loans are settled. Britain holds an ax over the Reich because she can deduct German debts from the money Britons owe German exporters. Last week, the potent Association of British Chambers of Commerce urged that the exchange clearing bill, passed in 1934 but never implemented, be enforced. But as such a move would blight Prime Minister Neville Chamberlain's present hopes of an Anglo-German appeasement, it was deemed stillborn.

This file is automatically generated by a robot program, so reader's discretion is required.