Settlement

As Anglo-Italian relations over the war in Spain last week took a slight turn for the better (see above), so did financial relations between Britain and Germany. The Chancellor of the Exchequer, Sir John Simon was able to inform the House of Commons that an Anglo-German agreement had been reached providing for continuance of the debt service on Austrian loans, repudiated by the Reich after Anschluss.

Germany, on her part, announced the Chancellor, agreed to take responsibility for Austria's Government debts owed to Britain. In return, Britain slashed the interest payments on the Austrian loans, also reduced the interest charges on Germany's 1924 Dawes loan and 1930 Young loan, both floated to help the Reich's reparations efforts. Further, Britain arranged to take an increased amount of German goods, allowing Germany to make future debt payments from the proceeds of these additional exports.

The agreement, strictly on a two-nation basis, made no mention of Austrian debts owed the U. S., France and half-a-dozen smaller powers. At the time of repudiation, these nations, with Britain, lodged stiff protests in Berlin. Britain, however, was the only power in a position to bring the Reich to any sort of terms. Since Britain annually buys $49,440,000 more goods from Germany than she sells, all she had to do was to clamp on exchange clearing control, deduct the debt payments from British money owed German exporters. Germany acted before this got beyond the threat stage.

Britain's individual settlement with the Reich leaves the other Austrian creditor nations to fend for themselves, with little hope of compensation unless they are willing to accept payment in German goods. The U. S., with at least $20,000,000 owed on the Austrian debt, is in no position to drive a settlement since she annually sells $29,280,000 more to Germany than she is forced to buy. So far, Washington has dispatched three notes of protest against Germany's failure to pay. Germany has not troubled to answer.

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