The application of the German Government to the United States Securities and Exchange Commission for the registration of a German Government issue of $69,000, 000 funding bonds to meet Ger many's interest and indebtedness, 4s said to reveal an alleged secret debt of $2,000,000,000. The report should arouse no particular astonishment, because for some time past it has been a matter for some speculation as to.how Germany was managing to finance all the huge undertakings she has embarked on. The subject is of some interest to Great Britain on account of the fact that the German Government owes British banks—£40,000,000 on which practically nothing has been paid since 1934, and concerning which conference was held in Berlin during the carly part of February, the results of which do not yet appear to have been made public. The history of the Joan is quite! short. About £65,000,000 was lent: on short term by London to Berlin: prior tothe crash of 1931, and of} that sum the £40,000,000 still remain unpaid, "frozen" under the: Stilthalt agreement. That Germany could pay this sum is apparent from a cursory glance at her trade position with Great Britain. Her merchandise export surplus to the latter country last! year was in the neighbourhood £6,000,000, and her total export surplus,—quite apart from invisible items, such as shipping freights,—was nearly £50.000,000 at par. In these circumstances Germany asked for an extension of the loans, despite the fact that even in the abnormal conditions resulting from the German effort {0 create "war self-sufficiency" the—German' authorities by no means lack foreign exchange resources for the Fepayment of overdue, unfunded debt to London at a substantial rate: annually.
An interesting publication "Germany's Economic Situation at the turn of 1936-37," a report issued by the Reichs-Kredit-Gesellschatt Aktiengesellschaft, Berlin, indicates that whereas in 1913. German credits abroad amounted to between 25,000 million and 30,000 million Reichsmarks, Germany is now burdened with a foreign debt of between 12,000 million and 13,000 million " Reichsmarks,—to! which must apparently be added the 5,000 million Reichsmarks representing the secret debt which has now been revealed. It is claimed that despite the moratorium, this debt requires the maintenance and transference, via foreign exchanges, of interest payments to} the order of 500 million Reichs~ rks each year. This, the report continues, has for some time meant the complete exhaustion of the hard-pressed active balance of foreign trade. Taken at its face value such a statement should arouse no little sympathy, but when the vast sums which Germany has spent on rearming are taken into account the matter assumes an entirely different complexion. In the last three budget years, 1934-37, Germany has spent on armaments about Rin. 28,000 million or, say, £2,200,000.- 000 at par, That one fact alone amply proves that, save for the military policy which the German government has been following, it could have met all its indebted nesses as they fell due and still be possessed of very considerable sums for less martial purposes. But Germany would have still been in some position to pay had she not adopted a policy envisaging "the positive accumulation of new Yang term resources by savings and by the ploughing back of undistributed profits—a process which in its turn has been considerably stimulated by the economic activities of the Government."
When a nation of set purpose models its entire economy on lines} for which a new term,—Wehrwirtshaft, "the economics of war."—has to be coined, it is understand-lable if other countries regard the German claim of inability to pay with no small amount of suspicion. In some quarters in Britain opinion [has been hardening against grant Germany. a prolongation of. her] loans. for despite the claims of poverty she has in: fact been amortising much of her long-term! foreign debt by buying up, at marketed in London and New York. Britons who do not favour extension are not without ideas as to the remedy which could be applied should Germany continue to refuse to meet her obligations. It is suggested that if the British Government were to support the "stand still" creditors with a threat] to "block" an appropriate amount of German assets in London the German attitude would materially change. But counsels of that, nature are not to be adopted lightly and nothing should be done which might increase the present) European tension. That does not) in any way minimize the seriousness of the moral issues involved, for it is becoming increasingly' apparent that it is not poverty. which prevents Germany meeting] her just obligations, but a determination to create a military machine the existence of which contributes so heavily to the present European instability. It is because of all these circumstances that the disclosure of the enormous hidden debt referred to above must: give rise to anxiety. There is no reason for believing that there are any more such obligations lying about in the world, but some uneasiness must naturally arise from the thought that if Germany can raise such a sum secretly, how much of her preparations against future emergencies also still rqmain unknown?
Text read from the printed page and cleaned; old type leaves the occasional error.