4.—­REGULATING INTER-ALLIED DEBTS, GERMANY’S INDEMNITY AND THAT OF THE DEFEATED COUNTRIES

These two problems are closely connected.

The victorious countries demand an indemnity from the conquered countries which, except Germany, who has a great productive force even in her hour of difficulties, are in extreme depression and misery.

Great Britain is in debt to the United States, and France, Italy and minor nations are in their turn heavy debtors to the Americans and to Great Britain.

The experience of the last three years has shown that, even with the best will, none of the countries owing money to the Entente has been able to pay its debts or even the interest.  With an effort Great Britain could pay; France and Italy will never be able to, and have, moreover, exchanges which constitute a real menace for the future of each.

The fact that France and Italy, although they came out of the war victoriously, have not been able to pay their debts or even the interest on them is the proof that Germany, whose best resources have been taken away from her, can only pay an indemnity very different from the fantastic figures put forward at the time of the Conference of Paris, when even important political men spoke of monstrous and ridiculous indemnities.

The problem of the inter-allied debts, as well as that of the indemnity, will be solved by a certain sacrifice on the part of all who participated in the War.

The credits of the United States amount to almost 48 milliards of lire or francs at par, and the credits of Great Britain to 44 milliards.  Great Britain owes about 21 milliards to the United States and is in turn creditor for some 44 milliards.  She has a bad debt owing from Russia for more than 14 milliards, but 13 milliards are owing from France, about 12 milliards from Italy, and almost 2-1/2 milliards from Belgium.  That is to say, that Great Britain could well pay her debt to the United States, ceding the greater part of her credits towards France and Italy.

But the truth is that, while on the subject of the German indemnities, stolid illusions continue to be propagated (perhaps now with greater discretion), neither France nor Italy is in a position to pay its debts.

The most honest solution, which, intelligently enough, J.M.  Keynes has seen from the first, is that each of the inter-allied countries should renounce its state credits towards countries that were allies or associates during the War.  The United States of America are creditors only; Great Britain has lent the double of what she has borrowed.  France has received on loan the triple of what she has lent to others.

The credits of France are for almost two-thirds undemandable credits of Great Britain; more than 14 milliards being with Russia, they are for considerably more than one-third bad debts.

France and Italy would be benefited chiefly by this provision.  Great Britain would scarcely either benefit or lose, or, rather, the benefit accruing to her would be less in so much as her chief credits are to Russia.