In four years French money dropped to one-third of par, Belgian between one-third and one-fourth, Italian one-fourth, Czechoslovak one-eighth, Jugoslav one-twelfth, and Rumania one-fifteenth. Greek, Bulgarian and Turkish money kept well above Rumanian. Poland, on the other hand, shared with Russia, Austria, and (after the invasion of the Ruhr) Germany the problem of keeping the paper money from becoming altogether valueless. Hungary and the Baltic Republics (except Finland) gave up the struggle of supporting their money in international exchanges in the early part of 1923.

For a time the English-speaking peoples looked upon the decreasing values of Continental European moneys with indifference or amusement. Trade with the Continent, which could not pay pounds sterling or dollar prices, fell off and threatened us with a crisis of over-production. This was a danger to which we quickly adjusted ourselves, with the consoling thought that the business would have had to be done on credit anyway. Who could afford to sell on credit to countries already virtually bankrupt and with a constantly falling currency? The English-speaking peoples had the rest of the world to trade with, and it seemed that there was nothing to do but to wait until some of the countries affected by chaotic financial conditions became bankrupt and repudiated their worthless paper money, as revolutionary France had repudiated the assignats and the American Southern States had seen their Confederate dollars become worthless. The more stable European countries could in time conquer the problem of inflation and rebalance their budgets.

Were it not for the two intimately related problems of reparations and interallied debts, Great Britain and the United States would probably not have become involved in the political and financial implications of the European financial situation. But all these countries owed Great Britain and the United States large sums, representing either advances made during the war or sums due on reparations account. This being the case, it was impossible to expect the Continental European countries to settle their accounts with one another until some agreement had been reached with Great Britain and the United States in regard to the accounts of all the Continental European countries with the creditor nations. The problem of international debts was still further complicated by two facts: that Great Britain owed nearly as much to the United States as was owing to her from her European debtors; and that the United States, while demanding preferred settlement for her bill against Germany for the expenses of the army of occupation, had failed to ratify the Treaty of Versailles and had made a separate peace with Germany.

The American Government was unwilling to accept the thesis set forth in the Balfour note of August 1, 1922, that Great Britain’s debt to the United States should be considered in connection with the debts of Continental Europe to Great Britain. It was unwilling, also, to defer the payment of the Rhine occupation bill until the general question of German reparations had been satisfactorily solved. Adopting the attitude that “business is business,” the American Government not only concluded a refunding agreement with Great Britain, independent of European financial problems, and sent a Treasury official to France to press the claim for America’s share in the German payments for military occupation, but also announced its expectation that other debtors should follow Great Britain’s example.

Of the Continental European nations Finland alone has arranged to repay her obligation to the United States. The United States holds sufficient German assets to cover reparations, and a German-American commission met in Washington, in March, 1923, to adjudicate the claims of American citizens against the German Government. No progress has been made in the matter of claims against other enemy countries. France, Italy, and the smaller European countries, except Finland, have made no move to pay the interest and amortize the principal of the loans advanced by the United States.

What has happened, however, as we have already seen, is that our European debtors have announced the policy of making reimbursement to the United States dependent upon the collection of reparations from Germany and the other vanquished nations. The argument by which they support this policy is easy to grasp. They say: “We cannot pay the United States and Great Britain unless we receive the reparations granted us by the treaties of the Paris settlement. If we modify or waive our claims, as embodied in the Paris treaties, we must look to the United States and Great Britain to cancel our debts to them.” For several years this has been the answer of the French press to American and British criticism of France’s reparations policy; on May 11, 1923, it was stated officially in Mussolini’s reply to the German offer to settle reparations on the basis of 30,000,000,000 gold marks.

American public opinion, while sympathetic to France and Belgium in the Ruhr occupation, feels that debts should be paid all around, and is unwilling to accept as valid the contention of contingent payments or to realize that our European friends have the right to expect us to let up on them if they let up on Germany. Europeans ask: “Why should the conquerors pay, while the conquered go scot-free? Are we not the victims? Were they not the aggressors? It is incredible to expect us to forgive our enemies when you are unwilling to forgive your friends?” The Americans retort, “Why should we pay the German reparations, for this is what your proposal amounts to?”

The principal interallied debts are as follows:

1. France owes Great Britain and the United States$7,000,000,000.
2. Italy owes Great Britain and the United States4,500,000,000.
3. Belgium owes Great Britain and the United States900,000,000.
4. Great Britain owes the United States4,750,000,000.
5. Russia owes France4,000,000,000.
6. Russia owes Great Britain and the United States500,000,000.
7. The smaller states owe Great Britain, the United States, and France more than3,500,000,000.

According to the ratio finally decided at the Spa Conference, France, Great Britain, and Italy are to receive respectively 52, 26, and 10 per cent of whatever reparations Germany finally pays, while Belgium is a preferred creditor of Germany, and Italy has a lien on the major part of Austrian and Hungarian reparations.