Courtesy Reuters

Salvaging the Debts of Eastern Europe

SO MUCH emphasis has been laid on the three billions or more of American investments and advances tied up in Germany that little consideration has as yet been given the fate of $650,000,000 of American money poured into the states of Eastern Europe during the years 1920-1931. Five of these eight states have bonds listed on the New York Stock Exchange which are in partial or total default due to local regulations prohibiting payments on foreign debts except in local currency -- namely, Austria, Bulgaria, Greece, Hungary and Jugoslavia. The finances of these five countries, and of Rumania, Czechoslovakia and Poland, have been passing through a series of severe crises. The first five, together with Rumania, rigidly control their foreign exchange operations. Even Czechoslovakia, whose foreign debt is insignificant, has had to fight to safeguard its currency and to keep its financial house in order.

Of the $650,000,000 of American money tied up in this region about $50,000,000 is in short-term loans. Most of this is in Hungary and Austria. The balance, consisting chiefly of long-term indebtedness, both corporate and governmental, was divided as follows at the end of 1930, and has probably been only slightly reduced since that date by repatriation:

Austria $115,065,000
Bulgaria 14,093,000
Czechoslovakia 35,393,000
Greece 52,987,000
Hungary 118,878,000
Jugoslavia 57,965,000
Poland 177,323,000
Rumania 25,211,000

How much, if anything, of this $650,000,000 can be salvaged and how best can the salvaging operation be carried out?

In estimating the probable ultimate capacity of these countries to pay their foreign debts we must ascertain the following facts for each: 1. What proportion of its indebtedness is due foreigners? 2. What is the total volume of its foreign debt? 3. What is the relation of its debt service charges to its capacity to transfer payments abroad? 4. What has been the history of its foreign trade, especially regarding its ability to establish a surplus of exports over imports?

Figures showing the ratio of foreign to domestic non-governmental borrowings are not obtainable. However, the following table, showing the percentage of government debts held abroad, probably reflects correctly the ratio in the case of general indebtedness, for the

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