Britain’s Foreign Office, which over the past year has been Germany’s most inveterate backer, has demanded an explanation. The response was more illuminating than polite. Germany, von Neurath said, is not bound by any budgetary limitations under the terms of the Treaty of Versailles. There is some justification for this position. But Germany deliberately ignores the indisputable fact that this does not apply to disbursements that contravene the provisions of the Versailles Convention. This is the case, however, when the German government devotes expensive funds to a reorganization of the Reichswehr on the basis of short-term military service, ignoring the fact that such a reorganization can only take place with the consent of signatories. This is still the case when colossal credits are devoted to the construction of a “national defense air force”, the very existence of which is prohibited by the terms of Versailles. In this respect, a statement made by the German Air Minister, General Goring, to Sir Anthony Eden, when the latter ventured to investigate Germany’s armament intentions, is enlightening. “Germany,” was the reply, “intends to have an air force second to none.” By these words, the spokesman for the German Cabinet signified that the Treaty of Versailles was about to be thrown, one more scrap of paper, at the feet of the allied nations.
And now? The next step must be taken by the debtors of Germany, whose position is far from enviable. France is intensely occupied with its own internal affairs. Under more favorable circumstances, it would no doubt have rallied Belgium and the Little Entente, and perhaps also Great Britain and Italy, to decisive action. But things being what they are, with the decision in the hands of London and Rome, the success of the German offensive is practically assured.
Belief or disbelief by the Allies of Germany’s poverty protests will not greatly affect the end result. These cries of “wolf, wolf” have been the preliminary to every debt payment demanded of the Reich in the past. It is true that Germany follows the lead of Britain, France and most other Allied nations in refusing to recognize its war debt obligations. But no other European power has yet tried to get rid of its private loans.
The New Republic always insisted that sooner or later Germany would be forced to give up its external obligations because it could not afford to pay. Its trade balance has been declining for years. In the three months from October 1 to December 31, 1933, its reserves of gold and foreign exchange decreased by 7,000,000 marks; from January 1 to March 31, 1934, this fall amounted to 140,000,000, with no prospect of improvement. The same disastrous downward trend is evident in Germany’s export trade. Since the first of the year, its balance of trade has been largely unfavorable, with its imports maintaining a growing advantage over its exports, although it would have been possible to protect its dwindling foreign exchange reserves through an import embargo. .