Italian Debt

The Italian Debt Mission, headed by Count Volpi, last week got down to business with the American Debt Commission, headed by Secretary Mellon. Observers remarked that the Italians appear to be a new kind of debtor--different at least from the other major debtors who have come to Washington to arrange their debts:

The British came like one banker coming to meet another. There was very little question of capacity to pay. The British were too proud to admit that they might be unable to pay any debt they had contracted. The negotiations were chiefly a matter of arranging suitable terms. The Belgians came, poof and little, but proud. They were faced by a creditor who acknowledged that there were moral reasons for mitigating the debt. Arrangements were worked out on this basis. The French came exclaiming "We are poor! Oh, so poor, helas!" and were intent on driving a bargain on semi-bankruptcy terms. They met a bargaining creditor and went home without result. But the Italians came and laid their cards on the table--or at least gave that impression. They said, "We are hard up. Here's an exact statement of our financial position. Let's work out a practical agreement for paying."

The Debt. The Italian debt to the U. S. with accrued interest amounts in round figures to $2,138,000,000. If they were to fund this on a 62 year basis according to the "standard" terms of the U. S.-British agreement, the annual payments would be about $70,000,000.

Intentions. At the opening of the negotiations Mr. Mellon said to Count Volpi: "In negotiating with you a settlement of the debt, this Commission will apply the principle of Italy's capacity to pay and will give due weight to the special conditions existing in your situation. We shall, I am sure, come to terms which will be within Italy's power to fulfill without undue pressure upon her or her people, and which will also recognize the sacrifices made by the American taxpayer in the advances to our Treasury,."

To this Count Volpi replied: "Upon starting the present negotiations, Italy accepts the principle laid down by the American Debt Commission that each debtor nation shall be considered independently and shall repay its debt within its particular capacity to pay.

"In determining capacity of a nation, the report of the Dawes Commission has shown that there are two principal elements: 1) the capacity to collect in a country from its people the necessary money, and 2) the transfer of the money so collected in the national currency to the creditor country in the currency of the latter."

From the general attitude of the Italian Commission observers were inclined to feel that there would be a settlement; in fact it was guessed that Mussolini's instructions to the Commission were: "Tell the truth and take the best terms that American goodwill will grant."

Capacity to Pay. In preliminary negotiations concluded with the Italian Ambassador and Signer Alberti last summer, the American Debt Commission asked for a statement of Italy's capacity to pay. This was presented by the present Commission in the form of "24 monographs," collections of statistics bearing on the point. The Treasury had of course had its own experts prepare similar statistics. Mark Sullivan, one of the ablest and most reliable of the Washington correspondents, was last week responsible for the assertion that the Italian estimates of their capacity to pay were slightly greater than the American estimates--an earnest of good faith on the part of the Italians calculated to put them in good favor with the American Commission.

Capacity to Transfer. One point the Italians brought up was that part of the capacity to pay included the capacity to transfer. It is all very well for Italy to collect money from her own people to pay her debts, but how is that money to be transferred across the ocean? Italy has no gold to speak of that she might send. Obviously the payment must be made in goods. But Italy has been importing more than she has exported. Last year her imports were about 50% greater than her exports, and considering only U. S.--Italian trade, Italian imports were nearly 300% greater than exports. Italy's principal exports to the U. S. have been citrus fruits, olive oil, wine, etc. Wine was struck off the list by prohibition. The citrus fruit export has been cut in half by the high tariff. What is more, remittances from Italian immigrants in the U. S. have been greatly reduced by the immigration restrictions which prevent Italy from exporting labor to us. Our debt commission cannot alter prohibition, tariff or immigration laws. The problem of transfer in Italy's case is knotty.

Progress of Negotiations. The Italians did not begin by laying down an offer. They laid down the facts and then the two commissions formed two sub-committees to consider 1) capacity to pay and 2) capacity to transfer. The problems were thrashed out jointly with the expectation that suitable terms would develop from the joint labor. An interesting feature of the meetings is that Count Volpi knows no English and is obliged to rely on an interpreter.

Publicity. A special arrangement was made in order to prevent such misunderstandings as took place when the French Debt Mission was here. The only information given out concerning actual developments was in the form of a joint bulletin issued by both commissions.