Super-Crisis

Finance Minister Etienne Clementel mounted the tribune of the Senate. . . . He had just been closeted with Premier Herriot. They had been discussing how to get France out of her financial muddle:

Ever since the War, the Government has been compelled to meet its prodigious expenses by issuing bank notes that were backed by an insignificant gold reserve. In other words, the value of the franc depreciated, causing prices to rise to new heights. This, in turn, forced the Government to issue still more paper francs. And so the dog went on chasing its tail.

In September, 1920, this mad-hatter financing was brought to an end by a law which fixed the fiduciary note circulation at 41,000,000,000 francs. Prices, taking the index figure of 100 for 1914, were 506 in 1920; by the middle of 1922, they were 332, but by the end of last year they had reached the apex figure of 514.

Etienne Clementel mounted the tribune of the Senate. . . . There was eager attention. First, he announced the obvious fact that France had erred previously by placing too much hope in German reparations payments. Then he warmed to his subject. He pointed out that many of the bank notes now in circulation were being hoarded by the people, advocated a new note issue to replace the old. He pointed out that, before the War, the note and metal circulation was 11,500,000,000 francs; that, since the value of the franc has

Depreciated fourfold, France should now have a note circulation of 46,000,000,000 francs. Last week, it was only 96,200,000 francs less than the 41 billion franc limit.

The cat was out of the bag. Naturally, the Senators and the outside world took this to mean that the Government intended to authorize an additional issue of five billions of francs -more money -higher prices -more inflation.

But M. Clementel, prepared for this reaction, attempted to scotch it on the spot. He declared that the extra currency was wanted for commercial purposes, that it would not be used to pay the Governments cash deficit, because, for the first time since the War, the Government has a balanced budget which takes into account every expenditure.* When Premier Herriot heard the news, he rushed to the Senate, met M. Clementel in a corridor, had a hot, short, strong talk with him. The result was that the Finance Minister remounted the tribune and toid the Senators in effect that he had been talking a lot of poppycock, that the situation was not as he had represented it to be. He was very sorry and totally misinformed.

Premier Herriot himself then mounted the tribune, explained what a sincere, simple chap M. Clementel was, how valuable his services had been to the Government and France, but condemned him out of hand for overstepping his authority and misrepresenting the Government, without, however, denying what the Finance Minister had said. His speech was a model of equivocation. He assured the Senate signifi- cantly that he would introduce a bill for the improvement of the Treasury's (Bank of France's) position.

M. Clementel had no alternative but to resign after his painful experience in the Senate. This he promptly did. Premier Herriot allegedly offered the vacant Ministry to M. Louis Loucheur, prominent and influential industrialist, but the latter refused it. The post was next offered to Senator Anatole de Monzie, an ardent Catholic and a prominent henchman of the Government in the recognition negotiations with Russia. The Finance Ministry was accepted by M. de Monzie on the understanding that the Government drop opposition to the Vatican Embassy. The Premier compromised on this question by stating that the Government would permit the representative of Alsace and Lorraine - whom he proposed to substitute for the present Ambassador (TIME, June 30, Sept. 8, Mar. 22, et seq.) -to represent France also. This was a complete negation of his ministerial declaration of last June (TIME, June 30) and gave the impression of defeat, for it showed the lengths to which he had been forced in order to keep his Ministry together.

But the last act was not yet written. A storm quickly brewed over the Premier's reference to a bill to alleviate the position of the Treasury. It was allowed to leak out that the Government intended to impose a capital levy of 10% in the form of a mortgage under which 1% per annum of the capital sum must be paid. This rumor, for it was nothing more, aroused the political elements to tornadic fury. M. Loucheur instantly withdrew his support from the Premier. This was not so serious as what followed. The Unified Socialists, under ex-Premier Aristide Briand, announced that, unless the Cabinet stuck to its capital levy guns, they would desert the Government ship, which must then founder, for the Unified Socialists, with 104 seats, form about one-third of the Government's supporters. If the Government advances the capital levy, it is sure to win in the Chamber, although the Senate was considered equally sure to reject it.

The Premier, through his Finance Minister, once more compromised. It was stated that the capital levy would be voluntary, but it was firmly hinted that, if the system were not successful, resort would be had to an obligatory levy. The "sop" to the extremes of the Government and Opposition parties seemed lost. Matters had gone so far that it was entirely possible that no fiscal project, no matter how reasonable, would be accepted by the Senate.

The horizon grew still darker when ex-President Alexandre Millerand scored an overwhelming victory (520 to 175 votes) over his Socialist opponent in a by-election for a Senatorship of the Seine Department. The new Senator became, in fact as well as in name, the leader of the Union Republicaine, of which party ex-Premier Poincare has hitherto been the Senate leader. And he lost no time in flinging the gauntlet in the face of the Herriot Government.

The logical result of the turmoil would be, it was pointed out, the resignation of the Government. A possibility existed that M. Briand would then be asked to form a Cabinet, but Paris critics thought that he would be unable to command a majority, especially since he is opposed in principle to the present Government's religious policy. It was inferred that the Radical Socialists under Herriot might withhold support from a Briand Government.

The Opposition parties looked forward to dissolution of Parliament with an early general election, but naturally the wish was father to the thought. At the present state of political feeling in the country, a general election would be likely to end in the return to power of ex-President Alexandre Millerand and ex-Premier Raymond Poincare. What then? Is France once more to witness the ousting of a President as it did last June (TIME, June 23) when President Millerand was forced to resign? The answer was unborn.

*Previous Governments had two budgets: one for ordinary expenditures which balanced; one for reconstruction and loan expenses, which was technically charged to expected receipts for German reparations.