"Germany Can Pay!"

Since the whole fiscal structure of Europe is based today upon the Dawes Plan, it is clear that the mightiest event which looms for 1929 is revision of the Dawes Plan, by the new Reparations Committee of Experts. Therefore the major international news of last week was comprised in the two following developments:

First. Prime Minister Raymond Poincare of France announced at Paris that Tycoon Owen D. Young had accepted a joint Allied and German invitation to sit on the new Committee of Experts as one of two U. S. members. This meant that the revised Dawes Plan will probably go down in history as the Young Plan. Among those who might object would not be Vice President Charles Gates Dawes. Just and modest, General Dawes has already said (TIME, Dec. 20, 1926) that the original Dawes Plan was largely the work of one of his colleagues on the Reparations Commission, none other than Owen D. Young.

Throughout the U. S. smart citizens and radio listeners know that Tycoon Young is Chairman of General Electric Co. and Chairman of Radio Corp. of America. Out on the farm in Van Hornesville, N. Y., where he was born, and where he now raises prize cattle, rustics know Mr. Young as a tall, deliberate, loosely built man of 54 who was once a lazy plowboy.* Gaffers recall how his father had to borrow the $1,000 which helped Owen to an education, world potency, historic fame.

Second of last week's vital pronouncements was the issuance at Berlin--one month late--of the annual report of Seymour Parker Gilbert, who succeeded Owen D. Young in 1924 as Agent General of Reparations.

For four years Mr. Gilbert, a quiet, courteous, red-haired graduate of Rutgers, has been making the Dawes Plan work. Unquestionably his present report, with its searching analysis of Germany's capacity to continue her huge Reparations payments, will form the chief basis of fad upon which Tycoon Young and the Committee of Experts will base their decisions in revising the Dawes Plan.

Had Agent Gilbert's report even hinted, last week, that Germany is desperately hard pressed to pay, the Reich might have hoped for important concessions and scaling down of payments by the Committee of Experts.

Instead the report bluntly declares:

"No question can fairly rise, in the light of practical experience thus far, as to the ability of the German budget to provide the full amount of its standard contributions under the Dawes Plan."

That sentence means, and jubilant Paris dailies whooped the news, last week, that:

"GERMANY CAN PAY!"*

Contrasting with French joy was the raging fury of the German press last week. In Berlin the potent, Democratic Acht Uhr Abendblatt, even thought that Prime Minister Poincare of France had "influenced'' Agent General Gilbert to write a "made to order report," and rashly charged that this perfidy had been arranged at the Gilbert-Poincare-Churchill and J. P. Morgan conference in Paris last autumn (TIME, Oct. 29). As German anger mounted, imaginative correspondents cabled the suggestion that if Mr. Gilbert had remained in Berlin, last week, he would have been mobbed. As usual, however, the Agent General had left Germany before issuing his annual report; and last week the Cunarder Berengaria brought him safely to Manhattan.

Elusive Young, Silent Gilbert. Officials of General Electric and Radio Corp. of America blandly told newsgatherers, last week, that they really did not know where Chairman Owen D. Young might be. This fact, convenient, frustrated for a time all efforts to confirm the flat statement of M. Poincare that Mr. Young would positively sit on the Committee of Experts.

When puzzled U. S. editors cabled their doubts to Paris, the statement of M. Poincare was irascibly repeated by his Chef de Cabinet. Thereupon a circular order was sent out by leading U. S. news services to all correspondents: "Keep on lookout for Young." As though he had been Charlie Ross, the wilfully elusive Chief Executive of two huge corporations was sought for everywhere that he was not.

Eventually news-sleuths saw Mr. Young. Arriving in Manhattan after a mysterious absence in Arizona, Mr. Young held himself virtually incommunicado, merely said he had not had time to confer with "anyone."

Almost equally secretive was Agent General Seymour Parker Gilbert, when cornered by ship-news reporters on the Berengaria. With hands clasped behind his back, Mr. Gilbert rose slightly on the balls of his feet and observed: "You must realize, gentlemen, that this is a good time for me to be silent.''

To the double-barreled question, "Is it true that you will resign as Agent General and enter the House of Morgan?" unembarrassed Mr. Gilbert replied easily, "I hadn't heard about that."

"Perhaps you play poker in your spare time?" asked a news imp. Still unruffled, the Agent General answered, "There's not much of that in Berlin now, but I do manage to get sufficient relaxation."

Finally Mr. Gilbert consented to observe that he would confer "quite unofficially" with President Coolidge and President-Elect Hoover in Washington, later rejoining Mrs. Gilbert at her home in Louisville, Ky., and returning with her to Europe in about a fortnight. To hotly pressed queries about Reparations, the Agent General answered repeatedly: "You'll find that in my report."

Presently Mr. & Mrs. Gilbert drove from the Berengaria to the Plaza Hotel, and that night they dined with Dwight Whitney Morrow, onetime Morgan Partner, famed U. S. Ambassador to Mexico, rumored future father-in-law of Charles Augustus Lindbergh. While this potent meal was in progress alert observers continued to digest the 170 pages of:

The Gilbert Report. Summing up four years of the Dawes Plan and anticipating the embryo Young Plan, the Agent General writes:

"Fundamentally, confidence has been restored and Germany has been reestablished as a going concern on a relatively high level of economic activity. From the outset, moreover, the Dawes Plan realized its primary object by securing the expected reparations payments and transfers to the creditor powers.

"But the fact that there was no final determination of Germany's reparation liabilities, has left an element of uncertainty in the plan itself, and in the affairs of all countries concerned in reparations. It has become increasingly clear that a final settlement of the problem to be achieved by mutual agreement would be in the best interests of the creditor powers and Germany alike. The new experts committee is to draw up proposals for a complete and final settlement of the Reparations problem and is thus expressly empowered by the governments concerned to consider the fundamental problem still remaining to be solved and carry to its logical conclusion the work of the first committee of experts."

In fewer words: The new Committee will fix the total sum which Germany must pay in Reparations and the length of time over which payments will be made.

Significant Excerpts point by point:

Railways: "The German Railroad Company is in a strong financial position owing partly to the recent increase in its tariffs and to the beginnings of improved financial control. There is no question about the ability of the company to carry the full annual charge for the service of its Reparations bonds, provided it follows a prudent financial policy."

Gold: The Agent General urges immediate resumption of gold coinage by Germany, since the "Gold reserves of the Reichsbank now stand at the highest point ever reached; and, for the greater part of this last year, the mark has been one of the strongest currencies in the world, from the standpoint of foreign exchanges."

Budget: As usual Mr. Gilbert finds that the German Finance Ministry is "still under the influence of tendencies toward overspending and overborrowing. . . . The situation is one which bristles with difficulties." He again recommends a complete overhauling of the system whereby the various states of the German Republic still balance their budgets with funds contributed from the National Treasury.

Foreign Trade: "German foreign trade has markedly progressed toward stability. The margin of excess imports over exports narrowed in the past year, and in September both attained a substantial equilibrium for the first time since 1926. This is partly due to the decline of imports, but exports reached the largest dimensions since 1924. Exports and imports came to an equilibrium in September at a level of approximately 1,100,000,000 marks as compared with 600,000,000 in 1926."

Revenues: "The revenues of the Reich continue to show favorable development, and the most encouraging thing of the whole four years, from a standpoint of public finances, is the great productivity of revenues, notwithstanding the important reductions in taxation that have been made."

Significance. Clearly the Agent General's report supplies the Allied Powers with ample data from which to argue that Germany can well afford to pay her pound of flesh. But even Shylock experts will not lose sight of three arresting facts:

1) Foreign loans have made possible Germany's phenomenal economic recovery, and to assume the indefinite influx of such borrowed capital would be sheer folly. 2) Since nearly half of Germany's pound of flesh is being paid "in kind" under the Dawes Plan--that is to say in German goods which compete with Allied home production--the creditor powers will find it still to their advantage to knock off something from the German debt in return for a promise of more "cash" and less "kind." 3) The four years covered by the Report do not include the present so-called first Standard Year, in which the German Reparations annuity rises to its final level of 2,500,000,000 marks ($595,000,000). Even Agent General Gilbert cannot know from experience how well the burden of the Standard Years will be borne a decade or a generation hence.

When Agent General Gilbert had had opportunity to peruse the extravagantly joyful comments of the French press on his report, last week, he very sagely said:

"I fear that there is a tendency to interpret as prophecies for the future many portions of our report which were in fact mere statements of past happenings."

When cabled to Berlin, these guarded words were featured by the press, along with a report just issued by Commercial Attache of the U. S. Embassy F. W. Allport. With a pessimism which delighted Germans, Attache Allport lugubriously observed that: 1) The number of German unemployed has increased during the past month from 671,000 to 1,030,000, making 70% more out-of-work than in 1927; and 2) "The five weeks shut down in the steel industry, which came to an end early in December, caused serious dislocations in the iron, steel, coal and coke trades."

Despite all this, however, the opinion continued current in U. S. fiscal circles that the predominant meaning of the report right or wrong is:

"GERMANY CAN PAY!"

*Legend tells that hot, sweating Plowboy Young was so impressed one summer day by the cool nonchalance of attorneys arguing in the county court house that he instantly resolved to turn from clods and dirt to law.

*"Les Baches Payeront!" was the slogan with which Prime Minister Georges Clemenceau (1917-20) justified every expense or extravagance in carrying on the War; and ever since Frenchmen have been putting off their own debt settlements with: ''The Bodies will pay!"