Britain, America and the War Debt Controversy

Sovereign Credit and the Fate of Leaders: Reassessing the “Democratic Advantage”

“…British democratic politics, rather than economic constraints, motivated Britain's decision to default on this particular external debt. The “overwhelming majority” of the British supported suspension of payments (Self :192). The public's opinion on refusal to repay debt hardened after France defaulted on its debt to the United States with no obvious consequences.…”

‘We can't pay’: how Italy dealt with war debts after World War I

“…The negotiations failed again. According to Self (2006, p. 179), ‘the British were handicapped in their planning for the forthcoming talks by an astonishing degree of uncertainty about what the Americans actually wanted’. In fact, in reading the diplomatic documents on British foreign policy, one has the impression that President Roosevelt was sympathetic to a revision of British war debts, but he was also fully aware that US voters and the majority of Congress were not 10 .…”

“…The American electorate and their representatives were much more isolationist than the leaders who privately acknowledged that war debt repayments were an obstacle to the resumption of economic growth in the world 11 . According to Sir Frederick William Leith-Ross, chief economic adviser to the UK government, who met Roosevelt on 1 November 1933, ‘[the President] can get anything he likes through Congress, but … he is evidently not disposed to take any risk … while he could get a settlement through Congress he would lose a good number of tail feathers which he can ill afford to do … I do not believe that he cares about the actual money except so far as an increased offer [from the UK] could facilitate his handling of Congress’ (Self 2006, p. 187). Without a settlement, the UK made the last partial payment of $7,500,000 dollars on 15 December 1933.…”

“…Furthermore, the British position argued that war debts were fundamentally different from self-liquidating commercial debts raised for productive purposes. War debts had been neither productive nor self-liquidating for the debtor (Self 2006, pp. 119–20; Shepardson and Scroggs 1935, pp.…”

“…Virtually at the same time, the German Reich announced that after 30 June 1934 it would discontinue payments under the Dawes and Young loans (Toniolo 2005, p. 154). In the certain knowledge that it would receive no further repayments from its own debtors, the UK finally agreed to suspend all debt payments (Self 2006, pp. 193–4).…”