The French Financial Problem

Report Outline
French Budget Methods
Pre-War Public Debt, Taxation and Income
Public Debt Increases During War
France's Interinational Inco Me Account
Adverse Trade Balance and Credit Operations 1914–1919
Trade Balance and Credit Operations, 1919 to 1923
Trade Balance and Credit Operations 1954
French Foreign Debt 1924
Special Focus

The Immediate Issue

The final overthrow of the Herriot Government on April 10 by an adverse vote of 156 to 152 In the French Senate was directly due to the fact that the Government, in spite of repeated declarations against inflation, had secretly authorized the Bank of France three months ago to exceed the legal 41 billion franc limit of bank note circulation by 5 billion francs. Herriot defended his government by placing the blame for France's financial crisis on the successive post-war governments which he claimed had left him a legacy which only radical treasures could solve. The Opposition pointed out that no matter how acute had been the crisis in the past no former government had ever resorted to illegal inflation. The real problem confronting the Herriot Government, however, was not so much inflation as the question of how to meet the whole French financial problem which had made inflation necessary.

The Real Problem

The essence of this complicated problem is the fact that the French public debt has increased from 54.2 billion francs at the outbreak of the war, to 412.6 billion francs at the close of 1924. In addition France has changed from a large creditor nation to a position where she owes 128.3 billion francs to foreigners. In meeting even the Interest on this enormous debt she is hampered by a greatly depreciated currency. Premier Herriot proposed to meet this situation by a forced loan or capital levy. The lack of support accorded this radical proposal for financial reform was the real reason for the fall of the Government although no other party has as yet offered any other solution which promises success.

The resignation of Herriot probably means either a Briand Government which would Include the left wing of the Nationalists and exclude the United Socialists, or else that the Left Bloc which holds the Chamber majority will force a new national election. In either case a new Ministry will find itself In the same critical financial situation as that which caused the defeat of Herriot. A brief analysis of this situation is made in the following report.